Bridging Worlds: Investor Meets Fractional CFO

Speaker A: Today's guest is Stephen Findlay, someone who I've known right from the beginning of Float's journey. And, uh, Steven brings a really unique perspective to scaling businesses. He spent a decade as a founder going through multiple funding rounds, and then another decade on the other side of the table as a VC and private equity investor, putting over 100 million to work across different companies. Stephen started growth CFO after seeing the same pattern again and again. Founders getting bogged down in financial management when they needed to be focused on product and growth. So from being a solo CFO, he's grown to become a practice of fractional CFOs who support companies through those critical scaling phases. In this episode, we dig into lessons learned from both sides of the table. What he wished he'd known as a founder going through multiple funding rounds, um, and what he later saw from an investor viewpoint that separates the companies that scale successfully from those that don't. So if you're a founder thinking about when to bring in financial leadership, this conversation gets right into that. Hope you enjoy it. Welcome to the new F Word podcast where we cut the fluff on business finances and lift the lid on the new F word, the fractional finance revolution. It's a game changer for small businesses. I'm your host, Colin Hewitt, co founder of Float Cash Flow Management for Xero on QuickBooks. We believe that really understanding your business finances makes all the difference in the world and having a strategic partner like a fractional CFO is the key to unlocking that. So join us as we dive into personal stories and actionable insights from forward thinking finance leaders and seasoned entrepreneurs to discover why fractional finance leaders have become an irreplaceable part of small business leadership. Stephen, it's really good to have you on the podcast. We've known each other for a long time, but yeah, it's been a while since we've had a conversation, so really looking forward to getting into it today. Be great to hear a little bit about what you're up to. And yeah, just how do you summarize your extensive career in a few short sentences?

Speaker B: Well, great to have to be on Colin, thanks for inviting me. I'll try and keep it short. I spent the last 20 odd years with growth companies on two sides of the fence. So I originally trained as accountant with Anderson's and then Deloittes and their strategy, uh, consulting and corporate finance team. But 2004 moved into private equity venture capital. So investing in growth businesses originally as a generalist across dental chains, care homes, those sorts of things. 2007, joined Fidelity as a co founder of the $500 million Tech Bio Fund. Was there for a number of years and then always had uh, an itch and desire to jump on the other side of the table. Always look more fun being an entrepreneur. So in 2013, left PVC, become a founder of what became a fintech. I spent a few months learning to code and program and then over the next 10 years ran that as CEO, did a couple of age rounds, a couple of VC rounds, and then for the last few years been working as a fractional cfo. Really enjoying my time and sort of helping, providing some insights into small, uh, growth startup scale ups as best I can. So yeah, really the sort of common thread is working with growth businesses.

Speaker A: It'd be great to talk a little bit about that latter part where you decided to become a fractional cfo. Is that, was that something that you had? I mean you've not been a full time CFO in a company in that way. So this is like what was the thing that decided to get you into this refractional side of things?

Speaker B: Yeah. So when I first moved in private equity in 2004, on the first day I was sort of allocated a number of investee companies to look after as investor directors. So right from almost embarrassingly early age was 24 years old, working as an investor director on the boards of these fantastic growth businesses, but had a portfolio of companies to kind of look after. And then when I went into being a CEO in 2013, obviously you just focus on a single business and you don't have that variety. And I really missed that, quite frankly. And so when the opportunity arose again to kind of think about what I could do next, I didn't want to go back into working for a VC fund or a PE fund. Um, I was too old to kind of go back onto that wagon again. So really being a fractional CFO gave me the ability to work with a number of different growth businesses and provide that insight and do it in a way where really you feel like you're being listened to because you're part of the executive management team as opposed to just advising. 18. So that was really the sort of genesis of how it came about, truthfully, quite sort of organic. So there wasn't sort of a master plan where I thought, this is my five year plan, this is what I want to do next. Perhaps as I sort of got a bit older, became a bit more selfish about doing things that I really wanted to do, spending my time with people I Wanted to work with and being a fractional CFO for a few startups gave me the opportunity to do that. And so very grateful for having sort of almost in some ways fallen into it a few years ago. But yeah, I really enjoy doing that now.

Speaker A: It is quite rare to have that experience of both sides of the table, I suppose. Um, did you have a CFO when you were running the fintech or did you do that as part of your existing skill set?

Speaker B: So I did most of that myself. Had a fantastic finance manager who helped me out, so she was kind of my right hand person on all those activities. But now it's all just a did most of that myself stuff myself. And I think back in 2013, had there been fractional CFOs around, it probably would have made sense for me to bring one of those in at that time because I found myself doing stuff which took me away from the two key focuses of in my opinion what a CEO should be doing, which is either selling or fundraising. So really you should. Bringing cash in at the top line as the CEO of a startup and if you're doing anything else, pretty much it's a bit of a distraction. So had there been people like me and some of the other fractionals I've met around at the time, then absolutely I would have delegated that across happily and strengthened the team in that way.

Speaker A: Yeah. And that's just the thing, isn't it? Like it just wasn't uh, it wasn't common, it wasn't certainly something that I'd come across when we were around in 2013 and the thought of hiring a CFO full time just didn't make any sense at all. And there were other more pressing hires that needed to be made. But yeah, I guess having the ability, having sort of sat in that seat almost, you know, doing that work, you gives you a really good platform to jump off to know what the role really is, it's needed.

Speaker B: And yes, yeah, I think that's right and I think with the fractional CFO piece really to my opinion, you need to have a, a decent amount of experience behind you. It's not just sort of a task orientated role. You also really need to be providing advice and in some cases the management teams that you're working with, you know, for the CEO, uh, or cto, it might be the biggest role of their lives, like the biggest thing that they've ever done to date. So having a few people around the table who sort of seen some of those challenges 2, 3, 4 times before is really, really valuable. And I think Whether it's fractional CFO or fractional other role, I've seen some great fractional GCs, fractional CROs, etc. That should be one of the key elements that uh, the founders are looking for when they hire these fractionals in. It's not just can they do the job, but have they seen it a few times before? They can help me navigate some of these challenges that I don't even know that are on the horizon.

Speaker A: Yeah, absolutely. I think that's huge. It's just, yeah, it's so like, there's so many technical skills that are useful, but it's really, it's the experience that, you know, I guess having been in the startup game for what's uh, becoming a long time, it feels like, you know, it's this uh, when I look back at the mistakes that I made, you know, I wouldn't make them now, but you have to kind of, you don't know what you don't know. And you know, having been, you know, having been through enough times, you know, certainly when it comes to things like funding rounds or hiring senior people, you've just got such a better experience of where this might go wrong. And yeah, makes, makes total sense.

Speaker B: We used to see that in the venture capital space. So, you know, as an investor you very often would want to be backing a second or third time founder. Now with Fidelity, where the team is split across the US and Europe, specifically the uk, there was two real divergence in mindsets there. Whereas in the us, if you were uh, a failed, if I can put that in quotation marks, but a failed founder, they'd say, well, you've learned a lot, dust yourself down, go again, and you'll probably do it three times faster. And that's exactly what happens. Whereas in the uk, and I think less so now, but certainly back in the mid 2000s were full of sarcasm and cynicism and if someone failed, then you'd have 10 people telling you why you were a failure and ever do that again and you've learned your lesson, go get a proper job now, hopefully now, as I say, people have kind of learned that the learnings you get from a failed startup actually stand in really, really good stead to go again. And that's exactly right. I think if you've kind of done it a couple of times before, having seen those things before crike, you're in a really good position to accelerate the next time you have a go at it.

Speaker A: Yeah, no, absolutely. Or in our case, you Just like we were talking about earlier, you just stick it out for, you know, 12, 13 years and you kind of. It counts as multiple. It feels like multiple startups. But, yeah, no, I, uh, think, you know, one of the things I wanted to talk to you about was, you know, you specifically been through fundraising, you've obviously invested. You know, it sounds like you'd be very well placed to help out with funding and, um, it'd be good to talk a little bit about that. And obviously, the funding landscape now has changed. It feels like it's changed massively. I don't know if it feels like that to you, but certainly for me, speaking to other founders who are out and struggling to raise money, what's changed, from your perspective, in the last three or four years?

Speaker B: Yeah, the market is cyclical, on ebbs and flows, and actually, if you take that phrase, the funding landscape has changed. And I sort of think about that from a UK venture perspective. Over the last 20 years that I've been active in this space. Even today, where it seems a lot tougher than it was three or four years ago, there are, uh, still a myriad of opportunities far more so out there now than there were 20 years ago. Now, it's not to say it's easy, but it's definitely a lot easier than it was 20 years ago. And then when you think about the cost to set up companies, I remember sort of sitting in board meetings having these conversations in the mid-2000s talking about how it was so much cheaper to get an Internet startup started today, because in the mid-90s, you'd need 10 million to just get the product built out, whereas now you might only need half a million to get the product built out. Crikey. Where we are today, you need about 500 quid to get an Internet startup built out. It's phenomenal in terms of the scale of innovation and what that means you can achieve in terms of getting your startup off the ground. But from a fundraising element specifically, it is tougher, uh, in the UK at the moment than it has been for the last three or four years. But there's still a wide range of angel investors groups like crowdfunding platforms like Crowdcube and Cedars and the like, as well as the angel networks as well as all the EIS funds. So there are ways and means to get funded. I think where it's always been more of a challenge in the UK again, as compared to the us, is really that Series A. I think there really is a chasm from seed funding to VC funding. I Think there's far fewer options here than there are in the US of groups that are willing to make that, uh, sort of three to eight million dollar or pound investment. And I think that is the real challenge for startups. So I think on a seed perspective, yeah, it's difficult, but you can get going from a VC perspective. You almost need to have all your ducks in a row to be able to raise those checks, to make the next step to get from series A to series B and normal M. And

Speaker A: yeah, ah, if you're, if I'm, um. I think one of the, one of the things in terms of, you know, the questions that come up in different groups that I'm a part of is should you be bringing on advisors to help you raise your funding round? Is that kind of. Look, some people think that that's kind of like a dirty word or you're essentially, you're not doing it right because if you're really good, you can do it yourself. What's your view on that?

Speaker B: Yeah, I think with advisors it's difficult. I mean it might be a luxury. You might not even have that opportunity, uh, to ask yourself that question because the advisors themselves, the very sought after ones, might simply be too busy with opportunities. So there's even a question about whether you're able to retain the type of advisor you want to help you with your funding round. But I think from a CEO founder perspective, building out strong investor relationships should be a core element of what you're doing as a startup. Assuming you're not going down the bootstrapping route, which again is an equally valid approach. Just to be clear, there is an approach where your sole fundraising route is through the sales that you generate through selling your products and services. And that's how you want to grow your company and you want to bootstrap and you never want to bring outside investors. That's completely legitimate, that's absolutely fine. But there's some industries and companies that structurally just um, aren't able to do that because of the cost to get things going or because they want to accelerate faster, get market share and presence and those sorts of things for all of the good reasons. So assuming that you're needing that external funding, then see, they should always be on top of that and try and build and own those relationships that can be supported by, for example, talking about here a fractional cfo, maybe other people they brought around the table, maybe the angel shareholder or investor who's joined the board or other nads they might have and they want to try and Retain, let's say, those relationships and build those relationships in house. And then from time to time, when they do their funding round, of course, you should be speaking to advisors, even if you don't want to appoint one. You should just understand what the opportunity looks like. And the value an advisor brings to the table can be huge. They should have their finger on the pulse of exactly where the market is, exactly which investors are interested in, which industries, and most importantly, at which time. Successful founders talk so much about timing and the importance of timing, and that's true of getting their product into the market as it is of raising funds. So an advisor can bring you hopefully, a lot of those insights to the table, but there's no silver bullet to this. You quite often will hear stories of founders having been turned away over a hundred times, only for their 101st meeting to be the, um, one which meant they got the money, which meant they were then able to build a unicorn business. And apologies if I got this wrong, but I'm pretty certain that's what the sort of the canvassee said of her experience with fundraisings. And she's done pretty well for herself eventually. And it's tough. It's not a linear process. You just keep talking to people, give yourself the best chance.

Speaker A: I want to talk about cash because it feels like when we started we had some initial companies that, uh, would be maybe the kinds of companies that you work with that were raising money quickly in the tech space. And, um, we always thought they weren't good customers for us because typically the way the CEOs thought about cash was, if something, we'll raise an eye and then we'll raise in 18 months, and then we'll raise another 18 months. So cashflow wasn't really something that they worried about. They just wanted to know the Runway, make sure it was a roughly, hopefully 18, 24 months and then they would figure it out, uh, when they were doing their next round. You know, it feels like the world is changing a little bit now. Obviously, companies trying to. We're finding companies like coming to us saying, you know, we're not raising at the moment, we need to get profitable. Cash flow has become very important, or it's changed, it's jumped up. Priority list for them is that, are you seeing that as well?

Speaker B: Cash is. As the old ad just goes, cash is king. It's absolutely critical. And whenever I start a new role with one of the groups that I work with or at Growth CFO, we have a panel of about 15 or so fractional CFOs who work with us. And whenever they work with their clients, the first thing that we do is we look at the cash flow forecasts and we check it back to the bank accounts. Uh, is the money actually there? And how much of a Runway have we got? And coming off of that, you then get quite a lot of quite relevant and important work streams. Whether it's looking at accounts receivables or accounts payables for a company that might be already up and running, can we improve those? How do we get cash out of the working capital cycle, uh, and make sure there's nothing left on the table? From that perspective, end of the month, have you got any issues around making payroll? End of the quarter, we've got any issues around making VAT payments, Thinking ahead to those sorts of things. Absolutely vital in that sort of first instance. And then straight away, as I say, for all those companies who aren't bootstrapping, when is your next fundraising round going to be? And then you've got to work back three to four months from that. Huh, Date to think about when you sort of kick that off. So if they're raising every 12 to 18 months, every six months or so, that should be thinking about. Right, well, we need to sort of refresh the deck. Think about where we are in terms of metrics, think about where the cash is coming from and how are we going to get there. And then obviously, as you well know, when it gets to the fundraising piece, all the investors are going to sit down and say, right, well, what's your CAC metric? How much cost to acquire a customer? What does that look like from a cash perspective? What's the value you're going to get from a cash perspective? So cash comes through all these different components, but absolutely, and I'm not, um, saying it because just on this podcast, but all the staff work with, we have float in there and we're looking at the 13 week rolling cash flow forecast. I do not want any surprises. And as a fractional cfo, that's one of the worst things I can do is say, oh, sorry, I didn't realize, but we're running out of money next week, chaps. I don't think that would land very well. So from my own perspective, it's absolutely vital that you're on top of it now. We hope it's never a problem, but you only know it's not a problem if you've had a look at it. And as I say to people, when you look at cash, I like looking at profit and profitability metrics or other metrics. Until you've looked at all of it, you haven't looked at any of it. You need to know if there's some hidden liability somewhere. You need to know if there's some payments coming around the corner. So in startup land, having cash and being on top of cash is just absolutely vital. But then as I say, that's right for a fractional CFO to be doing that sort of activity. The CEO, she or he have enough demands on their time to be growing the top line and building those investor relationships that yeah, it's priority, but it's a priority that hopefully they can easily delegate and then put to someone else in the team.

Speaker A: Yeah, absolutely. And then do you, you know, obviously to get that kind of level of detail on that 13 week, like rolling cash flow, you need to have your books in order, you need to have, you know, like you said, if you're using something like Xero, you need to have that up to date. Do you do that or do you find, do you have a sub team of people that you work with that you bring in to kind of run the whole life cycle of that?

Speaker B: Yeah. So the way that the team is structured as a function of the size of the company and so it does depend on, but your fractional cfo, they shouldn't be doing everyday bookkeeping activities because that's not a good use of the company's resources. So typically we'll have an outsourced bookkeeping company doing that basic effort, making sure that everything is reconciled and typically I ensure that that's within four to five days of month end. Xero has no uh, irreconcilable issues in it. And then as the company grows then quite often you bring in a full time finance manager who then oversees those bookkeepers and they're sort of doing a lot m more the prep work and the sort of work around it really in terms of getting the data in order. There's a bit of oversight for the fractional cfo, but it's more about them putting in place the right people to kind of do that on a cost effective basis day to day. But then on the forecast piece, and this is where candidly where float is so valuable, sitting at the top of zero, whereas the way it used to be 10, 15 years ago, you do a cash flow forecast, you'd base it off the bank statement and maybe your accounting software, you'd do it in Excel, but you'd know within a week to two weeks the whole thing is out of date because You've made some payments, you've had some stuff come in and you have to almost restart the exercise from scratch if you wanted to do it again in a month's time. Whereas with Float, you just as you know, because obviously ticks through to zero all the time, zero's up to date, floats up to date within 24 hours and your cash flow forecast looking out 13 weeks are still meaningful as opposed to sending around an Excel file which is now six weeks out of date, which has got a load of caveats attaching to it and you just, you just, again, you're just wasting people's time. So that's why it's so valuable and I think as a tool, as you had a podcast on this the other day, you talk about AI and how those sorts of things will come through and impact the role of being an accountant. Well, the role of being an accountant is about providing insight. It's not about making sure the numbers are correct. The numbers should be correct and there's tools and ways to do that, but it's providing that insight and that's what's super important. And that's what's true here with Float doing the grunt work on the forecasts. Well, we can talk about the. So what we talk about when we can raise money, how we can raise money if we need to raise money. We don't need to spend all that time and effort just crunching the numbers.

Speaker A: Yeah, no, absolutely. And then just as you're talking it sort of reminded me things like treasury management. So if you're raising a big amount of money and that's coming into your bank account, I know this is your, you've been in this world, how do you put that money to use? And responsible, uh, taking too much risk. What's your advice for a company that's maybe raised a couple of million and it's just obviously dividing it up across multiple accounts, what tools do you use? How do you approach that?

Speaker B: Yeah, I think one of the best ways to get fired is to be flippant with investors cash and put it somewhere where they're not anticipating it will be. So candidly, unless it's somewhere which is FSCS protected here in the uk, elsewhere there's other government deposit backed schemes. Unless you've got that, then you're kind of crazy. I think unless you're in the sort of multimillion realms, if you've got 10 million plus in the bank then fine, think about doing other things with it as a startup or a scale up. But the assumption is you've raised that money, so you're going to need it the next 9 to 18 months for your Runway. So that's the working assumption. Therefore, you can't lock it away for a long period of time. In terms of tools for that, well, there's quite good companies now that you can kind of just bring on board who will then open those bank accounts for you and allocate the money around and make sure you're earning as much interest as you as you can be. Now, that's a function of where we've been, I guess, post Covid after the interest rates coming back up again. But five, six years ago, you wouldn't even have a conversation because interest rates are so low, so pointless. The one caveat I'd say to that, all of that, is that if you're looking at growing internationally and, you know, you want to put your expenses maybe across Europe or across the US and you've raised that capital, then it can be helpful to open, um, bank accounts in those jurisdictions or denominated in those currencies, because you can mitigate against the FX risk and the FX risk is more likely to m, move wildly than interest rates. So for sure you can do things clever with treasury. But I mean, again, at growth cfo, we tend to work from startups from scratch all the way up to sort of series B, series C. Most of the startups pre Series B certainly, uh, possibly Series C shouldn't have to think about treasury in that level of complexity.

Speaker A: Yeah, yeah, it makes sense. Yeah. I think there's a part of me that always feels like a few friends of mine run companies where they're generating quite a lot of cash because they're holding onto cash. And there's part of the entrepreneurial part of me wants to think, you know, we could do something. You could do a lot with the millions that are sitting in your bank account. But yeah, to be responsible as well. That's why I need a good cfo.

Speaker B: I just think, yeah, again, as a CEO of a startup, your role is to grow the top line and build, out, uh, investor relationships for the next funding round, amongst other things. But those two are a few things. If you're spending time, or CFO spending time, like messing around with treasury, then the company's clearly in a fantastic place because that's got to the top of your to do list.

Speaker A: Yeah, yeah, yeah, no, absolutely. Well, I think, I think we're probably coming up to time on this, but yeah, anything in terms of growth cfo, it'd be good to hear a bit about, you know, like just tell us a bit about what that is. What do you do? Do you work with companies for a short period of time? Do you go all the way through like, like you say to series B, when do you drop off? How does it typically work?

Speaker B: So growth three episodes grown organically. So really it started with just myself working as fractional CFO for a few startups and was really, really lucky to find some fantastic startups a few years ago and sort of stayed with them on their journeys. And then a colleague of mine, actually he and I, James Wallace, trained together at Anderson Deloitte over 20 years ago, which was painful to say, it was a long, long time ago. So he sort of started with me last year on growth CFO and we sort of turned that into a consultancy, stroke recruitment consultancy. So it's for other fractional CFOs and as I say, there's a panel of about 15 or so that we have at the moment and adding more from time to time who then service startups and say right from seed. So we have a seed program M where we sort of discount and defer our rates to really help people get going through to sort of series B, straight to series C. And there's no definitive cutoff point but the thinking there is really at that point in time they probably should be thinking about a full time cfo. So if we've done our uh, role correctly, we've helped that journey company navigate that journey over that period of time and kind of made ourselves redundant at the back end because they hire someone full time. And the benefit of growth CFO is that because there is a number of CFOs and quite a few startups. Again, it's that commonality of problem solving. We see the issues come up across that portfolio all the time. The fractional CFOs share the challenges with each other. So we can just bring that to bear for the benefit of uh, our clients. And most importantly we really enjoy it. Genuinely passionate about working with startups and having been in a CEO seat, having been as a vc, seen it from both sides, know what it's all about and really hopeful we can sort of help other people become successful through those journeys and at least stop them from pulling out their hair maybe as much as I did through that. So feel very lucky and very fortunate to work with the clients that we do and work with the people that we do.

Speaker A: Fantastic. Well look, it's great. So if there's people um, who are watching this here in that fractional CFO space could be worth them reaching out to you, getting in touch, you know, if you're building the team and all that kind of thing.

Speaker B: So, yeah, uh, absolutely. And it's all about. It's all these businesses are about. The people. Don't mean sound cheesy, but it's why James and I do what we do. We are really keen to work with interesting people. So for sure there's other fractional CFOs and we're not exclusive. So they might have clients that they've got directly and maybe they want to have a client through us or something too. We're very happy to have those sorts of conversations equally on the startup side if they want to reach out. Don't know what a fractional CFO is all about, but very happy to have a conversation with them and just tell them a little about what we do and how it might work for them.

Speaker A: Steve, thanks so much. Really appreciate you coming on and hopefully, uh, speak to you soon.

Speaker B: Thanks, Colin. Appreciate your time and thank you for having me. It's been a pleasure.

Speaker A: Thanks for tuning in to another episode of the new F Word. I hope you enjoyed it. Remember, expert financial advice shouldn't be limited to to those with just big budgets. You can access the same level of advice for a fraction of the costs thanks to this fractional revolution. I believe that every growing business needs to know how much a game changer this can be. So if you loved the episode, please consider subscribing to the show. It'll help us keep doing what we're passionate about. And feel free to share this episode with others who might find it useful. Finally, we'd love to hear your thoughts. Feel free to connect with us on LinkedIn. See you in the next one.