#78 "When Do I Hire a VC Fund CFO?" (vs. Controller, Fund Admin)?

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“When Do I Hire a VC Fund CFO?” (vs. Controller, Fund Admin)?

This is one of the most common questions we get as LP investors and VC CFOs for hundreds of funds over the past three decades (collectively w/ Eddie Duszlak). There’s no one right answer here! We think it’s best to simplify by asking yourself a question.

What is the most valuable place to spend my time? How much time am I spending on the “other stuff?” We’ve seen great VC investors maximize time focused on:

  1. Investing: making great investment decisions (driven by research, pipeline)

  2. Supporting the companies you’ve invested in

  3. Fundraising (so that you have money to do more of #1 #2)

VC investors (and investors of all types, including PE/VC, public) can follow this simple framework to arrive at the right answer. For VC funds, the most common times we see funds hire a VC fund CFO are when they hit some combination of the following milestones, although it’s not a hard and fast rule:

  1. Portfolio: >50 companies

  2. AUM: $20m - $200m

  3. Growth: planning to raise their next fund in +/- 1 year and want to have great data, materials, and processes in place

We suggest that VC fund managers track their time for a week (or two, or a month!) to really understand how much time they’re spending within the three most valuable areas vs. outside of them. Then, hire accordingly, considering part-time and full-time.

In , Charles Hudson shared some great thoughts on this topic in his post “Do You Want to Manage or Do You Want to Invest?”:

  • “Growing and scaling venture firms is a management job that pulls you away from investing - spend time doing what gives you energy”

  • There’s “tension between investing and managing a growing venture capital firm”

  • “Even an emerging manager on his or her first fund with no full-time employees will spend time on management tasks beyond investing”

  • “In the end, being thoughtful about what you want to build will hopefully keep you from finding yourself in a place where you don’t like the way you’re spending your time.”

Differences Between Fund CFO’s, Controllers, & Fund Administrators

While the frameworks above are great, you have to run your business and make decisions on where you need the most help, today. We’ve outlined differences and key responsibilities of CFOs, controllers, and fund administrators to help you make a better decision.

Ultimately, we recommend finding a partner who can take ownership of key responsibilities while clearly showing that they’re getting done in an accurate and thorough manner via written documentation!

CFO responsibilities: Simply put, good CFOs should be strategic. If you want strategic help + tactical execution, hire a CFO. CFOs guide the finance team (controller + fund admin) and have a broad view of an organization’s financial health, allowing VC fund managers to focus on their own key priorities. Great CFOs are taking financial data from the controller and fund admin to forecast cash flows, build budgets, portfolio construction and investment models.

Controller responsibilities: A financial controller is typically a CPA and responsible for preparing financial reports. The financial controller is generally in charge of the accounting function in an organization and reports to the CFO or VC fund manager. A controller may be part of a team that includes bookkeepers, accounts receivable/payable clerks, payroll specialists, tax preparers and accountants.

Fund administrator responsibilities: own accounting & reporting. Maintain accounting books and records. Prepare quarterly financial reporting including partner allocations. Manage year-end audit and tax process. Ideally use technology tools to streamlines your back, middle, and front office operations.

Additional Resources

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