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The role Fractional CFOs play in investment readiness

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On the 14th of June 2024, Tenzing Search hosted our second networking event for Fractional CFOs. Our Founder, Lisa Collins, was joined by Chris Baker, Technology Partner at LDC who shared insight into the role of Fractional CFOs in tech startups. 

They discussed the common themes in the tech sector, including: 

  • Investment and financial oversight 
  • The role played in investment readiness 
  • Long-term financial strategy planning 

Keep reading for key takeaways from the evening. 


About Chris Baker 

Chris Baker has built an impressive career as a Non-Executive Director in businesses such as James and James Fulfilment and DSP. Chris also operates as a Technology Partner at LDC.  

A Private Equity Investor specialising in the Technology sector, LDC partners with ambitious management teams of high growth Software and Technology Services businesses. With more than 40 years of experience, LDC is the UK’s most active Private Equity investor in mid-market Technology businesses. 


Investment and financial oversight 


Chris highlighted the challenge of finding robust financial oversight in smaller tech companies. More and more start-ups “tend not to have finance professionals at the helm, certainly not full time.” Often, they rely on a Head of Finance and/or outsourced services. This lack of financial leadership can create significant challenges. The biggest and most common issue being a “lack of historical financial insight”.  

The involvement of experienced finance professionals, such as Fractional CFOs, is essential to bridge these gaps and ensure businesses are prepared for investment processes. 


What skills should start-ups seek in CFOs? 

Fractional CFOs can play a pivotal role in setting up financial systems. They can help reduce human error, increase operational efficiency, and ultimately help companies to “get their arms around the comfort blanket” of financial data. With Fractional CFOs, start-ups can finally make informed strategic decisions.  

When engaging a Fractional CFO, Chris emphasised the importance of bringing someone in who “has been through an investment process before” and understands how to “manifest an investment plan into something that could be relatable to a future investor.”  


The role of CFOs in investment readiness 


Fractional CFOs play a pivotal role in preparing companies for investment. Chris noted that many small businesses are “walking into” investment opportunities without sufficient financial leadership. In his role, he’s seen many lacking even basic financial documentation, like a cash flow model. This creates challenges, as private equity firms require reliable financial data to feel comfortable with potential investments.  

Baker emphasised the need for experienced finance professionals who have “been in the trenches when cash flows don’t work” and who can “support businesses either at the point of investment or, ideally, prior to investment to get them ready.”  

By stepping in early, Fractional CFOs help companies build robust financial systems and plans that align with investor expectations. They provide the expertise needed to navigate the complexities of financial planning and reporting, ensuring that businesses are well-prepared for investment opportunities and positioned for growth. 


Long-term financial strategy planning 


In the long-term, Fractional CFOs provide invaluable support in financial strategy planning, helping businesses align their financial goals with their strategic vision.  

Chris stressed the importance of starting preparations well in advance of any potential sale or funding round. Attendees at the event noted that “most people think it’s a couple of months, six months, but the process should start 18 months before you want to sell.” It’s crucial to build a solid financial foundation as early as possible, advising to “start building your data now, start getting your historics correct.”  

This long-term approach allows companies to present a coherent and attractive financial narrative to potential investors. Fractional CFOs bring their expertise to this process, ensuring that management accounts and financial records are meticulously maintained and that strategic financial plans are in place.  

By focusing on long-term financial strategy, they help businesses not only prepare for investment but also achieve sustainable growth and operational efficiency, positioning them for success in the competitive market. 


Tenzing Events

A big thank you to Chris for speaking at our most recent event. We look forward to hosting more Tenzing Events for our network in the future. For more information, be sure to reach out to our Founder, Lisa Collins at lisa@tenzingsearch.com


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