What’s so special about the startup financial director?

The accounting and finance function is one of the most crucial departments in businesses, with the success of traditional companies judged on short term profit maximisation. Typically practitioners are viewed as being risk averse due to most decisions being based solely on relation to historical figures. However, the finance role in startups requires a very different skill set to the one needed in blue chip corporations.

Nick Lally, the financial director of e-hailing taxi service Hailo, classifies the main difference between working in startups and corporates as being the speed at which decisions are made. Lally told Real Business: “In a startup you are able to make decisions, see their impact in real time, and make adjustments as needed.” He also singles out the satisfaction which comes from running a business from end to end: “One day you will be signing off a marketing budget, the next day you will see the advertising on a billboard or website, and the following day you will see the effect [that] it had on customer registrations and revenue.”

Lally started off his career at the Commonwealth Bank Of Australia, and found that the corporate environment moved along at snail’s pace: “The decision making process usually involved several meetings and multiplied management levels to find agreement.” 

This view is shared by Guy Hutchinson, former financial director of One Fine Stay. He told Real Business that “large corporate enterprises [have] a huge amount of inertia, existing products, a status quo around where the business is driven from and assumptions about how decisions are made.”

The tolerance for risk is another inherent difference between the roles of financial directors in startups and corporates. Hutchinson is of the view that the appetite for risk in startup companies is linked to the size of the opportunity: “Management teams and investors will tolerate more risk when the opportunity is bigger. The finance director has to strike the balance of the upside on delivering on a winning start-up versus the statistical odds that are inherent in any venture backed business.” 

Lally attributes the higher degree of risk in startups to a lack of cash and resources, which creates more uncertainty: “You have to place a lot more trust in people to use their best judgement and make the right calls.” Interestingly, Lally does not believe that this behaviour should translate to other business functions in startups: “When it comes to HR and legal risks, a startup’s tolerance should be on a par with its corporate counterpart.” 

Whilst the finance function in startups is less risk averse than in corporates, Lally still sees friction between accountants and entrepreneurs: “The entrepreneurs that I have worked with are almost the exact opposite [of accountants]; they like to dream, take risks, and are comfortable with uncertainty.” He believes that it is possible for accountants to become entrepreneurs by “venturing out of their comfort zone.” 

Hutchinson’s experience acting as financial director in multiple startups has led him to create a new venture called The Finance Foundry. He told Real Business that the company provides “clients [with] a part-time director service coupled with a comprehensive outsourced finance and accounting service.” 

This new business caters to the needs of early stage companies by allowing “access [to] the different levels of finance expertise without having to hire a full finance team ahead of the curve.” This flexible approach has resulted in the client base of The Finance Foundry ranging from a leading e-commerce player right through to an early stage resource marketplace.

Alongside The Finance Foundry, Hutchinson champions the role of finance directors in startups by running an online and offline networking group for like minded individuals called FDs In Startups. The idea for the group was borne out of a conversation Hutchinson had with David Lee (financial director of Mendeley), after realising that the London technology scene did not have a forum or networking event for individuals performing the finance function. 

He cites one of its main benefits as being “the power of the network as a shared knowledge forum.” The membership size of the group is small but includes representatives from Just Eat, Hailo, My Deco and Made.com. Hutchinson says membership “open to anyone with a senior financial role in a start-up or growth stage business.”

Nick Levine is a chartered accountant by training and a freelance writer in his spare time. His areas of interest are business, technology and culture. 

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