In a startup’s earliest years, it’s common for its financial functions to survive without a full-time finance lead — buoyed by a combination of a founder’s basic (or perhaps not-so-basic) data and financial literacy, user-friendly tools and software, and a range of options for outsourcing financial functions, such as partnering with specialist accounting firms and fractional CFOs.
But as a startup scales, the complexity of its financial operations and needs scale alongside it. The shift marks a critical juncture, where the decision to bring a dedicated finance lead onto the team becomes more of a necessity than a nice-to-have. The key, then, is just knowing how to recognize the shift.
How to know when to make your first finance hire
Generally speaking, the right time to make your first full-time finance hire is usually when you have early signs of product-market fit (PMF). That’s not going to mean the same thing for every company - it will always vary based on industry, business model, product, and distribution. For a B2B SaaS company, for example, a good signal that you’re at a point where you’ve reached PMF and are ready to make your first finance hire would be when you’ve got at least 20 paying customers.
If we think about it in terms of revenue rather than customer base, you’re probably looking at that $1–2M in revenue as a sign that it’s time to make your first finance hire. With that being said, revenue and funding milestones are not the only indicators of clear PMF.
What happens if you wait too long to make your first finance hire?
Finance is one of those functions — another in this group might be HR, for example — that companies often put off hiring a lot longer than they should. And this is usually because in a company’s early days, a founder is oriented around the product and distribution, with their main focus centered on delivering value to customers. At this stage, it’s not really top of mind for them to think about finance as a function, so long as there’s funding, contracts being signed, and cash in the bank.
But at some point, the reality becomes that the longer you wait, the harder it’s going to be to achieve product-channel fit and internationalize or build new product offerings without directly negatively impacting business scalability. Bringing your first finance hire on board is about building the foundations of scaling. Doing so too late is very costly to the business — it often takes triple or quadruple the amount of time and effort to untangle or unwind growth challenges. Because ultimately finance informs customer value and aligns that to organizational design and talent strategy.
What often happens is that companies have their statutory accounting in place, but are lacking in management accounting. The former is the stuff that’s easy to outsource. It’s all the work that goes into bookkeeping, reporting, and taxes — basically everything that the government needs you to do to be compliant as you run a business. Management accounting, on the other hand, is what goes into forward planning. It’s what helps you look at your customer unit economics and historical performance to determine the best approach to pipeline management or what your hiring plan should look like based on your distribution channels and overall business model. For example, if your company is built on an inbound motion of product-led growth, then the business needs to rationalize how many salespeople to hire, or the ratio of investing in digital marketing versus a BDR/SDR team, and how to incentivize and align compensation with performance.
By waiting too long to bring finance in-house, you’re often coming up short on bottoms-up commercial and operating planning, and tying hiring and investment outcomes to a certain time horizon. This could result in poor decisions and lack of accountability on investments into a new country, customer segment, or product functionality.
How to hire the right person to build your scaleup’s finance team
As you start thinking about who to bring on as your first finance hire, who you choose to hire will be just as important as when you hire. For startups and scaleups, the first employees you hire — and the people you bring on to build up new functions from the ground up — will always have a defining role in shaping the direction of your company. So hiring your first finance lead with the right factors in mind is critical to setting the foundation for a healthy culture around growth, planning, and cash management.
What hard skills to look for in your first finance hire
Figuring out who would be the ideal finance hire for your scaleup starts with thinking about the function and the particular skills you’ll need, rather than any specific job titles. (There’s also been plenty of noise around job titles in recent years, so the semantics can be a bit fuzzy.)
The first finance hire of a scaleup will largely be offloading the CEO who, up until this point, would probably have been the one handling a lot of the work. Their main goal off the bat should be to come in and begin implementing business and financial controls — starting with getting your books in order and putting in place audience-specific reporting (i.e. biweekly, monthly, quarterly).
A lot of companies in the early days — pre-finance teams — are run off cash and cash runway with customers and hiring decisions based on ‘gut’ feeling. As a business scales, it needs to do bottom-up planning and monitor ROI closely. This requires matching accounting practices with the business model (e.g. accruals-based SaaS accounting) as well as a detailed pipeline and revenue plan that aligns with the organizational design. The goal is ultimately to better connect the dots between when a company is incurring costs versus when it’s recognizing revenue, so that a business can measure and track customer unit economics closely in order to understand predictable patterns and path to profitability for delivering a product, acquiring customers, and scaling a business.
So if you start thinking about what that could look like in a role, an ideal first finance hire might be what you could call a “rock star” Controller or Senior Accountant who is also commercially-minded. It might also be a Finance Manager, Senior Finance Manager, or Head of Finance who ideally has accounting qualifications and is also an effective communicator and business partner. This should be someone with a forward-looking mindset and a proactive affinity to quickly pick up commercial and operational strategy.
You want to strike a balance between having technical and soft skills, business model acumen, relevant stage work experience, and a growth mindset — essentially an obsessive curiosity to learn about the commercial parts of the business, including product and distribution.
The level of seniority and compensation for the first finance hire will largely depend on the data and financial literacy of the rest of the leadership team. A more experienced hire with proven business partnering skills is required if the rest of the leadership team is not already ‘living and breathing’ data-led, financial decisions every day.
What soft skills to look for in your first finance hire
A finance leader’s role within any organization is to bring structure to the chaos. But a finance leader’s role within a scaleup is to do that while also allowing for chaos and experimentation to happen in a controlled manner, so the company can continue to grow quickly. It is a very delicate balance to strike - a skill that is often acquired on the job over the course of experience working at multiple scaleups, or under the guidance of a fractional CFO.
Another thing to look for is a candidate’s ability to communicate and effect change across varying levels of an organization - within a team, across the leadership, and up to the Board. Business partnering is a combination of communication, adaptability, and change management skills — all of these are as valuable as technical skills, as it often requires having worked in a mature growth environment (i.e., Series C to pre-IPO) or dedicated on-the-job training.
Bringing a full-time finance hire in-house marks an important milestone in your company’s growth. Making sure that you hire the right person at the right time, factoring in core needs, including the data and financial skills of the existing leadership team, will be essential to ensuring that this milestone is just the beginning of a new phase of growth — one that continues to mold your company into a mature organization with astute financial leadership and strategic decision-making.
Joyce Mackenzie Liu is the founder and CEO of Pegafund, a company that provides fractional CFO services and leadership upskilling to high growth, investor-backed SaaS businesses with a focus on strategy, planning, and reporting.