What is a fractional CFOs?
A fractional or outsourced chief financial officer (CFO) is an individual who has CFO experience and helps organizations with their daily financial needs on a part-time basis or contracted basis. Many of these individuals come from diverse backgrounds, accounting or financial analytics to head of finance or full-time CFOs. Usually, these professionals transition to fractional work because they are looking to make a bigger impact for smaller startups, many of which need assistance to start or take control of their finance. Fractional CFOs provide smaller startups with the advantage of obtaining a seasoned veteran for a fraction of the cost of a full-time equivalent. In turn, these smaller startups are able to provide more interesting work or projects for these CFOs, something that larger companies often don’t provide. A fractional CFO could participate in raising capital, implementing a new accounting system, navigating audits or significant financial transactions.
One such company that provides fractional CFOs for fintech startups is SiliconCFO. SiliconCFO is a marketplace of fractional CFOs, providing top talent to employers, and helping startups and SMBs bring on qualified and experienced finance professionals to their team. I had the opportunity to sit down with Jacob Sheldon, founder, and CEO, to discuss the viability of fractional CFOs and his vision for them to be more prevalent in fintech.
What inspired you to start SiliconCFO?
Throughout my Startup career, I have always been working on the back office finances and financial projections, either with my own startup or with either people’s startups. If it was my startup, I usually took charge of that area of the business; however, the companies I was working with typically had no idea what they were doing when it came to bookkeeping, cash flow, and forecasting. These processes always came naturally to me. Eventually, when I decided to run an equity crowdfunding platform, I did a lot more in-depth bookkeeping, clean-up, and some serious financial models. So when I ended up leaving the equity crowdfunding platform about 2 1/2 years ago, I immediately went into being a fractional CFO for some early-stage startups. This time my role was more of a consultant.
I eventually found the space of fractional CFO's and the demand for it. I heard that the space was very saturated, but this is not what I experienced as I was able to find clients and make a living from consulting, even having spare clients that I was forced to turn down. I realized that there was a massive opportunity for a fractional CFO marketplace. Before the pandemic, I started to build a talent pool of CFOs and connect them to companies that needed their services. It was a slow process on the demand side while the supply side kept coming. I was able to build a talent pool of 80 CFOs in as little as four to five months. At the beginning of summer, I started getting consistent leads on the demand side and was then able to monetize the business.
How does your process help single out the appropriate candidate, including the vetting process?
Our program has three rounds of vetting. The first is an automated process to ensure they have a certain number of years of qualified experience. The second was an on-paper review to ensure they had the right experience to be a consulting CFO. Lastly, I did a video interview with each candidate to see if they would be a good fit for our clients. This whole process cut out around 30-40% acceptance of potential candidates for client review.
The most valuable aspect of the entire process is gathering data so that the matching process can be accurate. The matching process has been manual so far, but in the coming future, we plan to implement our first automated machine learning system to help match CFO’s with prospective clients and make the process a little bit better and faster. We try to match around five to six different CFOs to potential clients to choose the best fit. We try to have their role filled anywhere from three to four days to 24 hours. Our automated system will eventually help us speed up the process by filtering candidates down to 10 to 15 options for manual review rather than 275 potential candidates we currently are dealing with.
Why would a CFO benefit from working with SiliconCFO rather than entering the traditional job market?
In the past, it took a long time for executives to find full-time positions. Many CFOs, for example, had one or two consulting gigs on the side because it would take somewhere between 6 to 18 months to get a new job if they were to be laid off, which was a fairly common occurrence.
The reason why CFOs like to work with us is that we get them, clients. We are one of the only platforms that focus on CFOs, although that will be changing soon. Most CFOs find us because they want to transition from a full-time role into a fractional one. A couple of reasons for that is because they get to diversify their income into multiple income sources, they get to have a more flexible and remote schedule. The aspect of more exciting work is another reason for the switch. Top CFO's get to focus on exciting work the entire day rather than the less interesting aspects of finance a full-time CFO would have to face.
What are your future aspirations for SiliconCFO?
Our plan is to continue fundraising and eventually rebrand our startup in the next three to four months. We plan to start expanding into more C-Suite roles for freelancers, becoming a C-Suite freelancer marketplace. We plan to provide CTOs, CMOs, CEOs, CIOs, and even part-time legal counsel for our clients.
Another problem we want to help solve in the future is task management software for our freelancers. Some of our CFOs have anywhere from 3 to 10 clients, all of which have their own communication platform of choice, let that be Discord, Slack, or MS Teams. This becomes a lot of systems to keep track of, and we have seen some of our CFOs hiring executive assistants just to help manage all of these systems and upcoming deadlines. We feel like we can solve this problem by integrating all of these systems together into one where you can log in and see all your messages, emails, tasks, calendars, and even billing.