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 * 
   Sophie Smith
   
 * 
 * * May 9
   * 
   * 5 min read




OUTLINING THE BEST FINANCE LEADERSHIP STRATEGY IN HI-TECH







It’s no secret that the computer software industry (or simply hi-tech) is the
most explosively growing field in the workforce across the globe. It is also
becoming clearer that a CFO will be under a significant portion of the corporate
spotlight, much like the CEO, CTO, and other members of the C-Suite. CFOs are
important, powerful and perhaps a breed apart from their C-Suite counterparts.
Their role has synonymously become more complex with the proliferation of
corporate technologies, as well as that of other positions in a finance team. In
short, the finance leader has become a uniquely important position in a hi-tech
organization. However, there are more reasons for their particular importance in
the tech industry.






For venture-backed companies, they’re the glue that binds the businesses. When
CFOs aren’t sparring with and grounding the CEO, they’re helping others
understand their gross margins. As well as helping avoid bad deals. On top of
this, when they’re not doing that, they’re managing your cash flow and capital,
parlaying with HR & Legal, and impressing the board with relevant metrics and
grounded, tactical projections.






Considering their versatility and significance in laying the groundwork for
quality business decisions, every hi-tech company must have a CFO… right?






Here’s the issue: over the past few years, only 64% of startups with valuations
of between $500 million and $1 billion had a finance chief. Additionally, out of
180 U.S. unicorn companies, 71% had CFOs.






The root cause of these figures may initially be counterintuitive, but one must
consider this: increasing versatility in the finance chief role (particularly,
in technological competencies) also means increased difficulty, and hence a
greater scarcity of competent candidates for the finance chief position.






Given this difficult state of affairs for the prospect of CFOs in the tech
industry, tech organizations should approach this issue with an understanding of
the following:






 * Why CFOs have unique importance in hi-tech

 * What competencies CFOs need to succeed in the industry

 * How finance technologies can be leveraged






UNDERSTANDING THE SCARCITY OF CFOS IN HIGH-TECH






By now you understand that it’s no piece of cake to hire a good CFO. What makes
recruitment so difficult is that the most experienced candidates, who have
previously launched a startup past the $1 billion valuation threshold to unicorn
status aren’t motivated to do it again. Such competent candidates understandably
don’t desire to return to square one. The problem is particularly acute among
enterprises on the cusp of unicorn status. Most unicorns have filled the role,
leaving the swelling ranks of up-and-comers to battle for a smaller pool of
candidates. As the higher-value, higher-profile companies snag CFOs, the
swelling ranks of up-and-comers are left to battle for the slim pickings left of
elite candidates.






Many of these companies don’t advertise the position, often due to fear of
tipping their hand to competitors. But corporate headhunters estimate that
dozens of promising startups are competing to fill vacant finance chief
positions. The competition is expected to increase as they mature and as more
cash flows their way.






Competition for highly skilled candidates is increasing the upward pressure on
compensation at a time when salaries of finance executives are rising across the
board. Pay packages at late-stage startups, that typically include stock
options, are contributing to a frothiness that is causing even established
companies to loosen the purse strings to recruit, or simply retain, finance
executives.







CORE TECH CFO COMPETENCIES







1. AGILE FRAMEWORK INTEGRATION



CFOs should tweak their organization’s approach to processes and tools. Instead
of operating on the traditional model companies could instead follow a more
Agile operation. This empowers finance staff and CFOs alike to pivot and switch
to pressing issues by priority.






By shifting concentration on ad hoc analysis to primarily stakeholders, the
finance operation will respond much more efficiently, particularly to the
rapidly changing external factors in today’s corporate landscape. Enable this
with a suite of financial tools, which have the power to automate and sync data
between your purchasing and requisition processes and provide you with real time
updates in a centralized location.






Forescouts’ integration of the FP&A software DataRails is a fantastic example of
how powerful the impact of agile frameworks can be for a tech company. As a
network security company, ForeScout Technologies was seeking a solution to
manage time more efficiently. Their finance team reviewed numerous revenue
statements in the form of Excel files on a monthly basis. But the constant
reviewing, checking and comparing of data became evidently a greater and greater
time black hole, and something had to be done about it. Will Federer, their
Senior finance manager, took the initiative to integrate DataRails software into
his department, and ultimately increased their teams productivity, efficiency
and ability to drive value.






With regard to maximizing processes, assembling the finance function in focused
project based teams is an indispensable tenet of a modern finance chief’s work.
Professionals with cross functional skills will thrive as they take on a single
project at a time and well defined accountabilities. Conduct non-transactional
tasks in sprints, just like agile development programs. This eases
organizations’ ability to iterate on and adjust budgets to quickly developing
conditions.







2. STRATEGIC LEADERSHIP & PURPOSEFUL SPENDING






Other crucial skills include creative strategy and general management. Positive
outcomes in our contemporary high-tech economy are heavily influenced by
strategic and visionary leadership. Successful finance leaders today can best
understand integrating innovative technology and agile organizational
frameworks.






The definition of a great CFO is no longer simply measured by tracking
performance and efficiency. The position has become so multi-faceted and
increasingly strategic. The expectation has evolved into counseling businesses
on innovative approaches for creating value.






The increasing strategy in the role requires more emphasis on the “why” when it
comes to expenses. It should be decentralized from just one senior finance
position in particular. Many businesses are used to assessing the why in its
relation to brand identity and as a marketing differentiator, but it’s
imperative in justifying the resources, services and tools you’re spending money
on as well.






Simon Sinek’s classic “Start With Why” eloquently illustrates its significance:
“Why” is the reason to buy and the “Whats” merely signify the tangible products
as a proof of that belief. In an organization’s spend, this is another primary
focus for the CFO and other members of the finance and operations teams. It’s
not just understanding where to throw your money at, but being able to
understand why, qualifying every spending event as an investment that will
eventually result in improved growth and ROI.







3. EMBRACE DIRECT LISTING






Another advent has been CFOs who are leading their companies to direct listing.
Spotify’s chief financial officer Barry McCarthy pioneered the direct listing in
high-tech, and even went as far to regard the IPO models of Apple or Microsoft
as “moronic”.






Slack’s CFO Allen Shim consulted with Barry and subsequently followed in
Spotify’s footsteps. Slack followed suit with their own DPO. Although
fundraising mechanics for businesses have undergone groundbreaking evolutions in
the last 20 years, IPOs haven’t changed much at all. They are increasingly less
suitable for businesses who want a simplified, less costly, and more fruitful
route ahead. While direct listings aren’t new, for the high growth tech
companies in question, they empower organizations with even more determination
over the process to the company and its founders.






The verdict is still out on whether or not DPOs are the way of the future or
some contemporary experiment that will go sideways. Currently, all signs point
to this being a success for both Spotify and Slack. While these two unicorns
continue to soak in the spotlight, the risks that led them to this stage were
undoubtedly at the hands of the rare, endangered, technical and dynamic CFOs.






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