Companies hire a Strategic CFO to drive value. Where’s yours?
This is a question we’ve been asking a lot lately! Most funds we work with advise the companies they invest in to build a great leadership team (often including a CFO). Yet many funds don’t have a CFO on their own team. Why is that?
When firms are just starting out and don’t have large AUM and team, the partner(s) are often covering the fund finance responsibilities themselves. This makes sense in the beginning as its important for them to understand all that goes into the fund finance function and speak knowledgeably about it to investors.
As the fund grows its AUM, investors, investments, and team, there’s less time in the day for partners to spend on fund finance. Whether or not you have a resource focused on this in-house or externally, it’s critically important to prioritize!
We’re often asked, “As a Fund CFO, what are the top priorities when you work with funds?” Here’s what we’re saying:
- Fund Model (Construction & Reserves): Model of how you will invest your fund (keep it simple in Excel to start). This answers key questions like how many companies, how much per company, over what time period? In today’s rapidly changing market, we advise funds to assess and re-orient quarterly at a minimum.
- Budget (Fund & Mgmt. Co): Forecast of revenues and expenses (write it down, even if it’s just on a napkin to start). This will help make key decisions. How much does it cost to start and run a fund? How do you classify expenses (fund vs. organization vs. mgmt. co.? This tool helps you assess and plan correctly.
- Process Documentation & File Organization: The Master Process Document is the source of truth for how things get done (execution) and who is responsible (accountability). The ones we build typically cover the following core areas: companies, operations, investor reporting, and compliance. It’s also critically important to have a robust system for file organization and record keeping.
- Legal & Compliance: You’ll need a trusted lawyer that has worked on similar investment strategies or structures. Lean on them to provide guidance on critical issues (and do your own research as well). Lean on your law firm and/or a compliance expert if your size, strategy, and/or investors requires it.
- Fund Administration & Accounting: Partner with a qualified fund administrator that is familiar with your strategy and structure. They should provide fund (and mgmt. co.) accounting, capital calls/distributions, quarterly reporting to investors, and support with audit & tax.
- Audit & Tax: Most institutional investors require an external audit of your fund’s finances and tax reporting. Find a firm that can work efficiently with your fund administration & accounting teams and that has supported similar strategies and structures.
- Bank, Bill Payment, Credit Cards, Expenses: We’re lumping a lot in here but they’re all closely related! Leverage technology and tech-forward firms when they’re a good fit. We work with several banks, often see Bill.com for bill payment, credit cards (Brex) for smaller expenses and Expensify / Divvy for expense tracking.
