For a startup preparing to raise capital, the financial side of the business needs to be just as strong as the pitch.
Investors want to understand the opportunity, but they also want to see the numbers behind it: how the business makes money, how quickly it is growing, how much cash it needs, what that capital will fund, and what the company expects to accomplish with it.
That is where a fractional CFO can make a meaningful difference. Rather than simply managing the books, a fractional CFO helps leadership understand the financial position of the business, prepare for investor conversations, and make informed decisions about capital. For a broader look at how an outsourced CFO can get involved with a growing company, see What an Outsourced CFO Actually Does in the First 90 Days.
Building the Financial Foundation
Before a company starts talking to investors, it needs a clear picture of its financial position.
For many startups, that means taking existing financial information and turning it into a useful management tool. A fractional CFO can build financial models and forecasts, establish meaningful KPIs, improve cash flow visibility, and give leadership a better understanding of runway and future capital needs.
This can include:
- Financial modeling and forecasting
- Cash flow and runway analysis
- Budgeting and scenario planning
- KPI development and reporting
- Financial statement analysis
- Investor-ready reporting
- Financial due diligence preparation
The goal is to give founders a financial model they can actually use to make decisions, not simply a spreadsheet created for the fundraising process.
Determining How Much Capital to Raise
One of the most important questions in a fundraising process is also one of the simplest: How much do we actually need?
The answer should be tied to the company’s operating plan and the milestones it expects to achieve, rather than an arbitrary fundraising target.
A fractional CFO can help management model different scenarios and determine how additional capital could affect hiring, product development, sales and marketing investment, expansion plans, and overall cash runway.
That may mean looking at questions such as:
- How much capital is needed to reach the next major milestone?
- How long will the company be able to operate with the capital raised?
- What happens if revenue comes in below expectations?
- How much additional investment is required to support growth?
- What level of cash reserves should the company maintain?
- When will the business likely need to raise again?
Having this analysis in place gives founders a much stronger position when entering fundraising conversations.
Preparing for Investor Conversations
Investors will dig into the numbers. The management team needs to be prepared to explain them.
A fractional CFO can help develop the financial projections and supporting analysis investors expect to see, while also helping leadership understand the assumptions behind the numbers.
That can include revenue projections, operating expenses, gross margins, cash burn, customer acquisition, headcount plans, working capital, and the company’s path toward profitability or its next stage of growth.
It also means being prepared to answer the inevitable follow-up questions: Why is revenue expected to grow at this rate? What happens if growth is slower? Why are expenses increasing? How much runway does this raise provide? What does the company need to accomplish before the next round?
The better those answers are supported by the financial model, the more useful the model becomes throughout the fundraising process.
Supporting the Fundraise
A fractional CFO can also stay involved once conversations with investors begin. Depending on the needs of the company, that may include:
Investor reporting and communications: Preparing financial information and helping management clearly communicate company performance.
Due diligence: Organizing financial records, forecasts, and supporting documentation for prospective investors.
Capital structure: Modeling debt, equity, and other financing options and helping leadership understand the potential impact of each.
Cap table and equity management: Evaluating ownership and dilution as different fundraising scenarios come together.
Scenario modeling: Updating the financial model as valuation, deal terms, growth assumptions, or the amount being raised changes.
Board and investor support: Translating financial performance into clear reporting for investors and board members.
The fundraising process rarely follows the original plan exactly. Having someone who can quickly evaluate the financial impact of changing assumptions can be valuable as the deal develops.
What Happens After the Raise?
Closing the round is not the end of the financial work. In many ways, it is the beginning of a new phase.
Once capital is in the business, management needs to track how it is being deployed, measure performance against the plan, and provide investors with visibility into how the company is progressing.
That can mean ongoing support with:
- Cash flow management
- FP&A
- Budgeting and forecasting
- Investor and board reporting
- KPI development
- Strategic capital allocation
- Financial systems and processes
- Growth planning
- Preparation for future fundraising
For some companies, a fractional CFO is the right solution for a specific fundraising period. For others, the relationship continues as the business grows and its financial needs become more sophisticated.
The Role of a Fractional CFO
A startup may not be ready to hire a full-time CFO, but that does not mean it should wait to bring experienced financial leadership to the table. A fractional CFO can step in where the company needs it most, whether that is building a financial model, preparing for a fundraise, improving cash flow visibility, supporting investor due diligence, or helping management make better decisions about capital.
The value goes beyond producing a forecast or preparing a report. It is about helping leadership understand what the numbers mean, what decisions they support, and how those decisions affect the next stage of the business.
For a startup preparing to raise capital, that perspective can make the difference between simply asking investors for money and having a clear, defensible plan for how that capital will move the business forward.
Looking for financial leadership without the commitment of a full-time CFO? Contact the Evergreen Advisors Outsourced CFO team to learn how fractional CFO support can help your business prepare for its next stage of growth.