Background 

A venture capital investor had committed seed and first round funding to a SAAS company without a finance director. 

The VC’s investment was contingent on an FD being appointed, while the Managing Director was oblivious to the benefits an FD could bring to his business and resistant to what he considered would be outside interference. 

I was approached to work with the MD for an initial trial period of three months, delivering one half day each month, and ongoing email and phone support. 

Challenge 

As a part-time FD for several SMEs, and often appointed by the investors, I appreciated the need to win the MD’s trust. It would be easy for him to see me as the ‘VC’s man’, and for this to impact our working relationship, which needed to be open and honest if I was to offer the best value. 

Very simply, the VC wanted to know that the numbers were credible. 

Solutions 

To start, I got stuck in to the numbers, clarifying the business’s position for the investor, while highlighting to the MD what insights the numbers were telling him. We discussed what the MD needed to know so that he was able to ‘read’ the headline figures and each month – gross profit figures, debtors and other key metrics that would enable him to make better informed decisions. 

I adopted the role of an ‘honest broker’ between the MD and VC, chairing meetings between the two parties. With the VC, I shared issues arising before they came to a head, and with the MD, I discussed what he could ‘do next’ and the opportunities available to him. 

Initially, I adopted a wide scope for my work, advising on cashflow, financial management, reporting, funding options, remuneration and finance function staffing, and my hours were extended to one day per month. My experience with other software businesses enabled me to advise on common errors NPD investment and pricing, and benchmark the company’s performance. 

Benefits 

In order the business could continue to benefit from accurate, timely and comprehensive reporting, I established a finance function, first working with a part-time bookkeeper, so the business paid for only what it needed. I advised when a full-time FD should be appointed, drew up the job specification and sat in on the recruitment – adopting a non-executive role myself. 

With credibility established around the numbers, my involvement kept the VC onboard and reinvesting. During my four years in post as FD, the business grew from £200k to £2m turnover and four to 24 staff, and benefitted from three further rounds of funding. As a result of this, the MD achieved a higher value on exit, and, I’m pleased to say, went on to engage me on his next venture. 

Case Study: Malcolm Holloway