Christopher Ling, a chief financial officer in the Boston area for years, first noticed a shift last summer in the type of inbound inquiries he was receiving from recruiters. The economic outlook was deteriorating, tech companies were talking about layoffs, fundraising was dropping and there was even talk of a recession.
“The conversations certainly did flip from talking about fundraising to, 'Have you ever actually run a business that’s actually made money?' and getting to a 12-, 24-, 36-month plan to get to a breakeven, and then putting the company in the black,” said Ling, who's held CFO roles at Waltham-based Veo Robotics Inc. and, more recently, Woburn-based water tech company ZwitterCo. “Those were conversations that had not come up when others had reached out to me in the past.”
Boston-area executive recruiters, CFOs and other startup executives say they’ve noticed a similar trend over the past year as the economy resets itself after years of sky-high valuations and optimistic growth. They say the conversation has shifted from hiring CFOs and fractional, or part-time, financial leaders with a "grow fast and furious" mentality to a more long-term, strategic mind-set with an emphasis on operational skills. Some recruiters and founders said they’ve even seen an increase in requests for financial leaders, making it more difficult to fill this key position.
“The last couple of years are the year of the (chief human resources officer) or the (chief people officer) because of how complex the people challenges were,” said Nick Cromydas, co-founder and CEO of Hunt Club, a Chicago-based recruiting company. “We’re entering the era — the year or the half-decade — of the CFO.”
CFO hype is real
Hunt Club has a growing Boston office that includes serial entrepreneur David Chang and former Silicon Valley Bank leader Jesse Bardo. Cromydas said search requests for financial leaders have gone up 30% to 40% year over year. Over much of the last five to 10 years, Cromydas said the primary metric by which CFOs and other top financial leaders were measured was growth. These “dealmaking CFOs” were focused on corporate development, outside fundraising and strategic planning, he said. Now, the trend operational CFOs — those who can help CEOs manage their direct reports, drive internal management systems and oversee capital allocation.
Zachary Donah, deputy CEO of the Massachusetts Society of CPAs, also sees CFOs taking on a bigger leadership role at companies. For a long time, CFO and finance roles were siloed and viewed as “scorekeepers” who produced a monthly report for executives, Donah said.
“Now I think it’s really the number-two role next to the CEO in these companies, because they’re the value partner that’s thinking about not just where the company is financially, but where they are from a data standpoint and a technology standpoint,” Donah said.
Donah credited this shift in the role of financial leaders to a few factors. The difficult economic environment over the past few years, beginning with the pandemic in 2020, led many business leaders to put their faith — and their fate — in the hands of CFOs.
“It’s the most complex environment for businesses and individuals that there probably ever has been before. And so I think when people are looking for a pathway through that complexity, it’s CFOs or public accountants that they go through to help with that,” Donah said.
The digitization of business data in the last few years has also given CFOs the ability to make more proactive business decisions rather than reactive overviews of the company, Donah said. And public accounting firms that offer client advisory services, essentially outsourcing CFO responsibilities, are seeing a growing demand for this offering, he said.
“I think it’s the fastest-growing service within the accounting industry,” Donah said. “Which I think speaks to the demand … this role is really becoming sort of key to every organization’s long-term success.”
It’s a jungle out there
Last year, Gradient AI founder and CEO Stan Smith knew he would soon be in the market for a CFO. The serial entrepreneur has founded five other startups before Gradient AI, a startup that focuses on applying AI to underwriting claims management in the insurance industry.
Gradient AI became independent in 2018 after spinning out of a larger company. Until this year, the company outsourced the financial management to a seasoned CFO and his team. Smith said he planned to bring on a full-time, internal CFO when the company hit its expected growth metrics in 2022.
But he found that it was “very difficult to find the right kind of person” when they began their CFO search around the start of 2023.
“It’s a very tight market. It’s tight in every aspect,” Smith said. “The good people were all tied up and just weren’t ready to move. Not a lot of folks in the marketplace.”
Smith eventually found and hired Jim Carr, the former CFO of Imprivata. But he said that beyond his own company, he's seeing the tight market conditions influence the type of CFO startups are trying to hire.
“The investment environment here has turned a lot more to efficiency, managing cash better,” Smith said. “I think the world is turning into, you need a very operationally centric CFO involved in the company if you want to get it to where you want to take it.”
Upsides of operational CFOs
Even if startups are putting a greater focus on operational CFOs more recently, not all recruiters think it should be a short-lived trend.
Carina Clingman founded Recruitomics Consulting to help startup biotech and pharmaceutical companies with talent acquisition. Most frequently, she said, those early-stage companies are looking for fractional CFOs.
Clingman said that some startups don’t bring in CFOs early enough, and don't value financial leaders’ insight beyond fundraising. Recruitomics has always approached the CFO position as a very important and operational role, she said.
“We’ve always seen them partner with our clients in that way, and the funding aspect is obviously critical, but it does ebb and flow,” Clingman said.
Clingman said she suspects this long-term operational mindset may just not have been talked about as much when capital was really flowing over the last few years.
“There was a lot of chatter about funding. Now things are tightening up in the last year and the money isn’t flowing as much so now that operational mindset is so much more important than ever before,” Clingman said. “Maybe it’s just more in the limelight.”
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