Startups are not just sharing workspaces, they are also sharing senior level executives in finance, HR, marketing. It helps keep costs low.
25 Sep, 2017ECONOMICTIMES.INDIATIMES.COM
If Sridhar Subramanian had a LinkedIn profile, it would probably read: Monday, CFO at fintech startup, Tuesday, CFO at agri-tech startup, Wednesday, CFO at gaming company, and so on.
Subramanian, 51, has two decades of experience in finance, working with large companies like 3M and Coca-Cola. Now, he works as what is called a "fractional" CFO, for over a dozen startups. He is the go-to man for these startups for issues in accounting and managing compliance, and he is also their sounding board for structuring plans. "My work is mostly need-based since these companies do not have a constant flow of work. It is financially rewarding and more challenging to do this," he says.
For startups that can't afford to spend much money, such fractional CXOs are a huge cost saving. Chennai-based OrangeScape has had Subramanian as a virtual CFO for close to a year now. "We don't have enough work for a full-time CFO as of now. We have finance folks who manage the book-keeping. What we need is a person who makes sure that the obvious things are being done and who can advise us on financial decision making," says Suresh Sambandam, co-founder of the company that provides a cloud platform to build applications. Subramanian advises on deploying excess cash, preparing documentation for banks, and strategic decisions.
Areas such as finance, marketing, strategy and sales lend themselves to virtual or fractional chiefs. Joydip Gupta has been working with multiple startups for the past two-and-a-half years across roles. Depending on the experience gaps that the startups are dealing with, Gupta takes on roles in strategy, marketing, hiring or market analysis.
Gupta says his calendar is his Bible. "I've been a stickler to the calendar from the beginning. Besides helping me keep my appointments, it also lets me know in advance when I may have a lean period," he says.
For fractional chiefs, a big benefit of working with multiple startups is the ability to apply learnings from one startup to another. "There are soft learnings that you can apply irrespective of the nature of business. How one founder was able to manoeuvre a roadblock, how a founder is setting the culture of the company, or something as fundamental as using a tool to facilitate team dynamics - these aspects are applicable across startups," says Masroor Lodhi, who works with nearly ten startups at any point in time.
But there are pitfalls too in this - issues of conflict and confidentiality could emerge. Gupta says managing multiple founders in different verticals can become challenging. Lodhi says building trust is critical. While some companies insert confidentiality clauses in their contracts, most startups work on trust. "I work with a startup to help them grow. If I cannot share their ideas with my network, I cannot help them make the right connections," Lodhi says.
Subramanian also notes that what looks like conflict can become an opportunity. "I work with multiple startups in the agri-tech area. They can choose to be competitors or work with each other. I don't exercise any influence on their decisions but I make the introductions," he says.
In what roles should you avoid a fractional chief? Sanjay Swamy, managing partner in Prime Venture Partners, says fractional CEOs would never work. "Ideally, a founder should be CEO. At Prime, we are happiest if founders scale and learn the ropes of becoming long-term CEOs, as the company progresses. The founder & CEO is the one who brings the passion for the business and is often the first and primary sales person too," he says.
Sambandam too is wary of giving them roles like sales and marketing. "Out of desperation, you may be tempted to bring in people to manage sales and marketing on a part-time basis. But these are strategic roles from Day 1. You need people who have their skin in the game," he says.
Padmaja Ruparel, founder of Indian Angel Network, says even the finance function cannot be fully handed over to a part-time professional. "Compliances are the company and CEO's responsibility. You can consult and hand over a small part of finance to an expert, but aspects like negotiations and collections are best handled by the CEO or someone fully invested in the company," she says.
But Swamy says that in most startups, a full-time CFO is only required later on. He thinks a part-time CFO can fulfill the requirements of accounting and compliance perfectly well. Sambandam too thinks the finance function does not become strategic till a startup hits revenues of $10-20 million. "At that point, you will need someone full time looking into it," he says.
HR experts say fractional work will be the trend going forward. "People don't want to be tied to a single organisation or be committed full-time," says James Agrawal, MD of executive search and leadership development firm BTI Consultants. So what startups are adopting today because of their exigencies appear to be the future of work.