Startups, which are raising an abundance of cash, are moving to hire more chief financial officers (CFOs), The Wall Street Journal (WSJ) reported.
Usually, startups would have just a few dozen employees and would be looking to stay light-footed, keeping their payrolls less burdened in their first few years, according to WSJ. Many would delay hiring CFOs until they became more robust organizations and had more of the means to do so.
But now, balance sheets have been rising quickly, and special purpose acquisition companies (SPACs) have given a new route with which to go public, WSJ reported.
So, many newer companies have been looking for CFOs earlier than they would have been. The number of CFO appointments for U.S. startups that have raised between $10 million and $100 million increased 95 percent, with the total number now sitting at 162 for the 12 months that ended May 14 compared to the year prior, according to WSJ.
Startups are expecting their finance departments to handle more complex operations earlier. They’re raising more funds at higher valuations, WSJ reported.
Before, this wasn’t the case, and many startups looked at hiring CFOs only when they hit their growth stages at Series C or later, once they had a decent business model and were making real revenues. But some startups now have begun moving the process up, and they have been hiring CFOs in the A or B stages as they mature quicker and need better finance departments, according to WSJ.
That applies not just to venture capital firms, but also corporations, hedge funds and private equity firms, which are all looking at younger companies now, WSJ reported. Last quarter, early-stage U.S. startups hit a record $14.5 billion, which was a 41 percent increase from the previous year.
Venture capitalists have been backing tech startups at a quicker-than-usual pace, with the competition among firms being the impetus. That comes despite worries about over-valuation.