Finance is often overlooked in the early stages of a startup, left to external resources or quick fixes. But without someone there to ensure the train runs on time, it can lead to blind spots–ones that cause everything from a minor hiccup to major setbacks down the track. 

The truth is, your finance function is more than just numbers. “In many respects, they’re the Chief Risk Officer and Chief Truth Teller. Sometimes, you have to tell somebody their baby’s ugly even when it’s the hard thing to do. It’s being the adult in the room in a lot of scenarios,” says CJ Gustafson, the mind behind Mostly Metrics and the host of the podcast Run the Numbers. 

Investing early and properly in finance isn’t just about keeping the lights on–it’s about setting the foundation for long-term success. We sat down with CJ to discuss how early-stage startups can get on the front foot of finance, starting with a 101 on finance tasks, roles and scope to building out your finance capabilities across business stages and the key metrics and mistakes to avoid. 

You can watch the full session or read our key takeaways below.

Finance fundamentals

The first priority for any finance function is simple but crucial: understanding how cash enters and exits the building. Cash is the lifeblood; without a clear grasp of where it comes from and where it’s going, you can’t effectively build or scale a finance operation.

At most tech companies, people are the most significant expense.

“70% of costs walk on two legs in software businesses,” says CJ.

“You either need people to build or sell the product or people who can help those two groups do it better. By partnering with human resources, finance helps allocate the headcount to be hired.”

Finance also sits at a critical intersection with the company. Whether it’s negotiating with vendors, managing headcount, or assessing quarterly performance, finance teams collaborate with every department. Intersections also tend to be where accidents happen, but CJ believes finance is equipped to handle these challenges because they know all the variables in play.

“As a first-time CFO, I was asked to negotiate a contract, hoping it would be with some Series B company, but it was our Salesforce renewal,” shares CJ. “I had to go up against this 800-pound gorilla and tell them we’re not renewing Tableau and we need fewer licences. But finance is best positioned for this as we understand all the levers in the negotiation, like how many people we’re hiring and the company’s needs across different departments.”

Taking a step back, CJ summarises all the “big rock” in finance to start with as:

• The annual operating plan and the hiring plan that accompanies it.
• Monthly and quarterly reporting that’s the by-product of putting those resources into action.
• Fundraising to ensure you have cash in the bank. 
• Admin items like travel budgets and cap table management.

When to bring finance in-house

Early-stage founders often default to outsourcing finance, typically working with a bookkeeper or a fractional CFO. However, many stick with those models for too long, missing the critical moment when an in-house function could boost growth.  

Striking the right hiring balance is key. “Hiring too fast–we all know how that movie ends,” warns CJ. “But hiring too slow can also be terrible. You put these ambitious goals in front of everybody at the company and get them riled up and you’ve got an 18-month window to capture the market. If you don’t get ahead of that, especially in sales, and get the right butts in seats and ramped, you’re not going to hit those goals and then the oxygen gets sucked out of the room.”

While outsourcing works early on, internal financial leadership becomes essential as the company grows. CJ also points out that the rise of specialised fintech tools and platforms like Gusto and Quickbooks makes it easier for early-stage startups to manage their finances without hiring a sledgehammer of a team. 

CJ believes that once a company reaches $5m-$10m ARR, it’s time to bring finance in-house. There are some exceptions to this, but tread carefully. “Anecdotally, I’ve heard of tech companies relying on fractional support through to $25m-$30m ARR, which I think is stretching it, but it can be done if your business model is very predictable,” says CJ. 

Adding a CFO early on provides critical oversight for startups with complex revenue streams, multiple product lines, or if you anticipate an acquisition. 

“When I see a CFO come in early on, they’re really like a CFO/COO that’s the right hand to the CEO for everything that doesn’t fall into the buckets of building or selling.”

Your finance function needs to evolve in step with each funding stage. Here’s CJ’s rough roadmap to guide your finance team’s development, from outsourcing the basics to building a full-scale department. 

Hiring your first finance team member

When you bring on your first finance hire, CJ suggests considering it less as hiring “finance” and more as your first core business hire. This role will go beyond just numbers–they’ll be embedded in the business, helping shape strategy from day one.

The first finance hire needs to be commercially minded, someone who can help founders think through critical early decisions: How should sales compensation be structured? What’s the best way to model out financials for fundraising? How do we ensure our board materials tell the right story? This person should have a solid grasp of metrics and be ready to build models that adapt to the unique demands of a high-growth company. 

When interviewing for this first hire, look for a candidate who is both honest and deeply analytical. Here are some two key questions to ask:

1. “What’s your weak spot?”
   Look for transparency here. A good finance hire will openly discuss areas for improvement and demonstrate a willingness to tackle any gaps.
   
   “They need to be willing to raise their hand when something isn’t working. If they can’t be honest about that or give you a BS answer, my spidey sensors would go on,” says CJ.

2. “Given what you know about our business model, which metrics would you prioritise or ignore?”
   This question assesses their ability to identify key performance indicators relevant to your business’s stage and strategy. It’s essential for this person to know not just what to measure, but what to deprioritise as well.

After evaluating their experience and mindset, a case study is the next critical step. “I have a rule, we call it dope on the table,” says CJ. “There are a lot of finance people out there who are slick talkers but have never actually opened a spreadsheet. I need to see you work the product because I don’t want to hire someone that needs me to stay up until 10pm moving wingdings around a slide. That’s not going to help me go faster.” 

If a candidate resists this exercise, it may indicate a lack of hands-on experience. Look for someone eager to roll up their sleeves and dive into the details.

Finance and founder dynamics

A successful founder-CFO relationship is all about complementing each other’s strengths and weaknesses. “Every Batman needs a Robin, right? You gotta go and figure out who your foil is,” says CJ.

The primary goal of the CFO is to help the founder sleep at night. “Finance allows the founder to be more on-risk and the team to play offence because we’re playing goalie,” says CJ.

“This doesn’t get said a lot, but sometimes you hire a finance person to be a human shield. And I’m okay with that—I can take a punch.”

Whether it’s pushing back on a new hire request or negotiating a difficult contract, CJ says being the CFO is a series of uncomfortable conversations over and over again. The CFO often takes on the “bad cop” role so the CEO can focus on motivating the team, building momentum and pushing the vision and company forward. 

A certain level of tension between the CEO and CFO is not only healthy, but necessary. “I have this saying that came from Jeff Bezos: Beware of all green dashboards,” says CJ. “A lot of the time, the CEO and functional leaders will want to show green dashboards. You have to be the person that’s willing to put the numbers on the screen that need improvement, otherwise people will get complacent.” 

For a CFO to truly partner with the CEO and the broader business, there has to be alignment on goals from the outset. CFOs who over-index on supporting just the CEO tend to clash with other executives, leading to short tenures. 

“What I think works well is spelling out the shared priorities and goals of the company. That way, when you have to play bad cop, it’s a lot easier to say, ‘We all agreed to do these things; if we allocate those resources here that means we can’t do that thing over there,” says CJ. “I try to get buy-in at the beginning of the year and every quarter on what those priorities are and use those as what we’re bumping up against by saying, ‘I want to enable you to go faster, but what did we all agree to collectively do?’”.

Avoiding common metric mistakes 

A frequent misstep in startup metrics is relying on complex composite figures like CAC payback period to manage daily operations. “There’s like 17 different levers in it. There isn’t one person I can turn to in the company and be like, ‘This sucks, how do we fix this?’” says CJ. Since no single person can influence it alone, it’s best to use simpler metrics for everyday tracking and reserve compound figures for quarterly or annual reviews of overall business health. 

Another pitfall is neglecting to segment key metrics by customer type. Different customer tiers, like SMBs and enterprises, have unique expansion dynamics and value trajectories. For example, a customer spending $1,000 per year has a different growth path and product needs compared to a $50,000 per year customer. CJ advises it’s never too early to start segmenting because every company reaches a point where they wish they had the historical data to track trends over time.

Finally, beware of cumulative metrics. “This one always grinds my gears,” says CJ. “They are worthless metrics. Please don’t put them in your board decks”. Figures like all-time users, total downloads, or lifetime revenue don’t reveal meaningful trends because they can only increase over time. They obscure insight into growth pace and momentum–key factors for decision-making. Instead, attach a time frame to metrics to showcase the rate of change, providing a clever view of your business’s current trajectory.  

Building your finance tech stack

ERP (Enterprise resource planning)

Start with something like QuickBooks, which has proven scalable–FitBit reportedly used QuickBooks until reaching $300m in revenue. Eventually, as you scale, consider transitioning to more robust platforms like NetSuite or Sage. Your ERP forms the foundation of your financial operations, so getting this right early is critical.

Payments and credit cards‍

“When the first finance person is hired, like clockwork within a day, everyone in the C-Suite is asking for a credit card, so you want to have an answer for that,” advises CJ. 

Platforms like Mercury, Ramp and Brex offer robust solutions that provide virtual credit cards and allow for easy spend monitoring. A clear policy on credit card users and spending management is crucial–ensure consistency, whether you’re taking a strict or flexible approach. 

Expense management and travel‍

Sync your expense management system with your ERP and payments system early, ideally by Series A. Unmanaged travel expenses can be a black hole for your budget, so integrating travel expense tracking with your credit card system ensures smooth operations and easier reporting. 

FP&A tools

While spreadsheets can take you up to $10m ARR, more complex financial planning requires tools that allow deeper analysis across geographies, marketing programs or customer segments. Your choice here depends on whether you prefer spreadsheet-native or web-based tools:

• Spreadsheet-native options: Aleph, Cube, Verado or Planful (heavier for Series B/C). 
• Web-based pane of glass: CJ recommends Runway for flexible and detailed financial planning.