Why more Indian startups are hiring CFOs? Razorpay, Xpressbees and Shiprocket CFOs weigh in

Startups are hiring CFOs for financial prudence, compliance and cost optimisation as they face a funding drought and investor demands.

  • Updated On May 10, 2023 at 04:28 PM IST
Read by: 100 Industry Professionals
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<p>Why are more Indian startups hiring CFOs? </p>
Why are more Indian startups hiring CFOs?
BY: Anjana Das

Amid funding winter and rising demand from investors on profitability and compliance, many startups are hiring chief financial officers (CFOs) to shore up their finances. ETCFO spoke to the CFOs of Razorpay, Xpressbeez and Shiprocket to understand the importance of experienced finance heads in startups.

Startups are hiring CFOs


Three CFOs of leading unicorn startups say the importance of a CFO is now institutionalised and it's the CFO who is brought in to ensure regulatory compliance, face investors' ire and queries and stabilise the finances of young startups.

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Roughly 50 startups have hired CFOs in the last one two-years.

“In India's rapidly evolving startup ecosystem, the need for a dynamic CFO has never been more pressing,” says Arpit Chugh, CFO, Razorpay, a unicorn FinTech company operating in the payment space.

Explaining the importance he says, “As young startups navigate dynamic regulatory environments and strive for growth, the CFO's role goes far beyond traditional financial management. Being a specialised role, it should not be treated as a secondary responsibility for company founders. Many prosperous startups and unicorns have recognized this and hired a seasoned CFO early on."

Rahul Agarwal, the CFO of Xpressbees, a unicorn logistics startup, believes that there is a need for specialised hands on top.

“ Processes and controls are bound to suffer in a young company if there is no specialised hand to man them and these two metrics are keenly observed by private equity investors coming into the company,” he says.

He adds that CFO is there to handhold the CEO and take over from him on the potential and prospects of the company while presenting it to the PEs and VCs for getting funding and a valuation.”

Tanmay Kumar, CFO, Shiprocket, another unicorn startup in the logistics space, also bets high on having a CFO.

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"Just as a pilot and co-pilot work together to ensure the safe and efficient operation of an aircraft, the CEO and CFO of a startup work together to steer the company towards achieving its business goals. CFOs are strategic thinkers with distinct viewpoints that help startups plan, maintain financial prudence, and comply with regulations. They also help prepare a startup for the systematic development of the finance ecosystem and enable financial analysis and insights."

Importance of CFO in startups


CFOs feel that while CEOs can play a bigger role in looking at the bigger picture in business terms and expanding it step by step, finance heads can build financial layers in place.

“The entire due diligence process, investment strategies and the company performance are fielded by the CFO. Now most investors are freaky about compliance. Nobody wants to take a single rupee hit on compliance. In today's time, governance is key and you need a full-time person in a CFO who takes on the compliance in a company," Agarwal of Xpressbees says.

CFOs helping startups to expand


What makes a big difference for startups is how fast they scale up and hence CFO becomes an integral part while financing the scale-up plan.

"The evolved version of a CFO now is a leader who can oversee multiple functions stretched from sizing the talent and technology investments of the brand and providing strategic insights to optimising costs, and ensuring compliance with evolving regulations" Chugh of Razorpay says.

He further adds that by bringing a farsighted CFO on board, startups can build a solid financial foundation that supports their long-term scalability and success.

Startups, IPO and the role of CFOs

Broadly the startup world is all about funds, private equity, venture capital, etc.

"Private equity investors coming to the startups look at the business prospects, market size, controls and processes in the company. If the CEO is to do all processes and controls, the system will lapse and it will be very difficult for a founder to keep the house in order while he goes to series C and series D (funding) says Agarwal,

Agarwal says the presence of a CFO is utmost for an IPO decision, preparation and filing along with the merchant bankers.

"At the time of going for IPO, there will be the need for a CFO along with the team. For small start-ups in series C and D rounds, investors take the interviews of the CFO because they are keen that there is someone who must be there to take care of compliance and be responsible for the company.”

Tanmay Kumar of Shiprocket, too, believes it's no more just financial management for the CFO's bio that now includes M&As and due diligence as well.

"However, it’s important to recognise other important roles they play. A good CFO will enable investments, be involved in mergers and acquisitions to ensure the right financial diligence and strategic fit and manage costs in a responsible manner while protecting the company's long-term financial health. Essentially, the CFO plays a pivotal role in flying the startup aircraft, always prepared to address unexpected challenges and changes in the market to keep the company on track," Kumar says.

Since the startups are founded by engineers, they focused on building the product and system first. But soon they realise that without having a financial controller the company neither will follow compliance nor will it scale up well. As startups are now filling the gap by recruiting CFOs, it will certainly keep a control on their finances.
  • Published On May 9, 2023 at 09:03 AM IST
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