📬 CEO or CFO: Who's responsible for startup fundraising?

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Now, on to today’s Mailbag.

We’ve got some great topics. Here’s what’s on tap:

Now, let’s get into it.

Karl from the US asked:

Whose responsibility is it to raise money at a startup? The CEO or the CFO?

It would be easy to say it’s a team effort, and of course, it is to a large extent. But in those early days it is the founders’ voice that will raise the money. Not the CFO’s.

But there is plenty of nuance to that, so let’s break it down…

In the early days you have no cash flows, few or no customers, and maybe even no product. The only thing you have is a story. A vision for a better future that depends on your startup existing, and a compelling case that you are the ones to execute it.

That story has to be told with conviction, credibility, and charisma. That is a founder and CEO job, much more so than a CFO job. Investors at the early stage are backing the person as much as the idea, and the founder is that person - not you.

I’m not saying a CFO can’t do this too, but you won’t do it as well as the founder. And if you can then you are arguably working with the wrong founder.

The CFO's role in early fundraising is to make the founder dangerous. Not to lead, but to arm. That means:

As the business matures, the balance shifts. By Series B and beyond, investors are doing real diligence. The metrics start doing more of the selling, and the CFO becomes a much more important voice in the room.

Institutional investors in particular will want to pressure-test the model directly with the CFO. Your credibility as a financial operator starts to matter as much as the founder's vision.

The CFO's job is to make sure the numbers tell a coherent, honest narrative that reinforces the CEO's vision rather than contradicting it. Nothing kills a funding round faster than a CFO whose model tells a different story than the CEO's pitch.

The CEO owns the relationship, the vision, and the room. The CFO owns the preparation, the credibility, and the numbers. And the latter becomes more important as the business grows and develops.

TLDR: In the early days, however hard you try, it’s the founders’ vision and conviction that will raise the money. The CFO makes sure they can. As rounds get larger and later, the CFO's role grows.

Stu CFO from the UK asked:

I’m interested in your thoughts regarding budgeting and how it links to financing decisions.

I’m in a manufacturing SME with debt obligations. I love the idea that we have just one set of budget numbers that fulfills both the performance management function and also supports financing projections (e.g., cash available for debt service). My idea is the transparency will mean the business knows it’s do or die on those numbers and there are not a set of secret finance numbers that have a lower bar which might take the pressure off.

However, attempting this leads definitely leads me to go conservative and restrict the operational stretch in the budget, because clearly I’m worried about missing budget and debt repayments. This conservatism will cap the drive for performance.

Is there no other option other than a budget for performance management that the business sees and then a “secret” financing model?

StuCFO, I think there is a short answer to this one.

But let me start with why your instinct to have one set of numbers is right. Secret finance numbers are corrosive. The moment the business senses there is a softer version of the budget somewhere, the tension drains out of the operational targets. People find the floor, not the ceiling. And performance malaise is real and insidious.

If the business eases off the gas by 5%, how does it know it has calculated that 5% correctly? It probably eases off by 8 or 10% accidentally, and now you have a problem that crept up on you quietly and is hard to reverse.

Kind of like why a sports team needs to stay sharp even against weaker opponents.

But pure operational stretch with no buffer is dangerous when you have debt obligations underneath it. So here is the answer.

Build a risk adjustment line into your budget consolidation. AKA ‘contingency’, ‘planning reserve’, or a ‘dummy’ line. The language depends on where you cut your teeth. It allows you to push operational assumptions to the right level of stretch while building enough conservatism into the total plan to protect your financing obligations.

Sizing it correctly is the hard part. Too small and it does not protect you. Too large, and it quietly becomes the secret soft budget you were trying to avoid. Get that calibration right, and the whole thing holds together.

You do not need to be secretive about it either. Tell the exec exactly what it is. You are pushing hard, something will probably miss, and this line absorbs factors outside anyone's direct control. Everyone is bonused against their operational targets, not the consolidated total. Any draw on the contingency requires a pitch from the responsible exec, with a clear explanation of what happened. That keeps the tension in the system and stops the pot from making people lazy about their targets.

One final thing. A stretched budget is only safe if you are actively monitoring covenant headroom throughout the year, not just at budget setting. Build a regular re-forecast cadence into your rhythm so you always know where you stand against your debt obligations with enough lead time to act if something is drifting.

TLDR: You don't need secret numbers. Build a visible risk adjustment line, push operational targets hard, size the contingency carefully, and re-forecast covenant headroom regularly.

Ben Button from the UK asked:

I'm a new CFO, operating in an unfamiliar sector, for a business that has experienced a couple of years of operating losses but turned a small profit in its latest financial year.

In the challenging years, the business was brought to its knees; banking covenants were broken, cash was tight, and morale was low. The eventual refinancing was conditional on aggressive cost-cutting and other strict terms, including (very) regular checks on cash collections. We're still locked into most of the stipulations, but to date, we have adhered.

An opportunity has arisen to acquire a strategically important asset for which we need financing. Doing nothing will stifle profit in the medium to long term as a competitor is also bidding. The seller wants potential buyers to act very fast (weeks, not months), they want cash and need proof of funding.

How would you suggest approaching this with our lenders, from whom I'd need approval even if I were to seek alternative financing?

BenButton, there is a lot going on here, and the devil is very much in the details. But let me give you my top-of-mind thoughts.

First question, and I mean this genuinely: are you sure you want this deal?

Your business has just gotten its face out of the dirt, but you are likely still on your knees…

Covenants broken, cash tight, refinancing conditional on aggressive cost cuts, and you are still locked into most of those terms. Acquisitions and integrations are brutal even in good conditions. They will consume your attention completely, and you need to know the core business will not crumble the moment your back is turned. You cannot acquire your way out of underperformance. I have seen a few businesses try, but I have never seen it work.

You could end up with ‘two drunks propping up a bar.’

That said, the best M&A is almost always opportunistic, and it rarely arrives at a convenient moment. So if you have genuinely stress-tested the strategic case, you know the asset is worth fighting for, and you are confident the core business can hold while you execute, then fine.

Let's talk funding…

Assuming there is no easy equity on tap (you wouldn’t be asking if there was), your current lenders are the obvious starting point. But be clear-eyed about where they are likely to land. They just lived through a very uncomfortable period with you. They will be cautious, possibly hostile, and almost certainly slow.

Here is where being the new CFO is actually an asset, not a liability. You have a legitimate reason to go and have open, informal conversations with your lenders about their appetite, their view on the credit, and their general sense of where the relationship goes from here.

Frame it as getting up to speed. What you are really doing is taking the temperature before you show your hand on the deal. That intelligence is invaluable, and you can gather it without committing to anything.

At the same time, map your alternatives. Is equity an option? Is there a challenger lender or someone in your existing banking group who is more ambitious and growth-oriented than the others? Having a credible alternative financing path is not just a backup. It gives you leverage with your existing lenders, especially if you are also able to refinance your current debt burden if needs be.

The ability to say, directly or implicitly, that you do not need their approval to get this done will change the dynamic of that conversation materially.

On proof of funding: you probably cannot get to a fully committed facility in the timeframe the seller is demanding. But a credible indicative term sheet from a lender, even a conditional one, is often enough to satisfy a seller in the early stages.

That is what you are racing toward. Not a signed facility, but something tangible enough to keep you in the process while the full diligence runs… giving you the time you need to run a fuller financing process.

Ultimately, it comes down to how attractive a financing proposition this actually is. Credit investors only care about getting their money back. They do not care how good good is, only how bad bad is. So your job is to build a story around three things: the quality of the current business, the quality of the target asset, and the credibility of the plan to create cash flow from combining them.

The cleaner and more conservative the story is, the better your chances.

And be honest with yourself about the downside. If the lenders say no and alternatives do not materialize, is there a version of this deal that is smaller or structured differently that would change the funding picture? Or does the business walk away? Knowing your walk-away position before you start these conversations will make you a sharper, more credible negotiator throughout.

Move fast on the informal conversations. You do not have time to be sequential about this.

TLDR: Make sure you want the deal first. Then use your new CFO status to quietly test lender appetite, map your alternatives, and get to an indicative term sheet fast. Know your walk-away before you start.

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

CFO of lender is convicted of bank fraud

This bank CFO defrauded his own bank to fund a car wash. The detail that hits the hardest: His LinkedIn still describes how he "curated a capital plan that maximized shareholder value." Lol.

Jack Reacher actor beats up a KPMG Senior Director

If you’ve seen that viral video doing the rounds of Alan Ritchson (who plays Jack Reacher in the TV show) beating up a neighbor over a dispute. Turns out the recipient of that beating is a Director at KPMG. Double Lol.

Some CFOs say AI is starting to pay off in profit and productivity gains

This is the first time I’ve seen any CFOs go on record and report real gains in their businesses from AI. It looks to mostly be in software engineering teams to date, but still significant nonetheless.

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

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Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.