Startup Guide on How and When to Hire Financial Controller in India?

Just a few months into co-founding my first startup with Mohit, I was hit with a barrage of documents and invoices that needed to be cleared. Before I could process one invoice, a few more hit my inbox. Soon after, we had revenue coming in from multiple ad networks. Simultaneously, we had to file a series of compliance forms and tax declarations. This didn’t stop. As we scaled, sometimes it took about two days of my week just to handle this and it clearly diverted my attention from product building.

Something had to give.

We tried to analyse what was going wrong. We had a CA to handle finances, but we needed an internal, focussed resource to navigate compliances and invoices. By this time we had raised our Series A round of funding and that’s when my co-founder and I decided we needed help and made our first finance hire—a financial controller (FC). With the FC, financial management was like clockwork. Vendor payments, invoicing, and compliance matters were delegated to the FC, which gave us ample time to grow and scale our gaming platform. Our FC also managed treasury, reporting, and other related functions.

Eventually, in November 2020, Flipkart acquired our platform. And now I have started up again with Mysa. Even a decade into my journey, some things haven’t changed. Founders still find it difficult to handle day-to-day finance operations and hiring an FC is the furthest from their mind.
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Challenges in Hiring Financial Controller

‍There are two challenges that hinder them from making this hire -
1. Founders consider capital to be valuable and conserve it for mission-critical roles, including tech and product.
2. Founders underestimate the financial complexities while scaling a startup.

Without sounding alarmist, the consequences of running a business without a finance expert for too long can trigger a loss of both time and revenue growth.

If you are a bootstrapped founder, non-compliance can mean penalties, leading to surprise cash out-flows
If you are a venture-backed startup, it means months of delays in due diligence and often certain large funds passing on the startup due to inadequate financial information.

I’ve heard pushback from my venture-funded founder friends. “I don’t need to raise capital soon.” “I raised two rounds without one. Why do I need one again?” Just for context, a venture-funded founder spends around 12 months in a span of 4-5 years actively fundraising. If your books of accounts are not in order, the financial due diligence inevitably is delayed for months. There have been situations where institutional investors have mandated founders to make a finance hire within days of the closing / cash hitting the bank account. This means founders end up trying to hire on a war footing and that often leads to rushed decisions that may not work in the long run.

In both cases, not having an FC timely directly impacts your company.
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Importance of Hiring Controller: What does an FC bring to the table?

While entrepreneurs are equipped to understand the financial obligations of their startup, getting an FC helps iron out mismatches.

Compliance: As an entrepreneur, you find it difficult to navigate the maze of financial regulations, tax laws, GST demands, and documentation. An FC ensures your finances are up-to-date and fully compliant with the existing rules.
Budgeting and expense planning: An FC has the onus to set a budget in accordance with your startup’s current revenue and future potential.
Fundraising: Today, accelerators, grants and VCs are not the only sources of external capital. An FC knows and can offer advice and execute on alternative sources of capital (revenue-based financing or ARR-based financing).
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When to hire a Financial Controller

‍Now that I’ve made the case for hiring an FC, let’s determine if you need one in the current stage of your startup.

If you are a bootstrapped startup, once you hit Rs 50 lakh-Rs 60 lakh in monthly revenue or Rs 1 crore of monthly spending, you need an FC.
If you are a VC-funded startup, the right time to hire an FC should be right after you raise $1 million in capital.

Sometimes, capital raised or monthly revenue may not be a true indicator. You can, for instance, be earning Rs 50 lakh a month, but if that’s from, say, five customers, you don’t need to hire one yet.

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‍Hiring Controller: How do you start looking for FC?‍

Once you’ve identified the need, you now need to understand how to start looking for one. I’ll be honest, I didn’t know either when I did this the first time. At that point, Sanam Rawal - Founder of Metamorph, helped me find one for Mech Mocha. This time for Mysa, given the nature of fintech, we needed experts to help us connect to the best in the space. So I reached out to Kanchan Panjwani from MetaMorph. I relied on her lived experiences to mould my opinions and find Karthik, who is head of finance for Mysa.

Given my personal experiences with Metamorph, we at Mysa have enabled this right out of the bat for you.

Carve out a budget to make the hire, because hiring an FC can be ‌a time-consuming process.

A bootstrapped founder should allocate about Rs 15 lakh to Rs 18 lakh as annual salary.
A VC-backed startup, however, depending on the complexities of work, may need to allocate up to Rs 45 lakh in salary expenses.

Typically, an ideal candidate would have between four and six years of experience, preferably with one of the large accounting firms or an active role with early-stage companies.

Caveat: These are indicative salary figures and the average costs can be significantly higher or lower based on the skills and experience of the candidate and your spending ability.
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Who do you hire? Qualities to Look for in a Financial Controller

You’ve carved out the budget and now you need to make the hire.

A SaaS startup, for instance, may require an FC that understands the software business, while a fintech startup may need someone who has some level of experience in the BFSI sector. An obvious must-have is integrity and dependability.Beyond the basics, I wanted to probe a little deeper and reached out to my network, including Ashish Fafadia at Blume Ventures, to find out the key requisites of an FC.

Here’s what he said, in order of importance:
1. Good pulse on accounting basics.
2. Good pulse on cash flow and working capital management.
3. Good communication.

Performing a thorough reference check is the best way to find out if the candidate has the above three qualities.I also understand that not every founder is finance-first. So being able to interview and vet the candidate is supremely important.

For a bootstrapped startup, reach out to your network. Find a CFO at a company you admire and request them to volunteer their time to interview your candidate.
For a venture-funded startup, investors often have capabilities in-house that can help founders through this process.

But if you are a finance-first founder, there are a few things you need to keep in mind when you’re interviewing the candidate. They need to:

Manage financial compliances.
Set processes and internal controls.
Offer transparency to the board and investors.
Be able to manage a team of two to three people as you scale.
Educate first-time founders.

Depending on the hiring market, it may take between 30 and 45 days to find an FC. However, keep in mind that the FC will need to serve another two months of notice period at their current organisation, given the criticality of their role. So start hiring at least a quarter before you think you need one.
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Empowering the FC

Every hire at a startup, irrespective of their role, can perform to the best of their ability only when they have the liberty to make decisions and challenge the founders. It is no different for an FC. Once you hire, it's important to empower and enable the FC to position the company towards a good growth trajectory and strong governance.

In the ever-dynamic world of today, a skilled FC can prove to be the differentiator while scaling, expanding, and raising capital. The earlier you start, the more time they get to understand your business and create an outsized impact.

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Startup Guide on How and When to Hire Financial Controller in India?

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Startup Guide on How and When to Hire Financial Controller in India?

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