The importance of the CFO in investment and raising

The role of the CFO is comprehensive and complex, involving acute financial awareness combined with the flexibility to understand the contributions of each business department. However, where CFO’s are arguably the most valuable is in raising capital through investment. In any industry, the CFO will need to have the skills and creativity to translate data and metrics into an attractive business model that will attract investors in multiple stages of business development.

The CFO is the driving force behind fundraising efforts, providing the information and strategy necessary for raising capital. They must meticulously study the financial reports of the company they are representing, ensuring that they are choosing the best possible fundraising strategy and planning an ambitious yet achievable future. The CFO will have a significant impact on the success of both investment pitches and general networking carried out by the company, as their credibility and capabilities will be considered a reflection of the business itself. The better the CFO is at the practical management of business finances and the presentation of the business in pitches, the higher the chance of securing investment.

There are numerous methods that a CFO can use for raising investment. They are a financial leader who needs to be able to add value to the company it represents through not only effective financial management, but also by creating a clear vision for the company’s future. The CFO is also heavily involved in the process of planning and delivering pitches to potential investors. As a result, they need to also have exceptional presentation and communication skills, alongside their ability to assess the potential development of businesses in the future.

There are five main funding rounds in investment – Pre-seed, Seed, Series A, Series B, and Series C. Sometimes there will also be Series D and E, that aim to accomplish similar goals to Series C.

Pre-seed funding is usually sourced from the personal resources of the business founder(s), such as personal savings, loans from family or friends, or crowdfunding campaigns. However, more local angel investors may also become involved

in this stage of funding if they see significant potential.

The Seed round of funding comes after the initial business idea is backed and has enough momentum to start preparing and carrying out the logistical side of the business. This is the first official round of funding, and it is usually most attractive for local angel investors and equity crowdfunding. Some venture capitalists may also become interested in this round depending on the prospects of the business in question and its financial projections.

During Series A funding, investors will be seeking out established businesses that can demonstrate early success and have ambitious goals for the future. They need to prove that their business has an established customer base, consistent revenue, and a plan for the generation of long-term profit. Series A funding stages are more likely to involve venture capitalists, alongside some angel investors. Many companies are now choosing to involve equity crowdfunding in this stage too. Series B funding is concerned with taking a business beyond the development stage and into the growth stage. Investors are seeking well-established companies in this stage, with higher valuations and clear strategic planning. In this stage, a new category of venture capital firms who specialise in later-stage investing will also become involved.

Series C funding is directed towards businesses that have already found success and need funding for expansion into new markets, new products, or even for the acquisition of other companies. Investors help companies to scale their vision for the future. There can sometimes be additional rounds D and E which aim to accomplish similar goals.

Capability building has become a more important role for CFOs, particularly in the wake of the Covid-19 pandemic which destabilised many businesses. Food retail, in particular, faced several rapid challenges, including changing its systems, processes, and technology in an overhaul aimed at facilitating a dramatic increase in delivery services and online purchasing. These companies now need to build the ability to rapidly adapt as one of their core functional capabilities as the world starts questioning what post-pandemic challenges we will face.

Investing in the core functional capabilities of a business requires effective financing. The CFO should already have an established understanding of how the different departments in a business function – they need this information to create comprehensive reports and pitches for investors, so are in the best position to direct this capability growth.