Outsourced CFOs for Fund Managers
In collaborating with hundreds of fund managers over the years, we have observed certain patterns of those interested in building a firm with lasting impact and value as well as great returns. When the fundraising close occurs, these emerging managers then expand their focus of efforts toward company building — having a disciplined investing pace, facilitating a robust deal flow, conducting deep and thorough diligence, cultivating their portfolio companies, and creating a foundation of operational excellence. We like to call this developing a “durable franchise.”
Best-in-class firms build this operational excellence with a cornerstone of finance from the earliest days. Financial management is an important part of tracking your investments as a fund manager, while understanding your performance and accounting. As a fiduciary managing the investing capital of others, it is your obligation to maintain appropriate financial controls and to foster fund administration that will accurately, transparently, and effectively communicate with your investors.
For emerging managers, very few funds have the budget to support an in-house finance team until they have typically reached Fund III or Fund IV, depending upon size. Most often, finance is an outsourced function at this beginning stage through a collection of fund administrators, accountants, outsourced CFO services, and tax professionals. The fund manager coordinates with these various professionals, synthesizes the information, and reports to investors.
The benefits of deepening your financial prowess include strategic planning for future fundraising, growing your investor base, laying the framework for operational due diligence as seen by future investors, and demonstrating strong business acumen as Limited Partners are watching this space to see how you choose to grow.
Our Outsourced & Fractional CFO Blueprint can help you find the assistance you need from external finance and accounting service providers. Most charge fees of $100-$400 per hour for general assistance, such as bookkeeping, accounting, and paying bills. Fees may climb up to $6k-$16k+ per year for more advanced work, such as forecasting, projections, lending packages, etc.
If there are other service providers in your ecosystem that you would highly recommend, please share with us! We are always interested in those whom you hold in high regard.
https://www.venturefundblueprint.com/blueprints/outsourced-cfos
Three Takeaways:
Best-in-class firms build a foundation of operational excellence with a cornerstone of finance from the earliest days.
It is common practice to outsource finance functions to a service provider if your budget does not allow it or if your financial reporting needs do not require in-house support at your stage.
Limited Partners watch closely how you choose to build your firm and handle finance needs, which will be evaluated during future fundraise efforts.
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By Shea Tate-Di Donna and Kaego Ogbechie Rust, authors of The Venture Fund Blueprint.
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Disclaimer: The providers, companies, examples, products, and services shared represent only a subset of available options and are based solely on internal fund manager conversations. These options are intended to be a general framework, not an exhaustive catalog, and should not be viewed as legal or tax advice, endorsements, recommendations, approvals, or rankings. We encourage you to do additional research into each category to find the resources that best fit your specific needs.
