Bay Area startups face plenty of challenges. The hardest is deciding where to spend the money on hand. If a venture capitalist chooses to invest in a new business, they expect their investment to be treated wisely. Intelligent investors will review who is on the payroll as the company ramps up.
This is the conundrum. An AI startup can require several highly paid professionals on their payroll to get up to speed. They will need data scientists and machine learning engineers to help develop and refine their AI models. Software engineers are required to build the infrastructure and applications. An expert product manager connects business goals with the technical teams while considering the market demands. A business development and sales professional can review market data and find the best opportunities to drive revenue. There’s also the importance of hiring a human resource and compliance expert.
Sometimes, the founders can play a role in some of these areas. A CEO might have a background in business development or AI engineering. But even startup partners can get spread thin. An expert Chief Financial Officer is one of the central pedestals of a robust Bay Area startup. And a full-time CFO salary in Silicon Valley can quickly eat up a budget!
AI Startups and Fractional CFOs Can Stay Within Budget on Day One
A CFO has a critical job, but the work may not require a full-time commitment. Depending on the work that needs to be accomplished, it may only take a certain amount of hours each month. It’s a common practice to hire a professional, highly experienced CFO on a part-time basis. This is called a contracted or fractional CFO.
Our Safe Harbor CPA firm is very familiar with using this type of model. Hundreds of Bay Area businesses rely on fractional CFOs to help their AI startups get through the first critical years. This is especially helpful for small—or medium-scale startups.
AI startups and other new businesses use fractional CFOs to manage the same duties as a full-time CFO. However, the duties can be drilled down to their essential needs. They can help with financial strategy and planning, raising capital, cash flow management, cost management, budgeting, and forecasting. A fractional CFO can also handle risk management and support audit requirements as well.
An article on Medium breaks down the benefits of hiring a fractional CFO. The strategy saves money, and a startup still needs an expert to advise them on financial issues. A significant benefit is that the founders of an AI startup can be confident that the financials are in good hands while they focus on other aspects of their business.
Our CPA team has worked with AI startups and fractional CFOs during tax season. We’ve also provided our own contracted CFOs and tax/bookkeeping professionals to support new businesses.
