Elena’s SaaS startup hit $1.2M ARR when a top-tier VC offered to lead her Series A — then asked for cohort analysis, 3-year projections, and sensitivity scenarios. Her bookkeeper kept QuickBooks clean, but investor-grade finance was outside the team’s skill set. A full-time CFO at ~$250k would burn ~20% of runway. She needed CFO expertise without CFO overhead — a fractional CFO.
Why this matters: Cash issues are the #2 startup killer. CB Insights found that 38% of failed startups cite running out of cash as a cause. The right fractional CFO helps prevent that by improving visibility, forecasting, and capital efficiency.
TL;DR
- A fractional CFO delivers senior-level financial leadership part-time so you get investor-ready finance without full-time burn.
- Best time to hire: 6–12 months before Series A, and many teams keep a fractional CFO through early post-funding growth.
- Expect help with financial models, cash forecasting, unit economics, fundraising, and systems — the levers that protect runway and increase valuation.
What Is a Fractional CFO for Startups?
A fractional CFO is a senior finance leader engaged part-time or project-based (typically 10–20 hours/week at $60k–$150k/year) instead of a full-time CFO at $250k–$400k. For startups, they act like a financial co-founder—building models, infrastructure, and decision frameworks that raise capital, manage cash, and guide growth.
Accountant vs. Controller vs. Fractional CFO
- Accountant/Bookkeeper (Past): Transactions, reconciliations, GAAP/tax compliance.
- Controller (Present): Close process, reporting accuracy, controls, audit prep.
- Fractional CFO (Future): Forecasts, three-statement models, pricing strategy, investor narratives, scenario planning, and board-level decision support.
Rule of thumb: Your accountant tells you what happened. Your fractional CFO tells you what happens next and how to get there safely.
Core Services You Can Expect
- Financial modeling & forecasting
Three-statement models (P&L, balance sheet, cash flow), scenario/sensitivity planning, cohort-based revenue forecasting. - Fundraising prep & support
Investor-ready materials, data room, due diligence, term sheet advisory, and post-close reporting. - Cash flow & runway management
13-week rolling cash forecasts, burn optimization, working capital tactics, vendor terms negotiation. - Unit economics & KPI tracking
CAC, LTV, LTV:CAC, payback period, magic number, NRR; set up definitions, data, and dashboards. - Strategic decision support
Pricing changes, hiring plans, market expansion timing, product mix profitability. - Systems & process setup
QuickBooks/Xero/NetSuite; Carta/Pulley; Mercury/Brex/Stripe; FP&A tools (Cube/Mosaic/Jirav); automated dashboards.
When Should a Startup Hire a Fractional CFO?
Pre-Seed & Seed (often too early)
- Usually bookkeeper + founder covers needs.
- Exceptions: deep-tech/hardware with complex R&D or grants; unusually large seed rounds (>$3M) with institutional expectations; complex models (marketplaces, multi-sided revenue).
Series A Preparation (the sweet spot)
Engage 6–12 months before the raise to:
- Build investor-ready models (three-statement + cohorts + base/upside/downside).
- Clean up revenue recognition and accounting issues before diligence.
- Craft a financial narrative that supports valuation.
- Organize cap table & historicals to accelerate diligence.
“Our fractional CFO found revenue recognition issues, rebuilt our model, and anchored our Series A story. We raised $8M at 30% better terms than expected.”
Post-Funding Growth (A → B)
- Budgeting tied to growth targets and capital efficiency.
- Vigilant cash management as burn rises.
- Monthly/quarterly investor reporting and next-raise timing.
- Many teams transition to full-time CFO around B/C (~$10–$20M ARR).
What Great Fractional CFOs Actually Deliver
1) Investor-Ready Financial Models
- Tie operational drivers → financial outcomes (pipeline, conversion, retention, CAC efficiencies).
- Realistic expense scaling; no “revenue triples, headcount flat.”
- Scenario & sensitivity analysis to surface risk.
- A model that naturally supports the valuation you seek.
2) Unit Economics You Can Trust
- CAC: by channel and period.
- LTV: includes churn/contraction; not just a rosy average.
- LTV:CAC: <3:1 = fragile; >5:1 = likely under-investing.
- Payback period: prefer <12 months; >18 months raises flags.
- Magic number: net new ARR / prior quarter S&M spend; >0.75 is strong.
Case: Blended CAC looked fine at $1,200. Channel view showed paid CAC = $3,800 with weak LTV. Reallocating to content (CAC $620) improved economics 40%.
3) Cash Flow Management & Runway Extension
- 13-week cash forecasts, updated weekly.
- Burn optimization (timing, contracts, hiring cadence).
- Runway extension via vendor terms, collections, venture debt, and tactical cuts.
Case: Hardware startup extended runway from 4 → 9 months (terms renegotiation + $200k venture debt + paced hiring) and hit milestones for a calm Series A.
4) Fundraising & Diligence Execution
- Data room readiness before diligence starts.
- Handle investor questions, variances, and analyses.
- Term sheet guidance (valuation, prefs, anti-dilution, board seats).
- Post-close admin: cap table updates, new reporting cadence, compliance.
Key Benefits for Startups
C-Level Expertise Without Full-Time Burn
- Full-time CFO year-one fully loaded can exceed $350k (+equity).
- Fractional: $60k–$150k; preserves capital for product, GTM, and hiring.
Avoid Expensive, Preventable Mistakes
- Revenue recognition errors; poor cash forecasting; premature hiring; bad terms; broken unit economics discovered too late.
Case: E-commerce at $4M revenue but negative gross margins after true returns/fulfillment/payment costs. Fractional CFO helped pivot to B2B with viable margins.
Faster, Better Fundraising
- Sophisticated narratives + credible models → higher signal to investors.
Case: Fintech reframed from “3× growth” to improving efficiency (-40% CAC, +25% LTV) and achieved 1.6× valuation lift.
Fractional vs. Full-Time CFO: How to Decide
Fractional fits when:
- Pre-B, <$10M ARR; straightforward ops; board doesn’t require FT CFO; runway and efficiency matter.
Full-time fits when:
- Post-B or $15M+ ARR; international/M&A/multi-product complexity; board mandates; you’re building the finance org.
Common path: Fractional through Series A & early B, then hire full-time. The fractional CFO often recruits & onboards their replacement.
How Startups Afford Fractional CFO Services
- Cash + Equity: e.g., $6k/mo + 0.5% (4-year vest, 1-year cliff).
- Milestone Step-Ups: $5k/mo pre-A → $9k/mo post-A → $12k/mo post-$5M ARR.
- Project-Based (Fundraising): $20k–$35k for model, deck financials, data room, diligence, term sheet, through close.
Real-World Impact (Examples)
- SaaS (Series A Valuation): $1.4M ARR → raised $9M at $45M pre, +$10M above early projections due to stronger model and narrative.
- E-Com (Avoided Overreach): Delayed costly EU expansion after working-capital modeling showed $800k requirement with 18-month payback.
- Marketplace (Runway Save): Four months of runway → ten months via contracts, bridge loan, and burn plan — enabling a successful raise.
7 Signs You Need a Fractional CFO Now
- Series A within 12 months and you lack investor-grade financials.
- $750k+ ARR; decisions now materially impact runway.
- Can’t answer CAC/LTV, burn multiple, magic number, scenarios with confidence.
- Bookkeeper/controller says modeling is beyond their scope.
- Complex economics (marketplaces, usage-based, hardware/software hybrids).
- Cash feels unpredictable; unsure you’ll make next milestone.
- Big strategic choices (pricing, market expansion, M&A) need robust modeling.
If three or more apply, you’ll likely see immediate ROI.
How to Choose the Right Fractional CFO
Startup-specific experience
- How many Series A processes have you led?
- Experience with our model (SaaS/e-com/marketplace)?
- Founder references from similar companies?
Fundraising track record
- Outcomes/valuations achieved?
- Diligence processes managed?
- Investor relationships and term-sheet negotiation experience?
Systems fluency
- Accounting (QBO/Xero/NetSuite), cap tables (Carta/Pulley), banking/payments (Mercury/Brex/Stripe), FP&A (Excel/Sheets + Cube/Mosaic/Jirav), basic data pulls/APIs.
Getting Started
Fractional CFO services bridge the gap between founder-led finance and full-time CFO leadership — exactly when expertise matters most without the overhead that shortens runway.
Exact Partners helps venture-backed startups from Seed → Series B with:
- Fundraising prep & investor materials
- Unit economics & KPI systems
- Cash forecasting & runway extension
- Board reporting & strategic decision support
Ready to talk? Schedule a consultation at getexact.com or call (716) 249-6434.
