As Ramp’s CEO, I was juggling the team’s finance needs in addition to the rest of my responsibilities in the company’s early days. Functions like operational accounting and financial planning are often their own dedicated finance segments. But I was performing these tasks for a year and a half before bringing on Ramp’s first finance hire.

These responsibilities included leading Ramp through a fundraise within its first few months, building financial models, and managing payroll. There wasn’t one particular moment when I realized that Ramp would benefit from a full-time finance staff member. Rather, it was the growing needs of an increasingly complex business that led me to finally make a designated hire.

Continuing to do it all myself became untenable, and I knew that by building and appropriately managing a strong finance team in-house, I would have the ability to focus on other initiatives that would help move Ramp forward. Through trial and error, I found a path for successfully creating a finance function that operates seamlessly and has been an integral part of our company’s success.

Ramp services and works with finance teams and leaders across a wide range of companies and has a unique perspective on how these teams grow. In this guide, we’ll share insights from some of our own finance experts, including our head of finance and capital markets, head of FP&A, and our controller, in addition to external experts with significant experience in advising startups, including Kruze Consulting and Burkland Associates. This guide is most relevant for growing startups looking to set the right foundation for their nascent finance teams.

Founders: What to look for in your first finance hire

In the beginning, the financials of any company aren’t that complicated. The important things are record keeping, the audit trail, approval for security, and basic systems for good health. Later on, it gets much more interesting. A year in for us, payroll was starting to grow, the expenses became recurring, and it was no longer a question of “Could we account for everything?” but rather, “What can we be doing to help us close the books faster?” and “What can we do to become more efficient and derive insights from our financial data?”

We recognized that in order for Ramp to grow and scale, we needed to invest in a finance team. If you just set up a system for autopilot, it’s not going to help build your balance sheet, income statement, or cash flow, or allow you to look strategically at the makeup of the business.

While it might be tempting to allocate your headcount to revenue-driving teams, especially early on, it’s important to also invest in finance. With the right setup, finance can drive growth while a company is expanding and reduce costs when a company is seeking stability amid uncertain market conditions.

Investment experience is increasingly critical

Before we delve into the qualities of the ideal first finance hire, it’s important to acknowledge how this role has evolved in recent years. Because of the rise of venture capital, companies are reassessing their hiring priorities. First hires previously came from accounting backgrounds, as businesses were primarily concerned with the quality of their books. Fundraising and financial strategy were thought to be secondary to this main skill. But this line of thinking has shifted.

It’s now much more common for the first startup finance hire to be someone with a background in investment banking or venture capital. That’s because these backgrounds lend themselves to being good stewards of capital for themselves and their investors, rather than exclusively focusing on the internal order of the business’s books.

This is especially true in today’s volatile markets, with companies vying for limited capital. The first finance hire is now more external facing than internal facing as businesses are forced to make securing scarce capital a top priority. Therefore, the ability to build out solid models and excel at investor relations is key. The difference between presenting your investors with good financial models versus mediocre ones could make all the difference in whether your business thrives or survives.

Healy Jones, vice president of FP&A and marketing at Kruze Consulting, explains it well: “The financial model is like your strategy, but in numbers. And it is a way that you communicate with financing sources. Having it in the right language is extremely helpful if you’re fundraising. Where you interface with a venture capitalist is through your pitch deck and pitching, but it’s also through numbers. And so these numbers matter quite a bit. I have seen companies do it successfully on their own, but it is often helpful to have somebody who’s done it before and is familiar with your industry’s KPIs and what VCs are looking for.”

Consequently, an emphasis on traditional industry experience has been deprioritized. Those coming from Wall Street, private equity, or hedge funds may find it easier to break into what was previously a more insular environment. The rise of finance automation and the ability to gain operating leverage have also opened the door to these nontraditional candidates.

The ideal candidate is one who marries fundraising and accounting expertise and has the analytical and quantitative skills inherent to a finance role. Finance experience, as mentioned above, can help you raise money from investors and lenders. A good accounting background allows you to set up your company with a solid internal foundation so that you can best understand your own numbers and impress investors who want to look under the hood. However, such unicorns can be hard to find.

Fractional CFOs are on the rise

Fractional finance hires are becoming a more viable first-hire option for many startups, owing to two major factors:

1. Greater acceptance of outsourcing finance functions: There is more acceptance within the startup community to rely upon—if not fully integrate—their outsourced accounting or finance team from the beginning and lean on them as a trusted partner. This wasn’t the case 5 or 10 years ago, when a seed-stage or Series A company might assume that because they had the cash, they needed to bring on a full-time finance hire, and then realize six months later that the new team member wasn’t being fully utilized. Now, startups are more open to the idea of initially utilizing part-time resources.

2. Technology decreasing the cost of outsourced financial resources: The cost of obtaining outsourced startup financial help has come down significantly over the last few years, mainly because of technology. Companies looking to operate lean and lighten their cash burn can use fractional hires as a cost-effective resource.

First-hire archetypes

A mix of accounting and investor relations skills and experience is ideal for your first finance hire. But as these candidates are rare, here are some common first-hire archetypes that you may encounter:

The scrappy rookie

This is a relatively recent grad (approximately five years out of school) with a traditional finance background. They’re highly ambitious and willing to put in any hours necessary and have a mix of these accomplishments and skills:

• Finance degree from a respected institution
  
• Summer internships at a financial institution
  
• Divergent dreams of either (1) joining a hedge fund or (2) securing a head of finance role at an exciting startup
  
• Are efficient and analytical
  

This candidate is willing to tackle any challenge that comes their way. They likely don’t have years of fundraising and interacting with investors and lenders but make up for it with detailed financial models.

The unconventional candidate

This is the prospect with an atypical background:

• Bachelor’s degree in a nonfinance major like comparative literature, psychology, or music
  
• Followed that up with a career in journalism or consulting
  
• Later got scooped up by an investment management firm
  
• Fast learner with a strong aptitude for logic and problem-solving skills
  
• Open to learning new skills and growing with a company
  

Our partner Kruze Consulting is an expert in helping startups set up their finances. Their founder and CEO, Vanessa Kruze, has experienced the gamut of candidate backgrounds, noting that she’s seen folks who have come to Kruze and even their companies with zero experience, such as one candidate who majored in Japanese history. But they turn out to be great hires because they’re passionate about learning the craft, serving the client, and being part of a company that’s doing mission-based work.

Healy notes that these first two archetypes are great to pair with an outsourced accounting firm that can understand the nuances of GAAP and accounting systems. You can let the outsourced accounting firm deal with the nitty-gritty and the internal first hire focus on more strategic efforts.

The seasoned pro

This is the experienced candidate who’s seen it all:

• Worked at a Big Four accounting firm for 20 years
  
• Followed that up with a stint in private equity (e.g., Deloitte)
  
• Later earned CFO experience while working at a venture-backed tech company
  
• For the past five years has worked part-time as a consultant; now looking to go back full-time
  

According to Kruze Consulting, they’ve seen folks who have 40 to 50 years of experience. While they’re technically at retirement age, they are looking for something community based that can provide them with a sense of fulfillment.

No matter what their background is, core to the future success of your first hire is their personality, adaptability, and values fit. Are their beliefs aligned with your company? Do you share the same 10-year vision? Do they believe in your mission? We’ll go deeper into ways you can assess if a candidate fits in with your culture in our next section below.

Don’t forget to consider the nature of the questions the candidate is asking you, as they can tell you a lot about the candidate. I think it’s vital to leave, especially for the first hire, a third to half of the allocated interview time for them to ask questions about your business and see where they go. How quickly can they pick up where this business is making money? What are the big watch-outs? Can they quickly understand the strategic issues? Every business has them, and it’s important to note how quickly the candidate can get familiar with them.

Build a team: Hiring principles to keep in mind

As you grow, your company will experience different needs. You’ll eventually need to change both who and how you hire.

Hire specialists as you mature

As you mature, your finance team will also grow and develop, with team members taking on more specialized roles. In the beginning, generalists who are willing to wear multiple hats and tackle any task that comes their way are crucial. But a need for specialists emerges as your business expands. Here are some guidelines to follow as your business grows.

When to start bringing on specialists: Once your finance team expands to five people or more, it’s time to start moving toward specialized roles. That’s because once you reach five hires, you can achieve greater efficiency by maximizing ROI for each head. Five is the inflection point at which you need to be more thoughtful about specialists that will move your org forward. I’ll go into more specific recommendations about hiring best practices below.

Note that the time you’re onboarding specialists is when you can also begin thinking about scaling. These specialists, who have historical experience of best practices and key learnings from previous employers, can help inform your business on ways to grow over time.

When it’s time to onboard managers: A general rule of thumb is that a manager shouldn’t have more than four to six direct reports. Once your level of direct reports exceeds that range, you need more managerial hierarchy within the org.

Don’t worry about scaling your finance team too early

It can be tempting to think about scaling early, even before you bring on specialists. But scalability shouldn’t be a primary concern in the beginning. Focus on getting through the initial foundational phases of blocking and tackling. After you’ve done it once, then you can worry about scaling and efficiency and think about the linearity of your most critical functions (e.g., how to grow functions that scale linearly—accounting—versus those that scale exponentially—FP&A, capital markets).

Hire a mix of ambition levels

A mix of complementary ambition levels is necessary for success as your team matures. You need employees who want to stay in an individual-contributor track, who might be slightly less ambitious about where they want to end up in the later stages of their career. This needs to be balanced with employees who want to climb the managerial ladder. A team full of Tom Bradys or Megan Rapinoes, which in this scenario looks like an entire finance team gunning for the COO/CFO position, would be doomed to failure.

Especially at high-growth tech startups, your candidate pool is full of extremely ambitious employees who are laser focused on their career prospects. To avoid this problem, it’s important to clearly communicate what the roles are and tie those roles to the value that they contribute to the organization. Doing so can avoid mixed expectations regarding job mobility and ensure you have an optimal blend of career aspirations.

Plan early for international growth and hiring

If you think your business will be looking to expand internationally, whether for business growth or to have access to a wider talent pool, it’s vital to set the right systems in place early to avoid potential complications down the line.

Expanding for international business growth

If your company operates or is considering operating globally, you should look into hiring an on-site finance team with local expertise that can help you navigate the regulatory and operational rules of new markets. For example, if you’re based in the US and considering operating in Europe, you could benefit immensely from a team that can assist with understanding the different finance, legal, and regulatory requirements. While this is something that can probably be outsourced in the early stages, you should consider staffing in-house depending on the scope and speed of your expansion.

Expanding for international hires

If you’re looking to hire internationally, you’ll want to make sure you have support from a payroll specialist from the outset (can be outsourced if you’re below 150 employees) who can help manage the operational, legal, and regulatory compliance concerns inherent to international operations. “It’s really important that a startup does that correctly, because we see it can come back to bite the startup in the due diligence process around funding rounds and acquisitions. So you want to make sure all your details are locked down around international hiring,” notes Kate Adams, vice president of marketing at Burkland Associates.

If you’re strictly a domestic business, consider the pros (more potential candidates) against the cons (a paperwork headache) before you decide to expand your talent globally.

Invest in payroll expertise if you’re building a remote team

Remote hires can also benefit from a payroll specialist who can help manage the technicalities of making hires from different states and countries. State tax and payroll filings can be both tedious and complicated, while different state hires also create tax liabilities for the corporate entity, which need to be managed.

“We’ve seen startups get hit on due diligence and around M&A and funding with this. For example, every employee has to be registered in the state where they’re working from. Not many startups know that,” says Kate. “And some of these states have tax requirements around employees when they’re in that state. You need to be careful, as some states make it very easy and other states are more difficult.”

Implement a smart finance stack to reduce headcount needs

Consider how automation will change how your team operates. For example, with tools that let you easily issue virtual cards to employees, finance leaders don’t have to worry about or waste time on expense reports, chasing down spend, etc. Using Ramp allows employers to give their employees autonomy and become more flexible workplaces. Therefore, your tools could have a big impact on the functions you need to hire. Note that you probably shouldn’t be experimenting widely with tools in your first three years. You should mainly rely on trusted tools that can help your finance team become successful. It’s fine to test out new tools, but make it the exception rather than the rule. You want to ensure that you have a successful, integrated tech stack that will set your team and the greater org up for success.

Your hiring plan for the first four years

Here’s a framework for structuring your team over your first four years. While this section is broken down by years, you should also consider your funding level as well. For example, one startup’s Series A could be a $10 million round, while a different startup could have their Series A coming in at $100 million.

Year one: Get your finance function up and running

Year one is all about starting the finance function from scratch. There are four common options:

1. Outsource your finance

Some startups elect to have their finance function outsourced. Popular fractional options include accounting, finance, and tax. Vanessa believes that you should think about bringing on an outsourced partner from day one, as soon as you have your incorporation docs signed and arguably even before you sign up for your first bank account. While most startups and small businesses don’t need a full-time accounting or finance team member until they’re about 25 people strong, it’s important to ensure that you’re setting yourself up for success by establishing the right bank accounts, choosing the right technology platforms, and ultimately not making a mess, should you decide to choose an accounting partner two to three years from now.

Vanessa sees bringing on an outsourced partner, rather than a full-time hire, as a smarter financial decision for most startups, explaining that she doesn’t typically see seed fundraising rounds between $1 million and $5 million, as they don’t have enough volume in their customer base yet to demand a full-time accountant.

While there isn’t a one-size-fits-all approach for who your first hire should be, there is a consensus that looking to bring on a CFO in a business’s nascent stages is overkill. Kate says that more startups are starting to realize that outsourcing bookkeeping and then an FP&A person to help with modeling can be enough. Once you get to your first round, that’s when you definitely need to bring in a fractional CFO.

If you decide to outsource any of your functions, it can be helpful to have a member of your team assigned with leading the outsourced team. They can help your fractional team best understand your company’s specific needs.

2. Have it treated as a part-time job by other team members

Similar to how I managed finance prior to bringing my first finance hire on board, you may be able to have your finance handled by a senior executive. Note that this is purely a temporary solution until a fractional or full-time hire is brought on.

3. Onboard a controller

Onboarding a controller to bring your accounting entirely in-house is another option. This can help ensure that your accounting and data are as strong as possible. This process typically begins with hiring a controller as well as an accounting manager or a staff accountant. Having an in-house function can be especially helpful for supporting your FP&A.

While FP&A can help drive best practices in accounting in month-end close and in automation of reporting, the accounting foundation and the integrity of the data need to be there in order for an FP&A professional to deliver outsized value to the org.

4. Hire a VP or head of finance

Some startups elect to hire a VP or head of finance role to lead the team. If they have a background in accounting, that can be even more helpful for creating a successful finance function. For businesses that decide to go with a full-time employee as their first hire, they often prefer titles like head of finance that confer seniority but aren’t tied to the C-suite.

Year two: Establish a clear financial strategy on where the company is going

Year two is focused on moving toward strategy and establishing clear, repeatable processes.

Hire FP&A: This is the point where you’ll start making the transition to a dedicated finance function by hiring a full-time FP&A analyst or manager. You’ll want to add this position once your accounting is in good standing so this hire can be in a good position to leverage and enhance it. In year two, the focus shifts from accounting and core FP&A infrastructure to more strategic, value-added services. This dedicated FP&A professional will own critical functions like reporting, forecasting, and scenario modeling.

Onboard a generalist: In addition to FP&A, you’ll want a strong generalist on board to help you quickly tackle and execute myriad tasks that pop up, such as your FinOps function. As mentioned earlier, this could happen in year two or anytime before your finance team grows to five people.

Invest in functions and processes: A greater emphasis is now placed on functions and processes. For example, if one of the processes is cash reimbursement, you need to have an accountant clerk or a similar role that can handle that responsibility. A sample in-house role to consider at this time would be a senior accountant to manage your HRIS.

Data science and BizOps are other key areas for finance to own at this time. BizOps fills the gaps in terms of analysis of financial viability and resource allocation across the company.

How my early mistakes helped set up Ramp for success

With Paribus, my last company, expense management actually became a big problem when they were getting ready to sell. We did not keep great records. We thought that having a credit card was good enough. But the audit requirements said, “You need a receipt for anything over $75, or we can’t deduct this as a taxable benefit, and it reduces the benefit of the buyer.” I spent weeks tracking down years of expenses, which was horrible. That helped spur the idea to create software to help people do that so they could avoid a similar experience.

Onboard a fractional CFO: A fractional CFO can be a good fit for startups that are between their seed and Series A rounds. They are ready for a CFO’s guidance but not quite prepared for the costs of hiring one full-time. Pre-seed startups typically don’t require a CFO and instead are better served by focusing on tax and accounting needs.

If you think a fractional CFO might be the right choice for you, consider working with one who understands your business segment.

Year three: Define processes; refine specializations

In year three, you’ll focus on further narrowing down your processes and creating more specialized roles.

Bring on specialists: After your finance team grows to five people or more, consider bringing on specialists to help round out and scale your team. An example would be a payroll specialist. When your organization reaches 150–200 employees, it’s time to bring one on. This is necessary for managing increasingly complex payroll needs and will be the first finance hire to have a specific job.

Hire a CFO: Around this time you might also consider bringing on a CFO in-house. This often happens after a company raises its Series D. You’ll want to look for a CFO that has startup experience instead of solely working in traditional finance and is familiar with issues unique to startups such as preserving cash runway, fundraising, and the importance of metrics and benchmarks.

Year four and beyond: Bring functions in-house; focus on customer satisfaction

In year four and beyond, the focus will be on bringing more functions in-house while not neglecting what matters most: your customers.

Tax in-house: Your tax has probably been outsourced until this point. But after the three-year mark or once your team grows to 25 people, you’ll want to establish an in-house tax function. “I think it’s safe to assume that you can and should rely upon an outsourced accounting provider up until you reach 25 people,” explains Vanessa. “It’s rare that we see a company go from 0 to 25 people in their first, second, or even third year, but it happens.”

Case study: Ramp’s finance team

Today, Ramp’s finance team plays a key role in helping the company continuously grow and evolve. From raising $150 million in asset-backed debt to transitioning to a new ERP, our finance function has been instrumental in taking Ramp to the next level. Had I continued to attempt to handle it myself, I doubt that Ramp would be where it is today.

Alex Song was hired as Ramp’s head of finance 15 months after inception. I was performing the operational accounting and financial planning myself prior to bringing on the first dedicated finance hire. Ramp’s growing payroll and recurring expenses contributed to the need for a dedicated position. Ramp was on the cusp of being very overdue for a finance hire when Alex came in.

What I was looking for in my first finance hire

I was looking for a candidate who had a strong background in strategic finance and could act as a partner in helping Ramp establish a strong financial foundation. We were searching for someone who could provide a strong strategic finance perspective, who could not only set up the systems to create financial statements, but also be able to evaluate our allocations, e.g., are we spending too little or too much in a certain area? We really wanted a thought partner around the construction of our business. And so we wanted a candidate who had experience with allocating a significant amount of capital and investments. I loved that Alex had been a debt investor for years.

Alex’s experience in investor relations was another attractive quality. We have investors at Goldman Sachs and Citi that are effectively buying our credit risk, and because of Alex’s previous experience, he was very skilled at credibly communicating the ins and outs of our books. I think investor relations is an under-discussed element of finance hires. At the end of the day, a lot of the business is creating trust and having a leader who is not just good on paper, but is also smart, well spoken, and able to run a great team.

How Ramp’s team is growing today

Ramp is now at the point where it’s starting to hire specialists that are staffed for just one function. It’s focused on staffing the org according to its broader verticals, such as having finance pods that specifically support sales and marketing, G&A, and R&D. Our platform’s automation capabilities allow us to hire fewer generalists while maintaining rigorous operations.

Ramp is also now thinking about bringing on a tax specialist to support our controller, who is currently responsible for the full tax. As the business is becoming more complex, this is starting to become a necessity. Scaling our own team will allow us to better support our main goal: helping business leaders save time and money. We’ll continue to carefully listen to our customers and ship updates that help them do more with less.

Build a lean, efficient finance team. Ramp can help—sign up. For more insights on how finance leaders are building their team and utilizing technology, check out the Ramp podcast.