The Rise of the CFO in Fundraising

The CFO plays a vital role in the management of any private equity firm. A central figure in the firm’s hierarchy, the CFO has historically been in charge of managing critical internal functions such as compliance, financial management and reporting, risk analysis and internal operating matters. As the private equity industry evolves, however, so too has the role that the CFO plays within the firm. GPs that we work with and observe in the market are increasingly turning to their CFO to play a more outward facing role – especially in the sphere of fundraising.

The evolution of the CFO in fundraising has come in lock-step with the evolution of the position within the private equity ecosystem. Today’s CFOs often play a “dual role” between their traditional internally-focused responsibilities and being quasi-Operating Partners. This change in the profile of today’s CFO is driven by the growing role that they play in portfolio management and portfolio company development. As a growing trend in the middle market, many private equity firms are turning to the domain expertise of their CFO to institutionalize financial management at their portfolio companies. CFOs are now more active than ever in implementing best-in-class ERP systems in portfolio companies, driving the hiring process and advising on operational initiatives at the portfolio level. They are taking on specific, actionable responsibilities with portfolio companies and as a result have an unprecedented level of familiarity with the operational aspects of the firm’s portfolio.

Today’s CFO is also playing an increasingly vital role while presenting to LPs. While the senior-most person (Managing Partner, Senior Partner, etc.) typically takes the lead while presenting to LPs, firms are learning that adding their operationally intensive CFO to that mix can make for a perfect pairing.

So why can a CFO be an ideal candidate for taking a more active role in the fundraising process? Firstly, apart from the Managing Partner and the Investment Committee, the CFO will likely have the best visibility and familiarity with the firm’s portfolio. Given their role in financial management for the firm across the platform, a CFO can speak to the entire portfolio in a way that deal team-focused Partners may not be able to. This is true regardless of how engaged the CFO is with the firm’s portfolio, but especially so if they take on the operationally intensive role outlined above.

Secondly, unless you’re doing an introductory meeting, the LP is likely already familiar with the broader tenets of your firm – the team, strategy and track record. When it comes to second or third meetings and beyond, LPs will be pressing the presenting team on details and nuances of financial performance in your portfolio. CFOs, who are naturally detail-oriented, are able to point to specific updates in the financial performance reflected in the portfolio marks. Combining the CFOs’ operationally intensive, detail-oriented role with their broad exposure and familiarity across a private equity firm’s portfolio, it is clear that operationally intensive CFOs are in a terrific position speak to the level of detail that LPs are looking for and make for more successful meetings.

With the full plate of responsibilities that a CFO has within the firm, it may seem daunting or impractical to add fundraising to that. At the very least, firms should be flexible with their fundraising team and add CFOs to the mix of presenters. Whether they take on the mantle of being one of the main presenters or are surgically deployed for follow-up meetings, your firm’s CFO can be a vital asset in the fundraising process.

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