As someone who has worked in investing for a decade and met hundreds of management teams (from Series B to large-cap PE and across most industries), I’m continuously shocked at how few CFOs have investing experience, and even fewer CFOs of investor-backed businesses build teams with this background in mind. To the point where it’s bothered me enough to write about it, to try and change a few minds. So – what will someone with investing experience be able to offer that’s better than the pack (yes, even better than bankers and consultants without investing experience, as well as the more “traditional” internal finance paths)?

Board-level thinking and communication: Depending on their tenure, investment professionals have either been on boards or have been working for senior investors on their teams who have been on boards. They’ve been trained to help develop metrics, to pressure-test variances and look for patterns in the numbers, and to communicate in an answer-first manner, with the level of certainty matching the amount of work that has been performed and the strength of the evidence. For CFOs looking to not be in every single conversation with their investors so they can focus on other things (or not work 75 hours a week!), having a trusted #2 that can handle many of these conversations is something I’ve seen work very well. And for CEOs looking to ensure their monthly and quarterly board communications are well-received, what better than to bring that investor mindset in-house as a sense check?

Ability to drive the work: Junior and mid-level investing professionals are almost certainly going to be experienced at building financial models and fundraising materials. They’ve probably been asked to review portfolio company budgets and projections in painstaking detail. And they’ve probably been given one-off financial analysis projects, either directly from board members/senior investment professionals, or from the CEO/CFO at the portfolio company.

As an aside / unfortunately for portfolio companies, I’ve almost never seen a senior investment professional happy that their teams are spending time on these portfolio company FP&A projects as opposed to their priorities (deploying capital, internal IR tasks, new areas they want to investigate, etc.) and so banking on being able to leverage junior/mid-level investment talent for free as a flex resource is probably not a sustainable long-term plan for a portfolio company.

Exposure across functions and sectors: One common concern hiring managers have is how quickly a new hire will build understanding of how the business functions. Investors (particularly those with a strategy consulting background) are used to jumping into new companies, and over the course of a couple months, deciding whether their firm should make a major financial and time commitment. This involves asking a ton of questions, as anyone on the other side of the due diligence process can attest. Now imagine being asked to do this across 10 different industries in a year. Many people won’t get exposure to 10 different industries in their entire career – someone with the investor background has done this “ramp-up” exercise enough to not be fazed by learning their new company.  

Aside #2: I personally think this is one of the significant downsides of specialist investment firms / teams – junior investment professionals don’t get pushed nearly as often to really think critically about different business models, which stunts their overall growth. Give me someone with generalist training (either across stage or industry) any day – the specifics are almost always quite teachable!

Work ethic and detail orientation: Most investors come from tier one investment banking or strategy consulting firms – and when you’re just starting out at those firms (and you know nothing) you succeed or fail based on your ability to grind and deliver zero-defect work. And while many years of experience (at well more than 40 hours / week – aka accelerated experience for age/tenure) no doubt builds financial acumen, most people who come from the “academy” of McKinsey or Goldman Sachs don’t forget the importance of making sure the work is on-time and correct.

One perceived downside to hiring most people with this background – most don’t have the accounting background to be able to close the books independently. If the numbers are very wrong because the accounting function is broken, the investor probably isn’t the right person to fix them (though they may be able to help get the right people into the seat). However – I think this concern is way overstated, with one caveat. If you’re an investor-backed business beyond a Series A, you should have someone on staff who can close the books without major issues, and that person doesn’t necessarily need to be the best strategic thinker or board-level communicator. If you’re the CEO or board of directors at a company with more than a couple million of revenue, and are that concerned about the basic numbers being right, then you might need a different accounting team (and then need to take a hard look in the mirror and ask yourself why you’ve been flying a plane with broken gauges).

One last thought – $$$. I still remember a comment from a former PE associate in his mid/late 20s I met at a management dinner a few years ago. He was working at his former portfolio company in an FP&A and analytics role, noting that instead of getting his MBA, he was “getting his MBA at Ken (the name of the CEO) university.” That level of access is exactly what this kind of candidate is looking for – and is something that can be offered to offset the lower compensation, relative to an investing role. Having spent a decade inside of investment firms and with friends across the landscape, CEOs and CFOs: don’t underestimate the number of people in their mid 20s – late 30s who have accelerated their learning and development through demanding investing roles but would be open to a change.

Not every great finance team I’ve encountered has had leadership / senior members with an investing background, but I have yet to encounter a middling finance team manned by former investors!