Building, launching and scaling your Web3 project comes with a multitude of challenges in the finance, regulatory and operations domain. In the early days, your focus is with the tech stack and the definition of an initial token utility concept. However, once your project comes closer to the launch of your token economy (incl. TGE), significant additional complexity is added in the finance, regulatory and operations domains.
Web3 projects do not often have much finance and operations knowledge onboard at this stage. In our experience, teams are often made of tech and community / marketing experts. Until a substantial fundraise is completed, there is also no funding available for a fulltime CFO. That’s why in our view, the addition of a fractional CFO role can be a key component to a well-prepped and orchestrated token economy launch at reasonable costs.
This blog shall provide guidance on how a fractional CFO resource can procure relevant support for your Web3 project before and after the launch of your token economy. As we offer such fractional CFO services, we would like to share hands-on insights on how such fractional CFOs actually work.
What is a fractional CFO?
A fractional CFO is a finance professional with vast experience gained from past fulltime CFO or management consulting roles who works with a limited number of client projects at the same time.
Their key role is to offer financial guidance, craft token launch strategies, ecosystem structurings and leverage expertise to support a Web3 project in making financial decisions and attaining their financial objectives. In addition to this, they often bring a more adult perspective into a generally young team when it comes to strategic decision making.
What is the difference between an Interim CFO, Part-Time CFO and a Fractional CFO?
First of all, it is important to mention that there is no final take on these definitions and many times these expressions are used interchangeably. However, we believe that there is still some relevant nuance to it.
The interim CFO takes on the full scope of tasks and obligations typically handled by a permanent CFO on a temporary basis for a specific project assignment (e.g. spearheading a token transferability event). An interim CFO usually works full-time and can be brought in for various reasons such as bridging skills for a specific project or until a dedicated new hire arrives.
A part-time CFO is a finance professional who doesn’t work full-time but dedicates sufficient hours to effectively carry out the CFO’s duties and obligations within your Web3 project. Such a person might exclusively work with your Web3 project but also covers a clearly defined and limited scope of responsibility.
The fractional CFO only works for a few hours a week, mostly averaging around 8-12 hours per week, for your Web3 project. Although the person works for 3-4 clients at the same time, they’re usually pretty agile in reacting to your needs and are fully integrated with your time. They can stay for a few months, but can also remain for a longer period of time. As you can see that there is not a large difference between a part-time CFO and a fractional CFO in our view.
What are the tasks of a fractional CFO?
A fractional CFO can support your Web3 project in many different ways:
- Navigate financial challenges
As your Web3 project grows and the complexity of the financial processes (e.g. financial planning, liquidity management, multi-entity group / ecosystem structuring) increases, it becomes important to have someone who is familiar with the intricacies of the financial landscape. This is where the experience of a fractional CFO is of huge help.
- Define your token launch strategy
The fractional CFO can support you in defining your token launch strategy and help you identify interdependencies (listings, market makers, ecosystem structuring) and key value drivers. They’re usually also instrumental in challenging for a more mid-term focused roadmap for your token economy.
- Fundraising (Seed / Series A-B)
Growing your Web3 project from a development company to an ecosystem setup requires a sound and coherent fundraising strategy (equity, tokens). In this process a fractional CFO can play a pivotal role. They handle tasks ranging from preparing investment documentation to liaising with investors and managing post-deal paperwork and due diligence.
- Implement new systems
As your Web3 project expands, you must upgrade your tool landscape to adapt to evolving needs (finance, HR, on-chain treasury management, etc). Luckily, there are many helpful tools available, but it certainly requires a realistic assessment of how such tools can add a value-add to your organisation. This requires oversight and direction from someone experienced in implementing various systems across different situations.
- Varia / upon request
As you are certainly aware of, special requests (from investor requests, founder dilemmas, tax matters or other audit requests) can emerge suddenly in a startup’s lifecycle. As most startup teams are short on staffing such sudden requests, an experienced professional a fractional CFO can join your Web3 project upon request in a short period of time to take effectively and independently charge of such matters.
What does a fractional CFO not do?
As important to understand what a fractional CFO does, it is equally relevant to get a clear alignment on expectations what this person does not cover:
- Bookkeeping: A fractional CFO is not your accountant who fishes for invoices and receipts.
- Operations management: A fractional CFO is not here to manage your operations such as GoogleDrive folder structures or drafting up internal corporate policies.
- IT Infrastructure: They’re not responsible for the company’s IT systems.
- Legal Compliance: Although a fractional CFO is usually experienced with tax and legal matters and can certainly contribute to high-level review of legal agreements, they should not assume the role of a legal counsel.
- Talent & people: A fractional CFO is not your people manager. Although there are some intersections such as the work on equity and token incentive or other compensation plans, general people matters should not be assigned to fractional CFO.
- Trading: A fractional CFO can assist you on treasury and liquidity management matters from a general planning, strategic asset allocation and monitoring perspective, but they should not assume an active role in the execution thereof.
Advantages of hiring a fractional CFO
Engaging a fractional CFO allows your Web3 project to access the expertise of an experienced financial professional precisely at the time it truly matters. At the same time, your Web3 project does not have to bear the full costs of a full-time CFO on its payroll which accounts for your efficient use of capital.
If you’ve enjoyed this read and are interested to understand how threek could support you, please do not hesitate to reach out to us and / or book a first call slot via our Calendly. Looking forward to being in touch with you.
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