Once a startup passes a certain threshold — whether a funding milestone, amassing a certain number of users or staff on the books — the founders might think about bolstering the ranks with grown up leadership. That is, filling up the C-suite with experienced leaders.
But with the fundraising environment tight at the moment and founders under pressure to make cash in the bank go as far as possible, bringing in a full-timer on a hefty salary might not be possible right now — and that’s leading to a new type of hire joining the ranks of European startups: the fractional C-suiter.
Fractional C-suite leaders join a team on a part-time or temporary basis, lending their years of market knowledge to help with specific business goals, before moving on to their next client.“Given the more stringent criteria around funding, startups are looking for ways to stretch their funding further,” says Steve Farr, divisional director of fintech executive search service Oakstone — which has seen a “significant rise” of around 25% in startups looking for fractional hires recently, compared to the same time last year.
But what benefits do they bring? And are they worth it?
What is a fractional C-suite hire?
The crucial difference between a fractional hire and a full-time one is that a fractional executive typically works on a part-time or interim basis, stepping into an organisation at periods of transition and/or scale, says Claire Trachet, CEO and founder of advisory firm Trachet — who also has experience of being a fractional chief financial officer (CFO). They typically work with a client for a set amount of time and then move on. They might also work with multiple clients at the same time on a part-time basis, rather than being a permanent addition to just one team.
The experience that founders will be looking for differ based on the role. Fractional CFO and strategic advisor Francois Tual says that “fractional CFOs tend to be experienced professionals who have previously been CFO or even CEO themselves, have scaled and managed finance departments and quite often led numerous fundraising or M&A transactions over the course of their career.”
Tual adds that founders often choose a fractional hire based on their connections to investors, lenders, advisors and other key players in the financial and business ecosystem. This experience comes in handy for startups considering M&As or fundraises, says Tual, who might be looking for someone to come in and steer the company through the process. .
One of the companies he worked with, B2B buy now, pay later service Hokodo, said that they brought him on board as the startup was refinancing an existing debt facility, and wanted to tap into Tual's experience of executing similar transactions in the past. "Debt refinancing is a time-consuming exercise," says its founder Richard Thornton, "and bringing in Francois allowed us to maintain seamless operations." Expecting that the refinancing would take between six and nine months, the team opted for a fractional role to cover the shorter time period needed: "Hiring a full-time employee would have been excessive and inefficient for a temporary surge in workload," says Thornton.
What are their main responsibilities?
A lot of founding teams don’t have a sales or commercial background says Dale Shephard, founder and CEO of TrinityHawk — which sends fractional chief revenue office (CRO) and chief operating officer (COO) to startups— so, a part-time CRO may be brought in to transition a startup away from founder-led sales and towards establishing a dedicated sales team.
A fractional CRO can also be brought in to act as a mentor and set up an early-stage startup for success, Shephard says, as well as to ensure a company’s product-market fit and ideal customer profile align.
There are other scenarios in which fractional leaders, particularly CFOs, can be helpful, says Tual.
- They can be tasked with shaping the finance function from scratch, bringing it in-house or advising on the right type of hires to cover the various functions like accounting or treasury, or simply helping existing staff develop the leadership skills they need to take the reins of the finance function themselves,” he says.
- “In a highly regulated industry like healthcare or finance, a fractional CFO would need to have expertise in compliance and risk management,” adds Trachet,“whereas in a consumer goods company, cost control and inventory management might be more critical.”
- Meanwhile, Trachet says a fractional COO might prioritise product development and operational scalability — though in a manufacturing context, supply chain management and production efficiency could be more relevant.
In general, Trachet says, “the ultimate goal [of a fractional hire] is to enhance the company's value, prepare it for scaling or position it for a successful exit — all while transferring knowledge and systems to the permanent team.”
Why would you hire a fractional role instead of a full-time leader?
Cost is a primary motivator. Finding a full-time C-suite leader with extensive experience can be a major expense, so hiring a fractional role restricts the expenditure to a specific time period — plus, the flexibility around how often the person works lets a startup benefit from their experience with a smaller budget.
Farr highlights that this cost-cutting is particularly important for young startups: “it delays the need to hire a full-time employee who would ordinarily put a financial strain on the organisation at such an early stage, yet still benefit from a strategic perspective on revenue generation,” he says.
If your fractional is no longer a good fit, it's a quick change with transparent costs.
Another reason for the hire is the value of having an outside perspective, says Trachet. “[Fractional executives] are typically experienced in driving challenging transitions and they come with a fresh pair of eyes, unhindered by the culture and politics that may affect full-time employees.” A lack of existing connection to the company means that they can be the straight-talkers of the company and talk frankly with the team about what needs to change.
In some cases, the sudden departure of a full-time executive can also create the need for a quick-hire option: “finding a more permanent hire can prove difficult to source so quickly,” says Trachet — so hiring a fractional role in the interim can be a helpful fix to keep the business running while the typically lengthy hiring process for a full-time employee takes place.
Hiring a full-time role can also come with higher risks, says Shephard. Leadership roles often come with long notice periods, which might leave a startup waiting months to onboard a new hire, who the company then needs to replace a year or two down the line thanks to the changing needs of the company as it scales. By contrast, “if your fractional is no longer a good fit,” he says, “it's a quick change with transparent costs.”