How The Right CFO Can Help Scale Middle East Startups For Success The CFO role will be critical to empower Middle East startups with full functional leadership that not only ensures an effective finance function, but scales the business in a region that is ready to reward success.
By Tom Clarke
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In 2023, Saudi Arabia became the top market for venture capital funding in the Middle East and North Africa (MENA) for the first time, attracting more than US$1.38 billion of investment. Claiming second place was the United Arab Emirates (UAE) as a strong contender, topping the MENA region in the number of deals closed. As it stands, the startup ecosystem in the Middle East has grown from strength to strength- and it looks set for a continued growth trajectory.
Going into 2024, startups based out of the Middle East seem primed for success. Founders, however, must keep top of mind their choice of a chief financial officer (CFO)- or risk squandering their competitive edge at this critical juncture of growth. While scaling could look different for every startup, a CFO is fundamental from the get-go of this process, as companies seek to manage growth, capital allocation, and risk management, effectively, in unison.
Not having the right CFO in place could leave founders struggling to navigate this period of hypergrowth, and ultimately lose their momentum. That said, every startup is built differently, which then demands a distinct type of leader with specific portfolios of technical capabilities, leadership qualities, and experience. Nonetheless, two broad types of CFO needs are apparent based on our discussions with startup founders and investors in the Middle East.
Option #1: A CFO who looks forward
The strategic and growth-minded CFO best fits startups with a relatively mature finance function, or one that sits on the opposite end of the spectrum- a simpler set-up that already meets the organization's needs. Such CFO hires primarily focus on projects that drive the business to become future-ready. These could include fund or debt raises, initial public offering readiness programs, merger and acquisition activities, talent development, and so on. Leaders that fall under this category tend to already have significant financial services experience, either serving as CFOs in previous roles, or coming with expertise from areas such as investment banking, financial consulting, or private equity. This is especially key today with the CFO role elevated beyond a functional lead to a true business partner to the CEO, according to recent research by Heidrick & Struggles. Such CFOs come equipped with experience in helping others navigate through periods of rapid growth and challenging macroeconomic conditions, a critical attribute required to confidently -and precisely- influence the overall business direction.
Related: Striking Out Alone: Developing Your Identity As An Entrepreneur
Option #2: A CFO that looks inwards
The operationally strong CFO, on the other hand, looks mostly inward. They bring the greatest value to startups who require support building up finance functions, either from scratch, or simply fine-tuning existing systems to become more autonomous and data-driven. Such leaders come with a strong technical background, usually stemming from experience dealing with multiple enterprise resource planning systems and modules. They are what we call financial surgeons, with the operational expertise needed to tackle the granular tasks, ranging from accounting and financial planning to full-on system rollouts. Interestingly, such CFOs are likely to be in stronger demand in markets like the UAE in the Middle East. Research from startup directory MAGNiTT revealed that the UAE's funding momentum was underpinned by the rise of serial entrepreneurs and early-stage companies using the Emirates as a regional launch pad. Startups of this nature need CFOs who are not afraid to get their hands dirty, helping to build finance processes from the ground up.
The startup CFO
While CFO hires with scaleup and growth experience are the obvious choice for many founders, the truth is that very few startup CFOs have only ever worked at startups. Keeping an open mind will allow founders to tap into the pool of leaders with multinational corporation (MNC) credentials who come with different, yet equally relevant skills. For example, they would have existing acumen in compliance and risk management. These areas of experience are especially valuable as the startup matures, and it begins developing its risk tolerance framework, particularly for early-stage companies. Ultimately, what separates successful startup CFOs from their MNC peers is the ability to "build the plane as they fly it."
In other words, the right CFO to help scale startups quickly and sustainably is someone who embodies a management style that prioritizes agility and flexibility over traditional planning and execution. The Middle East startup ecosystem this year will be one to watch- from Saudi Arabia continuing to lead the charge, to up-and-coming Qatar with the roll-out of innovation-friendly policies. Now, more so than ever, the CFO role will be critical to empower Middle East startups with full functional leadership that not only ensures an effective finance function, but scales the business in a region that is ready to reward success.
Related: Unicorns Vs. Zebras: Rethinking What Counts For Entrepreneurial Success In The MENA Region
