Brian Tang’s company is growing fast. He founded Hong Kong-based PRtech start-up Tango Digital in 2020, and since then it has seen a 20-times surge in profit and is now expanding into new markets. As with any fast-growing start-up, there is the risk of founders and their teams being overwhelmed, which is why Tang recently hired his first chief financial officer.
“As we expand into different markets, looking at merger and acquisition (M&A) and other bigger moves, we think it’s the right time to bring in a more strategic and experienced CFO who would help guide our structures across markets and work closely with myself and investors to grow our business,” says Tang. His company uses social listening, artificial intelligence (AI) content generation and automated solutions to help companies safeguard their online reputation and avoid PR crises.
Someone who will be familiar with the new hire’s initial few days or months on the job is William Chong, Finance Director at Glints, a Singapore-based start-up that runs a recruitment and career development platform. Chong, who is a member of the Hong Kong Institute of CPAs, joined the company just after it had raised US$6.8 million in Series B funding in 2019 and launched in Vietnam, Taiwan and Hong Kong.
He notes that at a certain stage of a start-up’s growth, bringing in a CFO has its benefits. While outsourcing financial management and financial reporting is common among small businesses and allows them to better manage their budgets, companies that are scaling up quickly will inevitably need to have their finance function well taken care of.
“For start-ups, things change every few months. You have to be able to build backend systems and processes that are flexible enough so that you can move in an agile manner. A CFO can also think with the end in mind, and say ‘at this stage, you should get to this point,’ and then work backwards and build the aforementioned systems and processes quickly and within a controlled budget. That’s the benefit of hiring someone more seasoned and experienced,” says Chong.
The attraction of start-ups
The response to Tang’s CFO job ad was “overwhelming.” Over 300 candidates applied, with many having previously worked at larger organizations, including the Big Four. The reasons for wanting the role ranged from having an interest in AI and technology to “the growth and potential upside of being involved in a start-up at our stage,” Tang says.
Institute member Rebecca Chan took on the CFO role at a biotech start-up with career development in mind. She already had 35 years of working experience in Hong Kong Stock Exchange and three of the Big Four. What was missing was insight into working at a corporate. “I thought by joining the company, my career would be more complete,” says Chan, who was previously co-head of the IPO and head of accounting affairs team of the listing division of the HKEX.
She joined Cloudbreak Pharma in 2022, and one of her recent focuses is to prepare the company’s listing on the HKEX through section 18A. The company, which was founded in 2015 in California, is a clinical stage biotechnology company developing ophthalmic drugs for chronic eye diseases with few treatment options. “We basically develop eye drop treatments, and focus on first-in-class and best-in-class products, which means no one has developed it before, because our founder doesn’t like to do products similar to what are already available,” Chan explains.
For Chong, meeting the founders convinced him that joining Glints was the right move for him. “The culture of beginner’s mindset very much aligned with what I was looking for. And the founders are very mature and intelligent. Through my interaction with them, I felt like I could be part of the right team to grow and scale the company,” he shares.
An “engineer at heart” – he has a bachelor’s degree in civil engineering – Chong says that working at a start-up allows him to “build,” which was a welcomed change following his time in investment banking.
Current priorities
QuantumPharm, a Chinese AI-driven drug and new material discovery company, also known as XtalPi, caused some market excitement in June this year when it listed in Hong Kong. It became the first company to list under Chapter 18C of the Hong Kong Listing Rules, which came into effect in March 2023 and makes it easier for specialist technology companies to list in the city.
Its CFO immediately saw how the new Chapter 18C regime would benefit a wide range of innovative high-tech companies like XtalPi. “The IPO was a landscape-changing, precedent setting transaction for the Hong Kong market because previously for deep tech companies like us, we didn’t have many choices when it came to IPO. Most listed in the United States, but with the geopolitical sensitivity and the A share market slowing down approval for new IPOs, Chapter 18C opens up another channel for deep tech companies to tap into the capital markets,” says Ronald Tam, CFO of XtalPi, and an Institute member. “I think it has a profound positive impact on the deep tech space in China and is certainly a very attractive option for young start-ups.”
When Tam joined the company as CFO in 2020, he insisted on doing another round of pre-IPO fundraising, emphasizing the importance of maintaining first-mover advantage. “I suggested to my cofounders that we don’t know whether the market window will open or close in the next few quarters, so while the market condition allows, we should switch on the fundraising engine to build a war chest in anticipation of any adverse market conditions,” recalls Tam.
Today, given it’s recent listing, Tam is focused on corporate governance. “We need to continue strengthening our corporate governance, including setting up various subcommittees at the board level to engage external parties to look at specific internal control matters,” he explains. “I also need to work closely with business because any capital market fundraising exercise should go hand in hand with business development needs.” Financial reporting remains a very important task, he adds.
Fundraising mode
For most start-up CFOs, securing and managing funding is a priority. “As a pre-revenue biotech company and a start-up, we have to manage our funding very carefully and ensure there is adequate funding for our research and development purposes, and we need to adopt multiple strategies involving internal and external parties. Meeting and finding investors is part of my day to day,” says Chan at Cloudbreak.
“You need to understand the scientific side from the teams, to understand our projects’ potential and align our financial strategy accordingly. This is actually tied to my character as a lifetime learner.”
The best approach to achieving this is to learn all that needs to be learned in the biotech world. “You need to understand the scientific side from the teams, to understand our projects’ potential and align our financial strategy accordingly. This is actually tied to my character as a lifetime learner,” Chan says, adding that this allows her to help investors understand the industry trends and the clinical trial process.
In the mid to long term, Tang of Tango Digital expects his new CFO to focus on fundraising, M&A or any growth plans. “Help guide the company on profitable growth and be a constructive voice in our management team to keep everyone in check,” he says.
For Chong of Glints, to accomplish fundraising in today’s environment, he says the company had to shift to finding a balance between growth and operational efficiency. “In the past, most companies looked to survive through fundraising. But the fundraising is more challenging today given the macroeconomic environment. So right now, more focus is given to processes, establishing operational excellence,” he explains.
Letting fires burn
With the lack of resources, start-up CFOs will need to have the ability and willingness to roll up their sleeves and pivot quickly. One of Chan’s responsibilities when she first joined was to set up the company’s Hong Kong office.
“Building something from ground zero was not something I had experience on. In the past, I would not need to care about which telecom service provider to use, which office space we should rent, or which decoration company we should hire,” says Chan, speaking on the work that needed to be done internally to prepare for IPO. “On the external side, Cloudbreak was new to Hong Kong at the time, so I had to introduce the company to many stakeholders and do a little PR work. For a smaller company, you cannot just do the CFO role or just looking at the numbers. You have to do a little bit of everything.”
“In a start-up, you often have more work than you can handle. Everywhere you see fires burning – you put out the worst fires and for the rest you just let them burn.”
Compared to what CFOs at large companies do, a start-up CFO’s role will have similarities, but there are important differences that Chong points out. “At a larger company you would have some protocol SOP set up by your predecessors, and with a larger number of headcount, a lot of time would be spent making sure people are on the same page to make things happen. But in a start-up, you often have more work than you can handle. Everywhere you see fires burning – you put out the worst fires and for the rest you just let them burn.”
This mindset pushes him to prioritize and always think about what drives the business, he adds. “Employees generally are given more autonomy and are empowered to make decisions. This is a key difference between a start-up and a more established company.”
Advice for start-up CFOs
CPAs interested in joining a start-up as a CFO should be prepared to multitask and work alongside a range of internal and external stakeholders, says Tam of XtalPi. He adds that CFOs add value by having a strong business development mindset. “The CFO and finance team cannot work without bearing in mind what is in the best interest of the business and in turn the best interest of our shareholders.”
With Hong Kong’s continued aspirations of being a leading innovation and technology hub, Tam believes now is the best time for CPAs to be open to CFO or senior finance roles in the deep tech or start-up world. “I think they will be amazed about how fast the pace could be. Together, we can add value to global technology advancement.”
The start-up ecosystem thrives on innovation, making continuous learning crucial. Chan’s advice for CFOs is to expand their knowledge and to embrace adaptability, as a start-up CFO has to have characteristics beyond strong accounting skills.
She adds that having a diverse career journey has enabled her to take stock of past experiences that are most relevant to a start-up. “I would encourage people to move on to different roles, to see things from different angles. Then it will be much easier for them to handle challenges,” Chan says.
CFOs should be prepared to get their hands dirty, especially in early-stage start-ups. “Things won’t be ready. Expect to see a backlog of stuff that you have to manage and take care of,” Chong says.
Being successful in the role also requires a big shift in mindset. “If you join a start-up, you have to think like a business owner. The survival of the company is pretty much the top line. So even though I’m in charge of finance and legal right now, I also need to think about how we can drive revenue,” he says.
Indeed, Tang sees himself teaming up with the new CFO to grow his company. “We will work closely together on budgeting, bookkeeping process, audits, expansion plans, strategic directions, investor relations – basically everything from top to bottom,” he says. “I view the CFO as a partner in the business and together we should make the company more efficient.”
To foster the growth of start-ups, the Hong Kong Chief Executive announced in the Policy Address 2024 plans to launch the “I&T Accelerator Pilot Scheme”, allocating HK$180 million in the form of matching funds to attract professional start-up service providers with proven track records in and beyond Hong Kong to set up accelerator bases in the city.
