Capital markets have been unforgiving on the intangible valuations of technology firms. Fractional CFOs are uniquely positioned to help founder CEOs navigate turbulent market conditions. This article sheds light on how a chief financial officer can help you with your start-up's intellectual property strategy.

Start-ups that are raising capital to fund losses prior to becoming profitable are not generally capital intensive. They fund development costs and take their minimum viable product to market as quickly as possible. Successful start-ups find their product-market fit and move into a revenue-generating stage.

Once start-ups are generating revenue, that becomes their primary valuation metric. The enterprise value of the firm, or the sum of its monetary, tangible and intangible assets is usually a multiple of its revenue and that multiple, in turn, expands based on the revenue growth rate and its expected persistence.

The processes, know-how and other unique aspects of their business model become their intellectual property. In Canada, intellectual property is often framed in terms of licenses, copyrights, patents, trademarks and internal operating processes. These assets drive the revenue of the start-up and, accordingly, the valuation.

A CFO can help founders establish the financial reporting, taxation, regulatory, commercial and governance aspects of your firm's IP strategy. This can include familiar topics such as accounting for R&D, disclosure to investors, R&D tax credits and the accounting for, and taxation of, income arising from intellectual property.

These are complex and specialized niches that require professionals who have pursued advanced training and expertise. The base salary expectation of modern, full-time Canadian CFOs range from $150,000 to $325,000 which can be a steep price to pay depending on the maturity and size of the start-up.

Many scientifc founders don't understand the role of their CFO and thus may under-invest in the role, or worse, neglect the needs entirely by relying on their advisory board or VCs. The challenges that arise in so-doing can be devastating to the long-run health of the organization. Company creation requires that critical infrastructure such as accounting systems, controls, documentation and disclosures by established properly early-on.

Another common pitfall is to hire a junior or mid-career professional whose skills are more aligned with a controllership role. For more details on the difference between the CFO seat and the Controller seat, please see our checklist.

Regardless of which roles suits your firm best, the magnitude of the salary investment should have founders considering whether they'd benefit from a part-time or fractional CFO or controller role early on. Shortages of CPA or CFA talent are leading even junior professional to command healthy compensation packages.

That's where we come in. Our business model is designed to accommodate the part-time needs of seed funded or series A firms. We like to be involved for a period of 18-24 months so we can dive deep into your firm's needs and assist with the insourcing of full-time professionals.

If you're concerned about capital markets, recessionary pressures or the impact labour markets are having on your valuation, we'd be happy to engage in a complimentary consultation.