by Camila Acevedo
Imagine you’re a bootstrapped founder, a deliberate jack-of-all-trades, handling everything from marketing and product development to finance and operations. At the early stages of your business, it is manageable and good enough to maintain each aspect of the operations. However, as your business grows and the demands of scaling become more complex, you realize that the demands of each function will require more specialized skillsets–beyond your current expertise. This is where fractional services can play a significant role. It is the solution you need to fill those crucial leadership gaps-whether it’s a CFO to guide your finances, or a CTO to navigate tech challenges- all without the expense of hiring full-time executives. As your company pushes forward, it is clear that fractional executives could help your business more efficient, compliant, and ready to scale. This is what fractional leadership is, offering not just cost savings, but access to leadership expertise and flexibility necessary for startup growth.
At Angel Investment 101, we dove into the potential impact of fractional leadership for startups through a panel discussion featuring experts in this space. Moderated by Maya Cieszynska, Partner at Pinch Marketing Inc., the panel included Hamid Alemohammad, Co-founder and COO of Brickeye, who has firsthand experience with fractional leadership; Sina Sadeghian, CEO of NuBinary, a company founded to help tech startups scale through fractional services,; and Robert Kunihiro, National Industrial Lead & Regional Director at CFO Centre, an organization that offers part-time CFO expertise to small businesses.
Advantages and Value of Fractional Executives
According to Sadeghian, fractional leadership offers three main benefits: cost efficiency, flexibility, and access to top-notch talent. Many senior executives are unlikely to join early-stage organizations due to the high risk and uncertain stability. Typically, these executives have a well-defined career path, benefits and higher degree of job security. As a result, they may take fractional roles as a side job, or they might be retired professionals looking to generate extra income. Fractional executives can fill critical knowledge gaps—like business strategy, human resources, and finance—allowing companies to reach important milestones without the financial burden of hiring full-time executives.
Fractional executives also contribute to long-term strategy, those with entrepreneurial experience, bring valuable insights and a strategic mindset to a startup. They often go beyond their designated role (like a CTO) and take on a coaching or mentoring role, guiding the company towards more efficient and scalable practices. Sadeghian emphasized that, for tech companies, having someone with deep experience in technology and security can be especially impactful in shaping the company’s long-term strategy.
Alemohammad shared his experienece with fractional services: “We were a team of experienced tech professionals, but soon realized we needed expertise in business strategy, HR, and finance- areas where fractional executives made a huge impact. They helped us define KPIs, set clear goals, and track progress. It is like a regular business execution, but with additional expertise on your team. What was key for us was accepting the need for fractional roles like CFOs, CEOs, and CMOs. It is part of the entrepreneurial journey. After all, Mark Zuckerberg became who he is, in part because of his COO, not just because of his own vision.”
Finding and Integrating Fractional Executives
When it comes to integrating fractional executives, one of the challenges is ensuring a seamless fit with the existing team. As Kunihiro from CFO Centre pointed out, “Fit becomes 50% of the formula, the other half would be industry fit and skillsets. The key to success is ensuring that the fractional executive feels like a natural part of the team”. For example, many fractional CFOs operate as if they were full-time employees, carrying business cards and having company email addresses, which helps foster a sense of belonging. However, fractional executives are often working with multiple companies, there is a slight risk that they may leave or be unavailable. But this can be mitigated by partnering with organizations that have a pool of professionals, that allows a seamless transition should one person leave.
The intention is to incentivize a culture of collaboration where the executives have access to broader networks and resources. At the CFO Centre, fractional CFOs are part of a large community where they can collaborate and share insights across different clients and sectors. This dynamic can further integrate fractional roles into company culture, helping to create a frictionless experience for them. By ensuring both the right skillset and a strong cultural fit, startups can maximize the value of fractional executives without disrupting team dynamics. Also, as a startup progresses, it may require a different skill set, such as expertise for new funding rounds. In these cases, swapping out fractional executives may bring in the right leadership for the new phase.
Challenges and Misconceptions
Startups sometimes mistakenly believe that fractional services are expensive. However, experienced fractional executives can achieve significant results in just one or two days per week, especially when the company has departmental structure, systems and procedures in place. Kunihiro pointed out that these executives often offer flexibility, remaining “on-call” when needed, which provides value to the startup.
It is crucial to establish clear expectations from the start. As Alemohammad, CEO of Brickeye, points out, the arrangement must include agreed-upon availability, such as how one day a week translates into actual working hours. As Sadeghian noted, “The biggest challenge we have is managing expectations because you have 20% of a person’s availability, then you cannot have them on call with a response time of one hour for every single issue.” Misunderstanding the level of commitment, or expecting immediate responses every time, can lead to frustration. But with proper alignment, communication and well stablished processes, fractional executives can bring exceptional value, even part-time capacity.
Success Stories and Transitioning to Full-Time
There is not a specific timeline for startups to transition from fractional to full time leadership; it will depend on the company stage and specific needs. As Alemohammad shared: “Bringing in full-time executives raises the level of accountability, and this transition should be well-planned.” At Brickeye, this shift occurred during an acquisition and as the company was expanding into the U.S. market. The timing was right to hire their M&A executive expert full-time and start building a larger team.
Alemohammad also reflected, as a founder, he initially handled the finance function but eventually realized the need for a fractional CFO. If he could go back, he would have hired one immediately. As Brickeye grew, hiring specialized full-time leadership, such as a CEO and CFO, was essential to scaling the business.
When the time comes for the transition, founders can receive guidance. Kunihiro from the CFO Centre, shared that he is personally involved in the process, assisting with the recruitment and integration to ensure a smooth handover to full-time leadership.
Investor Perspective
Investors’ perceptions of fractional executives have evolved over time. While there was initial skepticism, many investors now recognize the benefits of fractional leadership. Fractional executives can strengthen a startup’s pitch to investors, as they bring credibility and expertise to the table. Kunihiro shared an example of a startup that had developed an innovative electric-powered outboard motor, superior in the market, but the team didn’t know how to properly communicate their unique value. Therefore, they decided to include three fractional executives to develop the business strategy and craft the initial presentation deck, helping instill confidence in the company’s ability to succeed. It is recommended that founders clearly communicate, with investors, the roles and value of fractional executives, ensuring they understand the level of expertise and their extent of involvement.
Kunihiro addressed the importance of due diligence from an investor’s perspective, which could help founders to understand and prepare in advance. “It is not going to be a panacea”, he said, “and not everyone claiming to be a fractional executive will necessarily be effective.” He advises investors should thoroughly track the record of the fractional executives, doing the same due diligence they would do for any other key executive in the team–checking references, reviewing experience, and reviewing the reputation of the organization that supports, and finally evaluating outcomes for the companies they have worked for.
The Future of Fractional Leadership
The role of the fractional executive is expected to continue growing as the startup ecosystem expands. Alemohammad highlighted the benefit of access to a cost-effective pool of talent stating, “fractional CTOs and other executive roles make it easier for non-technical founders to scale their business.” Sadeghian added that with people becoming more self-employed, fractional roles will become even more common and advocates that startups should consider using it. Finally, Kunihiro pointed out that fractional executives could help improve productivity in Canada, which he admits, is far behind the U.S. He believes the increasing reliance on fractional services will contribute to bridging that productivity gap, and that the next generation will grow up in an environment where fractional roles are the norm in startups, helping to drive growth and efficiency across industries.
As the demand for fractional leadership services increases, startups and angel investors must approach this model with careful consideration to maximize its potential. Thorough due diligence, finding the right cultural and technical fit, and ensuring accountability through measurable results are key to leveraging fractional leadership successfully. By embracing fractional services, startups can access valuable expertise while maintaining cost efficiency, ultimately driving growth and maximizing revenue.
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