Does my startup need a CTO?

Rob Patrick has been a member of Founders Network since March 2018. He’s also been a prominent FN member in our Los Angeles Chapter. To receive peer mentorship from Rob and over 600 fellow Tech Founders, please request an invite and join our global network.

One of the most common requests from an early-stage startup is “Can you introduce me to a great CTO?”. However, just as important as asking yourself “Does my startup need a CEO? Is: “Do we need a CTO?”

What does a CTO do?

The Chief Technology Officer (CTO) role is one of the most misunderstood roles within startups. The term gets used interchangeably, ranging from technology advisor to lead developer to the person who fixes your personal computer. So what does a CTO really do?

The traditional definition of a CTO is “a senior executive with responsibility for managing the technological requirements of a company or other institution.” However, this can still be misleading for an early-stage startup that does not yet have management layers. The most senior technologist is often your developer, or maybe an advisor who has a technical background.

Does that make them your CTO by default? Definitely not.

As a member of the C-level executive team, a CTO is a high-level management role. They have a strong understanding of the business, are closely aligned with the company vision, and offer strategic guidance on how to utilize technology to achieve short and long-term organizational goals. They should have the ability to vet and attract top talent, as well as build out a full-scale engineering organization.

Typically, a CTO does not do development. They are a manager and technology strategist at the highest level of the planning pyramid. Their day to day should be focused on research & management, with around 10% dedicated to hands-on work.

In large companies, reporting to the CTO would be the VP of Engineering, which is typically about 60% management work and 40% hands-on. They are more of an engineering project leader. The Director of Engineering under them works about 65% hands-on and 35% in management. Finally, you have a Lead Developer role, which is 95% hands-on and 5% management.

Technical Leadership Roles

Based on those common role definitions, you have to ask yourself — what does my startup really need? Are you looking for a lead developer who can just get something built? Or, do you have a small team of engineers that need technical guidance from a Director of Engineering? Or, are you truly looking for a CTO to structure a long-term technology strategy, and then recruit and lead an engineering organization?

Let’s face it, early-stage startups are often “cash poor”. This means they have to use other creative ways to attract talent. One such method is to assign a fancy title to make the position feel more attractive.

This can backfire and be detrimental to the company, and employee, if not done properly. Calling your lead developer “CTO” means one of two things:

• When your business grows, that person must be capable and willing to take on increasing technical management duties.
• You will have to strip that title and hire someone more appropriate for the evolving duties when the time comes.

Many startup founders leave an unqualified person in that role. All this, to avoid the potential conflict or uncomfortable discussion that comes along with rectifying a misalignment of one of your longest standing and probably most loyal team members.

If you do grant a CTO title, it is always best to set the expectation up front that the demands of that role will evolve as the company grows. There should be a mutual understanding that at some point, if that person’s skills or desires no longer align with the needs of the role, a title change should be expected.

When should I hire a CTO?

Each stage of a startup has unique challenges and needs. Without putting a position label on it, let’s explore what type of technical leadership capabilities you will need at each of these stages.

Concept Stage

In the earliest stages of founding a company, you are likely looking for a technical co-founder or advisor. Someone who has the ability to imagine and research a technology solution that would empower your business. This person should ideally have a background in the industry that you’re in. They should be able to communicate technical concepts clearly, and be closely aligned with the company vision.

When self-funding or raising a friends & family round, you can get by with a part-time technical advisor to start. Committing full-time is preferred, but likely not necessary. It is important to note that the skill set required of a technical leader in the Concept stage vs Pre-Revenue / Active Development stage are possibly very far from one another. Take caution when making long-term commitments at this stage.

Pre-Revenue / Active Development Stage

Once you are ready to start building a proof of concept or MVP (Minimum Viable Product), the technical role becomes essential. It is common to have an engineering team of between 1 and 3 people, with a flat management structure and direct interaction between all team members.

You need someone who understands your product vision and is hands-on in writing code. You don’t need a manager yet, but you do need a solid lead developer who can make sound architectural decisions.

If you’ve chosen to hire a dev shop, you could opt to pull in a technical leader to guide that vision and oversee technical quality and delivery. This person should be a strong team manager, but still capable of ensuring code quality and enforcing best practices.

Funding in this stage tends to be Angel and early-stage seed investors. These investors want to ensure that you have a team capable of taking the company to their next round of funding, or better yet, to profitability. Your technical leader will need to have a strong sense of the product roadmap and technical capabilities to deliver on that plan.

Post-Revenue Stage

Once your product is generating some initial revenue, the landscape shifts as you race to adapt to customer feedback and new opportunities to reach product-market fit. Technical management becomes a core skill as your engineering and product teams expand past 5 team members. When revenue is early and unpredictable, your technical leader should be more hands-on in development. But they should also have a strong enough management foundation to guide a team of up to 10.

You’re now drawing interest from venture capital investors looking to accelerate you into that hockey stick growth trajectory. Your technical leader will now be more closely scrutinized and should ideally be adaptable enough to expand within the role. They need to be able to meet the scrutiny of investor due diligence and instill confidence through experience and capability. Since much heavier technical management duties are on the horizon, this is a good time to realign your organizational chart if necessary.

Growth

As revenue sources stabilize and start showing predictable trends, you’re now in the territory where you need a technical leader. This person should have a firm grasp on your business model and broader market trends. They also should be able to provide of technical vision and experience to leverage best-in-class technology solutions and prepare for the multitude of scale challenges that occur within a rapidly growing organization.

Chief Technical Officer is largely a management role. They look after the big picture of the company. It is someone who is more geared toward vetting and attracting top engineering talent, and who can build and manage an engineering organization of 20+ employees.

Raising a growth capital round will require a technology executive who can achieve that 10x scale and align technical strategy around a 5-year plan for the company.

Conclusion

Every company has a unique path. Each company stage comes with unique technical challenges. It is very rare that one individual is best suited to lead the company through all the various stages.

Your technical leader will at minimum be an essential team member. They will likely be instrumental in the company’s success.

As with all hiring, do not be hasty in bringing on a technical leader. Seek counsel and talk to people who have been there before. At each stage, there are temporary solutions that will fit the need while you continue searching for the right candidate. This will likely be one of the key decisions that you’ll look back on as defining your success (or failure).

Good luck, and happy building!