Founders often ask us if they need a CTO in order to get funding for their startups. Investors tell them things like, “If you can’t attract a CTO, then you must not have a compelling company.” Sometimes they’ll say, “I only invest in companies that have strong tech leadership.” Unfortunately, this conventional wisdom is misleading. Bringing on a CTO at the wrong time can cost companies dearly in the long run.
If you run an early-stage startup, what you’re really seeking is execution. At this point, you don’t even have a product. So, why would you need to pay someone full-time to manage team growth and development? You need someone who can help you vet processes and make critical engineering decisions you won’t regret later. Informed advisors, consultants, or engineering teams can give you this information. Generally, reaching out them strategically means you’ll pay much less than you would for a full-time CTO.
A CTO is responsible for leading the company’s tech strategy as well as team growth and development. That person also often has client-facing responsibilities and rarely writes code. It’s common for under-qualified startup cofounders to call themselves CTOs. However, many times they’re just execution-focused engineers with inflated job titles. Theoretically, it would be great to have someone in this role at the outset. But unless you have unlimited time and money, it’s a terrible idea to hire a CTO for your startup.
We know from experience that you can build a successful tech company without a founding CTO. We’ve worked with more than a dozen founders who’ve collectively raised millions of dollars in funding without hiring full-time CTOs. Instead, these companies brought on fractional CTOs or lead engineers who were equipped enough to make well-informed decisions around the direction of the technology.
Here’s what you really need to build a successful startup.
A Quick Caveat
We’ll caveat the following with a few exceptions. First, if you are building a product that relies on a type of technology that doesn’t exist yet or is in its infancy, your probably need a CTO. Second, if your product combines software and hardware, this may be a good reason to have someone at a CTO level involved to help dictate the technical strategy. Third, if your product targets engineers or technology teams, you’ll probably want a CTO if you aren’t yourself a former engineer or tech team member. Typically, founders that fall into any of these groups have enough domain expertise to already know with an absolute level of certainty that they can’t build the product they want without someone in this role.
You Don’t Need A CTO, You Need Execution
When investors say you need a CTO, they’re looking for assurance that you’re working with someone who can help you build a great product. Unfortunately, a CTO doesn’t guarantee a profitable business. There are much more valuable ways to spend your time and resources to build a sustainable business.
In the early phases of your startup, it’s essential to spend most of your time on customer development. This means taking sufficient time to learn about your customers via market research, surveys, interviews and a host of other methods. Using the data you’ve compiled, you should then begin to outline your core product. Industry-speak for this is MVP, or minimum viable product (we’re not fans of this term, but that’s another blog post).
Ultimately, the goal of customer development is to accurately define the problem and make sure the solution, or product, is directionally correct. While a CTO could potentially help you with this, there are many other people who are better suited to help. Even if your CTO excels at all aspects of customer and product development (which is uncommon for most technology candidates), that person may be ill-equipped should your business require a pivot beyond the CTO’s area of expertise.
It’s an unfortunate reality that, due to the nature of product development, you’re going to need to rewrite your software multiple times over the first few years. It’s our experience that startups typically don’t need dedicated CTOs until they’ve launched Version 3 of a product. By this point, the team has ironed out the product’s core capabilities and validated them with users. The engineers have rewritten the tech to support these capabilities so the product can scale. It’s only at this point that product’s success hinges on true technical leadership and strategy.
At this early-stage startup phase, you should focus much more on getting the product right and much less on getting the tech right. Early feedback and learning often result in significant new product directions. “Premature optimization” can result in wasteful spending on parts of the code that might just be rewritten soon anyway. Best practices should inform your product’s code. Remember, it only needs to be good enough to support usage and scale for the next 6-12 months.
You’re Unlikely To Find A Good CTO Anyway
The average CTO salary in New York City is around $176,000, according to Glassdoor, and can run as high as $300,000. If a person can earn that much and gain equity at a profitable company, you’ll have to make a pretty strong case that your company is a better bet if you want to retain that level of talent. Most companies are far too risky for the CTO to want to take this plunge. Even if you’re willing to offer more equity, the CTO knows all too much about high rates of startup failure and will likely to dismiss your fresh, unfunded company, opting instead for the stability of a more established, though possibly still startup, company.
Generally, qualified CTOs are also well aware that your company doesn’t need to have someone in this role at such an early stage. These individuals won’t accept the role no matter the pay. If you can find someone willing to accept substantially lower pay for this role, they may be under-qualified. And, if they’re a lousy CTO, you’ll need to replace them once you hit a certain level of market success.
Just about the only time a qualified CTO would choose to work for a brand-new startup is when that person has the utmost trust in the founder. This typically happens when the founder has a notable reputation in the industry. But even if you have such a reputation, the CTO may take you months to find. All this wasted time could have gone toward developing your startup and building your product. Sometimes founders try to mitigate this risk by finding part-time CTOs. But, it’s hard to run a company with someone only half-invested in the role.
If you do find a diamond in the rough, retention is an entirely separate issue. Unless you’ve worked with that person before, the person you’ve hired as a CTO will probably actually assume the role of lead engineer or tech lead. And, you don’t want to overburden an engineer with management responsibilities, because your business really needs to focus on building a product instead of working on management-level technology strategy right off the bat.
Spend Your Time And Money Wisely
You don’t need a CTO for your early-stage startup. A CTO isn’t the right person to help you build a successful product. Don’t hire someone to help you focus on comprehensive architecture and manage an engineering team you don’t yet have. Spend your time and money getting the basics of your engineering process right. Use your resources to develop a product your customers will actually want and use.
Instead, use the time and money you’d spend trying to find a CTO to focus on customer development. Conduct research to ensure you’re building a product people actually want. Then, focus your efforts on building a successful startup. Learn the ins and outs of raising money. Once you do raise, bring on an engineering team with a track record of success. After you find product/market fit, satisfied users and growth potential, your success will help you attract the right full-time CTO. At that point, you’ll be able to give that person the team, resources, and momentum to do their job.
FounderTherapy helps startup founders build better businesses. Want to learn how we can help you launch your business? Get in touch at www.foundertherapy.co.
Image credit: CC by Jordan Richmond.