At some point during the lifetime of a new software company, every founder considers appointing a Chief Technology Officer (CTO). When is the right time, and do you really need one?
Perhaps you’ve built the first version or MVP (Minimum Viable Product) of an application or platform with a sweat equity team or via outsourced developers and things are going well.
As the viability of the business becomes more certain and in order to move to the next phase, you may consider broadening the internal skills base by hiring an experienced CTO.
You may even think it’s essential.
However, before rushing in, it’s important to note that there are many misconceptions about what a CTO actually does and when and why your startup would need one. There are also potentially better alternatives.
Bearing in mind that the average annual salary of a CTO – a C-suite position – in the United States is around $260,090 – appointing a CTO at the wrong moment could be a costly mistake.
This article aims to help you assess at what stage your business may need a CTO – if at all – and if not, which roles you should be filling instead and why.
A common misconception is that a CTO is the company’s lead developer.
The CTO is the highest technology executive position within a company and leads the technology and engineering department. In this role, they are responsible for hiring at least engineering management, if not the entire team.
The CTO is therefore usually less operational than the Chief Information Officer (CIO) and has a more outward-looking and strategic planning role, including being responsible for the company’s future vision.
The exact functions of a CTO depend on the size, nature and stage of a business, but generally, the responsibilities include the development of policies and procedures and the use of technology to enhance products and services, as well as developing strategies to increase revenue and provide competitive advantage for the business.
Other duties to consider are that of the company mascot – the public face of the company. This requires them to write articles, have a significant social media presence, and give presentations. Basically, be in the public space. In many instances, they also serve as a super-salesperson. Depending on the technology space, a CTO is responsible for leading intellectual property efforts.
This means the CTO function requires a broad understanding of both business and technology. Rather than just being the lead engineer, the CTO should also be a technology strategist with the ability to perform well in the public space. Let’s call it charisma. In order to lead teams into battle and be in the public space, it’s required, but often not considered.
Finding the right person for this job is no easy task and often companies appoint the wrong person at first because they are not certain of exactly which skills they need or choose someone after startup ‘speed dating’ and end up with a considerable mismatch.
One of the typical problems when appointing a CTO is that many engineers are not natural leaders, which means you may end up with a CTO who has top-notch engineering skills but lacks the problem-solving and communication skills to lead a team and grow the business.
Although the functions described above are needed in most companies, they don’t necessarily have to be fulfilled by a CTO in the traditional sense. They’re presented for your consideration.
For example, there are many scenarios where other member/s of the team, especially the founder, could be fulfilling functions usually associated with a CTO. In this scenario appointing a CTO with a hefty price tag would not be in the best interest of the business, particularly not during the early stages.
A more appropriate question to ask to help determine the positions you need to fill could be:
“When is the right time for the founder to offload some of his or her responsibilities and what is the opportunity cost of not doing so?”
For example, if you have a great idea for an application and little technology knowledge, but you create a functional MVP with the help of a sweat equity team, everything may run smoothly with you as the founder fulfilling all the functions of the CTO.
However as the business continues to grow, you get bogged down with too many administrative tasks or trying to keep up to date with the latest technology, leaving little time to focus on the big picture and the future development of the business. The business may also be held back by the lack of skills or experience of the sweat equity team members.
At this point, the opportunity cost of not getting additional help is clearly getting too high and it would be time to consider adding to the existing skills base.
However, does this mean you need a CTO? Not necessarily.
Adding a CTO to the payroll could be considered a luxury at this stage.
What the business really needs is more hands on deck to allow the founder more freedom to focus on the overall development of the business. Consider a simple use-case analysis of the day-to-day to determine your needs. While the founder is likely the public face of the company, they may need expert advice on leadership strategies and technology tools to take the startup to the next level.
Although a CTO may address some of these issues, the cost is prohibitive and one person may not provide the right balance of strategic and hands-on practical expertise the business needs.
In this case, it may be better to consider working with a reputable technology partner – who has extensive experience in creating complex IT projects from planning to launch because they’ve been owners and founders of startups themselves. They have faced the exact same challenges, made mistakes and learned lessons, which would prove invaluable to any business in the software development industry.
Not only do they bring the right product development and technology skills to take the business to the next level, but they can advise on anything from future technology tools and solutions to risk assessments, as well as provide guidance on the big picture vision for the business.
This combination of technology skills and founder/owner experience essentially covers all the functions of the CTO role and much more – without adding the cost of a C-suite salary.
At some point in your company’s development, probably in the post-product or public listing stage – is a much better time to look for someone to take over the sole responsibility for the company’s technology vision, strategy and execution. Some of the mascot duties of the founder will also be transitioned to them then.
This is when the company needs an official technology lead to present to customers and investors, but now the business not only will have a much better idea of the type of person they need but will also have the funds to pay for the right CTO that has the broad spectrum of skills and attributes needed.
At REEA Global – our global team offers a full service including software development, analytics, and data transformation from concept to launch. Our large team provides instant scalability and all of us have launched products, started and sold companies of our own. We are one of you. We are not consultants, we are builders and entrepreneurs.
Let us help you grow your business.
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