Introduction
You may have been told by someone (possibly an investor) that you need to hire a CTO
for your business, but it's not always the case you actually need a CTO full-time
for an early-stage startup.
You may just need a lead developer or technical lead to build the project
Still think you need help planning the platform or working out whether your startup needs
that AI, machine learning, distributed ledger piece?
Hiring a fractional CTO may be sufficient here, or someone in the interim for a few months
to hire you the initial engineering team, guide you on a product build with an agency or
advise you on how technology fits into your strategy
- The Chief Technology Officer
- How the CTO role varies
- How an interim CTO Works?
- How a fractional CTO Works?
- The CTO Skillset
- Hiring an Interim or Fractional CTO
- The Cost of a CTO
- Further Questions/Contact Me
The Chief Technology Officer
Let’s cover the basics of the CTO role. The CTO (Chief Technology Officer) is often the most confusing role in the c-level exec suite. In terms of why you might need a CTO, McKinsey provides a good explanation here. As to what they do they will :
Work with the executive team as an expert in technology on strategy and the utilisation of technology for competitive advantage. That typically involves deep technology research as well as development.
Oversee product and engineering roadmaps to ensure a product can compete in the marketplace, is productive to work with, and is robust, secure, performant and reliable so that you have happy customers : )
Establish key partnerships for the business in terms of product and engineering around third-party integrations, non-core elements of the product or outsourced team capabilities;
Build and scale the product/engineering teams and development capabilities in terms of development, test, dev-ops, security, performance and data science/engineering capability.
Typically, a CTO comes from an engineering background. They often have a degree in Computer Science or another numerate discipline. Above all this, is a commercial awareness and business minded approach to technology, rather than technology for “technology sake” or a CV driven development approach.
You’ll also see people come from a product background or project management background. Whatever their background may be, they have to understand the technology, how the product is assembled and how the team work with it. That is more and more important if you rely heavily on “science” or are a deep-tech, hard-tech company.
If you hire someone who doesn’t understand the technology then they can only manage a team and product based on scope, time or financial constraints.
If they constantly propose features or your development team are constantly fire-fighting or miserable, then you have to ask whether you have the right approach to building a product. Consider an audit or review (I also provide these for companies).
How the CTO role varies
The type and nature (full-time, part-time) of CTO varies based on a number of factors:
- The stage of your business — Seed to Series D and beyond;
- You startup domain (e-commerce, fin-tech, prop-tech);
- The type of platform you have (B2C, B2B etc…).
The CTO role at seed funding stage is very different to the CTO role at Series B stage. I’d liken the seed-funded CTO as the “pioneer” and technical lead of the startup, whilst at Series A/B the CTO role is more “town-planner” and helping the product/engineering function to grow-up in terms of process, structure and the way in which they interface with the rest of the business.
In terms of domain, if you’re building an e-commerce solution to sell online, then you’re unlikely to need a CTO unless there is a key technology component or interface. However, the e-commerce space is messy and you may well need a Fractional CTO to guide you through the technology selection process.
If you’re building a “product” for e-commerce, such as a warehouse, product information management offering then you will need a CTO. If there are heavy technical elements to your platform, e.g. you’re utilising predictive analytics or machine learning as part of the product then you may require a part-time or interim/full-time CTO.
If you’re building a B2B platform as opposed to a B2C platform then you’ll typically need an interim/full-time CTO due to the issues of scale, reliability and robustness. For a B2C web or mobile solution you can typically utilise off the shelf components and make do with a fractional CTO.
How an Interim CTO Works
An Interim CTO will provide full-time, or near full-time coverage for your business (3–5 days of the week). It’s not always the case that you need a CTO, some people think they do, but they really need a tech lead instead.
What problems do they work on?
Companies will typically hire an interim CTO in the following situations:
- You have a senior technical member of the team who is struggling to meet the needs of the executive team or business and needs coaching or needs to understand where they fit into the business;
- You have key members who are leaving or need to cover your departing CTO/VP of engineering and/or provide continuity whilst helping you to find a permanent replacement. Often the need here is to provide immediate cover to help stabilise the ship (because people have left). A key part of this is understanding root causes and addressing those issues (through transformation). It’s key to go through the analysis of the right individual, based on what I’ve seen in the business and to ensure that is captured in the job advert, but also the interview process;
- You are struggling with growth and achieving your next funding round (whether that is seed, series A or B). That might be technology innovation, help with scaling to meet traction, working on helping the teams to “grow-up” towards Series A etc… in terms of processes and people.
- You have specific product challenges or problems that require deep-technical knowledge which they cannot find in-house or which would be difficult to hire for.
Within each of these, there are often a set of objectives that need to be set out at the beginning including the exit criteria for the engagement. This is important to establish expectations on both sides of the role.
How a Fractional CTO Works
A Fractional CTO is slightly different and will generally provide support for a specific project or problem, coach someone or provide general help on an ad-hoc basis or for one day a week or a few days a month. You might find yourself in one of the following situations: You are early stage and can’t afford a full-time CTO and need somebody to advise and input on product and technology strategy (developing the pitch deck, defining the product in terms of discovery and helping them find the right agency; You need an independent analysis of a product (which has been developed by an agency) or a team (because of disagreement/fallout). That comes with a review and report on the situation and what to do next in terms of people, processes or the product in question.
The CTO Skillset
There are a set of skills that are important for an interim CTO:
- Deep experience with technology with a significant amount of time spent as an engineer in the past. That includes cloud-based infrastructure, different architectural styles, web/mobile/desktop and one or more programming languages;
- Experience with technology strategy knowledge and being able to connect product and engineering using various objectives and metrics to measure success;
- Understanding of product management as well as engineering — particularly when a company is trying to find product-market fit in the early days.
- Understanding of people, having experience dealing with motivation, problem resolution, and helping people to work together within a team and between teams;
- Understanding of product and engineering processes that are adapted to the situation, never be applied carte blanche, and always to support rather than “for the sake of it”.
For VP of Engineering, it is slightly different and less about technology strategy and deep-tech and more about processes, engineering efficiency, and transformation (generally). In early-stage companies (up to Series A, maybe a little later) you’ll see the CTO cover both roles.
Eventually a CTO has to choose whether they want to align more with technology, strategy and innovation or more with process and people.
Domain experience is a major plus in terms of helping out a startup/scaleup, particularly if you’ve been through the process of co-founding businesses in those domains. The challenges in terms of what worked and what didn’t with products, developing roadmaps, customer challenges, and internal company challenges are critical to the success of other companies in the space. For me, that’s generally been in the areas of ed-tech (co-founder), health-tech (co-founder and advisor), high-scale e-commerce (engineering/architecture) and travel (engineering/architecture).
Hiring an Interim/Fractional CTO
How would you go about hiring an interim or fractional CTO? There’s a few things here to consider:
Go direct to interim/fractional CTO’s via their consulting websites.
Speak to an executive headhunter then they typically will refer/recommend a selection of people, including myself. In the past this hasn’t incurred a fee on top of the standard day rate or monthly retainer;
Avoid recruiters, they will look to take 20% on top of a standard day rate, which at £800 — £1100 a day makes the whole arrangement unworkable due to cost.
The Cost of a CTO
The cost of a CTO varies based on business size, experience and a number of other factors.
For a permanent CTO, you're looking to pay a minimum of £120,000 a year with equity to compete in a highly competive environment.
If you're outside London then I typically see a variance of approximately £20,000.
An interim CTO will cost approximately £900 a day minimum. That will go up from there based on the stage of business, difficulty of the situation and the type of work.
Domains such as fin-tech take this up further (on a perm/contract basis). Expect up to £150,000 for perm and £1100 on a day-rate.
That rate might seem high and may appear as a shock, especially if you haven’t hired a contractor/consultant before. You can check the median rate via ITJobsWatch here also.
Make sure you consider this cost in terms of potential value and also the following:
- The breadth of experience this brings on top of your in-house team and their current situation, skills-gap;
- The difficulty of the work, particularly when dealing with problems around culture, executive team alignment or team/people issues, in addition to the technology;
- A typical engineer contract rate, e.g. a senior/lead engineer (circa £650 — £800) and the cost of a full-time permanent CTO with
- What would happen if you didn’t hire them, based on the problems you’re facing today? Would your existing team cope, would the business be worse off?;
- The potential commercial benefit of hiring someone — in terms of strategy, revenue and opportunity.
- How you work with them — fractional or interim — and whether they work on strategic or operational problems is also key here.
Further Questions/Contact Me
If you have any other questions feel free to contact me via:
jon @ hwintegral.com
07854 651897