Before launching their startup, all entrepreneurs ask themselves a number of questions. Will the product they make be in demand on the market? Will there be enough money to develop and grow it? What risks could a startup face on this path?
One of the crucial questions at this initial stage is, “Who will realize the idea?” It is extremely hard to underestimate the importance of this question as it’s these people that the future of the startup depends on.
When talking about a tech startup, the first person that comes to mind is the CTO. The person in charge of the startup’s most important component – its expertise.
In this article we will investigate:
- The part a CTO plays in a startup;
- Which startups need a CTO;
- How a CTO’s duties evolve at each stage of a startup’s development;
- Why outsourcing as an alternative to a CTO does not work;
- How to find a CTO if you don’t have one yet.
The part a CTO plays in a startup
The part of the Chief Technology Officer is one of the vaguest and most unclear ones in a startup. It’s a position that sounds cool and is often attributed to people who perform radically different tasks.
In startups, the position of CTO can be occupied by a Technology Consultant, a Lead Developer, and even a System Administrator. The reason is, every startup has different requirements for its Chief Technology Officer. The position’s requirements vary at each stage of a startup’s evolution.
To avoid confusion, the position of “Chief Technology Officer” will be used in this article as a general term, while the duties of a CTO and the skills necessary to fulfill them will be the focus of attention.
So who is a CTO?
According to Founders Network – “A CTO is part of the highest level of the executive team and mostly performs a managerial function. A CTO generally does not deal with software development directly, but rather acts as a manager and determines the company’s technological strategy. Most of their work is focused on research and management, while only 10% is devoted to practical work”.
A CTO must have a good knowledge of business, be closely tied to the company’s vision, and propose strategic recommendations on the use of technologies to achieve the startup’s short and long term goals.
Which startups need a CTO
In a perfect world, everyone needs a CTO. However, startups work in conditions of uncertainty and limited resources. A huge percentage of failed ideas shows how important it is to properly use resources and consider all the risks to avoid bankruptcy. That is precisely why entrepreneurs make informed decisions about whether they should spend up to $200k on a CTO’s yearly salary.
To make the right choice, for starters, you must determine what startup you have and what goals you should set.
All startups can roughly be divided into two types: tech or tech-enabled. A classic tech startup is one where technology is the core IP and company valuation is largely dependent on it. A tech-enabled startup is one where technology is not the core IP but helps run the business. In this case, the service and traction determine the valuation.
In the first case, the CTO is a key figure of your startup, ergo operation without them is impossible. In the second case, operation without a CTO is possible, but only at the idea testing stage. Sooner or later the project has to be scaled, and steady growth requires a sturdy technological base.
Also, one must remember that tech-enabled startups are easier for competitors to replicate. Therefore, it is important not to waste precious time on product restructuring and, when possible, hire a CTO as soon as possible.
How a CTO’s duties evolve at each stage of a startup’s development
Every startup’s life cycle consists of several stages. Each of them has its own unique features and requires a special approach. Let’s consider each stage separately in terms of how the CTO’s duties evolve as the startup grows.
Stage №1: The Business Idea
Any tech startup starts with an idea. Quite often the company doesn’t yet exist at this stage. The co-founders brainstorm, work out ideas, and develop a business plan.
Possessing great technical experience, the Chief Technology Officer (who is often a co-founder) tests the technical feasibility of a business idea and proposes potential solutions for the realization of a software product.
Hiring of a Chief Technology Officer at this stage allows to reduce the time spent on working out labor-intensive ideas, as well as determine the best way to realize the product in terms of the price-to-quality ratio.
Stage №2: MVP Development
After the idea has been worked out, it needs to be proven in praxis. That is why startups develop MVPs. At this stage the CTO is the main and oftentimes only developer on the team.
Besides the development itself, the CTO’s duties may include:
- selection, training, and control over the technical staff;
- selection of the technology stack;
- establishment of the development timeline and budget;
- development of the application’s architecture;
- application testing.
These tasks require a greater managerial and technical experience, as well as the ability to adhere to a flexible software development workflow.
Stage №3: The Finished Product
When the MVP is done and the startup is blazing its trail on the market, the Chief Technology Officer focuses on improving the product. Their duties now include:
- improvement of product functionality;
- team scaling to satisfy the growing need for product maintenance and tech support;
- development of a scalable, optimized product infrastructure to increase corporate efficiency.
Gradually, the Chief Technology Officer’s part transforms from a highly qualified developer into a hybrid of technical visionary, personnel manager, and team manager.
Stage №4: Growth
At the growth stage of a startup, the CTO’s duties once again evolve and now include:
- observation and control over several developer teams;
- development and realization of workflow principles;
- resolution of issues related to safety on a company scale;
- selection of architecture for applications and other digital products;
- monitoring and introduction of the latest technological trends in production.
As a rule, mid-sized companies also tend to assign certain product management tasks to the CTO.
Stage №5: Expansion
At the expansion stage, the CTO is a senior manager who is several levels removed from practical tasks. At this stage of the company’s development, the position of CTO includes the following duties:
- management of large or several departments;
- introduction of advanced technologies on the corporate level;
- participation in conferences and other specialized corporate events;
- training session management and many others.
The most prominent ones are the ability to communicate, make precise forward-looking decisions, control the team’s and department’s progress, plan the development of new technologically competitive advantages, and be the face of the technology and the company – that is the image of a perfect Chief Technology Officer.
Why outsourcing as an alternative to a CTO does not work
Most entrepreneurs work with limited resources and therefore have to search for ways to reduce costs. One of such ways is searching for an alternative to a CTO, whether it’s working with a contractor or hiring only regular developers.
Both options are viable if you operate a tech-enabled startup. At first, you truly save your funds. However, are they worth it at the cost of product quality?
In a startup, something changes literally every day and the stability of your entire system depends on how good your foundation is. Low product quality today means higher costs in the future, and perhaps even losses due to missed deadlines and a “half-baked” product.
It is extremely difficult to combine doing business and controlling development. In most cases, it leads to failure in both areas. An important correction must be made at this point. If you are a CEO who possess no technical background, then looking for an alternative to a CTO is not only pointless – it is even dangerous.
The danger lies in the fact that you cannot control something you have insufficient knowledge of.
Many IT companies take advantage of that. You can find numerous articles online saying that outsourcing MVP development is safe and helps save costs, but that’s not true. There are a number of reasons for this:
- You have no control over your product. By giving away development to a third party, you don’t know who actually does it and you cannot vouch for the quality of the finished product. Product quality in a startup is not a low-priority item.
- Problems appear when scaling the product. Since product quality suffers and you don’t know how it works, you cannot count on its stability in further development.
- You become dependent on the contractor. The MVP is only the beginning of your startup’s path. By entirely handing the development over to a contractor, you lose your independence.
These are the precise reasons why investors have a negative opinion of startups that use outsourcing (not to be confused with outstaffing). They simply cannot be sure of the future of such a startup.
How to hire a CTO if you don’t have one yet
So, the CTO is undoubtedly an important part of every startup. However, there remains the question of where to find a suitable person for this position.
The success of a startup mainly depends on how well the team works, how much its members trust each other, and how much they interact with each other. This is exactly why the best option is a person you have already worked with in the past. You know them, you trust them. Of course, this person must be well-versed technically. Ideally, they already possess a vast network of contacts. Since everyone in the startup is a salesperson, a marketer, and an HR manager, keep that in mind.
If you don’t know any such person, you can find CTO here:
- Local meetups and conferences. Many people with similar interests and views come to such events. One of the reasons for that is networking. It’s an excellent way to find a CTO who is a kindred spirit.
- University acquaintances. One of the main reasons universities are so valuable is networking. On the Web, you can find multiple examples of successful startups launched by alumni of the same university. Hundreds of them purposely promote the spirit of entrepreneurship and help to create and set up an environment suitable for it in every way.
- Employees of large tech companies. Highly qualified people work in such companies. Many of them would prefer the creation of their own product to corporate culture. That is why they create their own startups alongside their main occupation. Choose a company from an industry that suits you. For example Cisco – if you work with computer networks or Salesforce – if your domain has to do with marketing automation. It will help you find a person who possesses not only the technical skills but also the job experience in the necessary area.
- Networking platforms. These platforms combine all the items above. This is where you can find people who are already interested in a particular subject. The most popular among them are CoFoundersLab, Founder2be, FoundersNation, Angel.co, and Hachi.
Thank you for your time and attention!