I specialize in recruiting leadership roles for startups. As a result, I end up talking to lots of Founders in businesses at different stages of maturity and, quite often, common themes will become evident. For example, in the past few days, I met with three really early stage, non-technical Founders, all of whom had been developing their products with external agencies and were now thinking about hiring their own CTO. For all three, funds were tight and yet they still wanted to (and absolutely deserved to) hire a great CTO. Given that similar questions and issues were raised, I thought it might be useful to share some of these here in case you are trying to find a CTO for your own early stage startup.
The discussions typically followed this format:
We are an early stage startup and we don’t have much money. How can we attract a good CTO to join our startup? Could we pay our CTO a really low base salary and have them earn equity?
There are a few problems with paying a “really low” base salary to an experienced tech leader. Firstly, experience usually (not always) comes with maturity and maturity comes with lifestyle responsibilities that cost money. These could include things like a mortgage, kids, school fees and so on.
You don’t want your CTO to be worried about feeding his/her family because you need him/her to be focused on your business. Sure, equity is attractive, but it’s not worth much at this stage and they can’t really sell a piece of it to pay the rent. Even if you do manage to attract someone to take a super low base salary for the role, you then run the risk of them being poached at a later stage by another startup offering a market level or at least livable base salary. As a non-technical founder can you really afford your CTO to be a flight risk?
It may feel a bit uncomfortable, but it’s worth talking about how much they need to manage their day-to-day living expenses. Of course, if they are serious about joining an early stage startup then your would-be CTO also needs to appreciate the focus on managing salary costs too and keep in mind that there is a risk/reward balance weighted towards the potential value of equity in the future. Sometimes these things simply won’t reconcile and it’s good to work that out quickly so less time is wasted.
To maximize productivity, we really need the CTO to be hands-on with the code.
This sounds like the perfect solution, you get a heavy-hitting CTO and a developer all in one. The problem is the more senior the CTO, the less likely they are to be heavy into cutting code. These people have been developing other skills around leadership and management to ensure a quality product is delivered in accordance with the bigger picture vision, on time and to a budget.
Don’t get me wrong, great CTO’s are often the geekiest when it comes to new tools and will typically have a bunch of side projects on the go. However, their interests and skills have generally diverged from that of the individual code cutter who is better placed and better priced to do the work.
So that really begs the question:
Could we just hire a great engineer to keep the costs down and have them grow into the CTO role?
Sure this is possible. The only problem is, not all developers have the capabilities to, nor skills or interest in becoming a CTO. The difficulty here is in choosing one that does.
On the plus side, you will be able to pay a more junior level developer less to attract them, but are they giving you what you really need? Do you need a developer or a CTO?
If you’re hiring a junior developer with plans for them to grow into the CTO role then you’re taking a bet on whether they are capable of stepping up. Will they be able to achieve the big-picture translation of vision into product? Do they have the project management skills? Will they be able to attract, recruit, retain and motivate people and to build a great tech team for you? Good, experienced technology leaders are talent magnets and will often come with established networks – these networks will help save you money in the future and build a more robust tech team for your startup.
Ok, so we need a CTO who is an experienced tech leader, but how can we afford one?
Paying a base salary level that at least covers living expenses is a given, however, you still need to keep costs low while attracting a great CTO to your team. What other non-salary levers do you have to work with to attract a great tech leader? Luckily, there are a few things you can do.
Firstly you can slide the equity portion up or down depending on the salary level, noting that there are many ways to structure the equity component of their package.
Secondly, you can designate your new CTO to be a “Co-Founder” of the business. Yes, this is a title but not “just a title” as it goes beyond that to provide a genuine and very public sense of ownership. Your CTO is critical to the success of your startup and you want them to be totally on board. As they are joining at this early stage, the Co-Founder title is a good way to prove you are committed to them as well.
Another way to secure a more experienced (and higher priced) CTO when funding is light is to consider hiring them on a part-time basis. This way you get the horsepower you need overseeing development and you can promote the fact that you have a high caliber CTO when looking for investors while only wearing a pro-rata salary cost and enabling the CTO to supplement their income with other projects in the interim.
All that being said, the real key to attracting a great CTO is to get them excited about what you are trying to achieve and also excited about genuinely partnering with you to make it happen. It’s the killer combination of a meaningful goal and a great team that makes both the journey and the effort worth taking the risk. That’s how you attract a great CTO when you are early stage and haven’t raised a lot of money yet.