Demystifying CTOs for Tech Start-ups

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Why You Might Need a CTO

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If your solution requires a technical solution – like code, data, or aggregated integrations with third-party tools  – you likely need a CTO to define the solution's architecture,  technical requirements, and security considerations. They can also assess the (technical) viability of your solution and take ownership of the tech side of the business.

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As your business scales, a CTO can educate stakeholders on the value of the technology you're building. They can also defend your tech team, its budget, and its execution. This is distinct from the hands-on work of coding and development.

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A CTO is crucial for owning the technological side, especially in system failures or breakdowns.

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A CTO's role isn't just about handling tech; it's about aligning technology with business objectives, assessing long-term viability, and framing security and cost considerations. It’s a big-picture role.

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Hiring a CTO shouldn't be a default step for every startup.  Just because you're building a tech product doesn't necessarily mean you need a CTO right away.

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Do you need someone to get your codebase into shape and to wrestle with any number of coding languages? Then you need someone who will actually do the work of coding! Often this means you actually need a lead developer and not a CTO -  go get one of those first. This is a crucial point we see many founders misunderstand: not all CTOs are the right people to code your solution. Take a look at what a CTO does and doesn’t do to see what we mean (from our experience).

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What a CTO Does (and Doesn't Do)

When thinking about whether or not you need a CTO it’s vital to have a clear understanding of what you can reasonably expect them to do - and what isn’t really in-scope for the role. Here are a few things to bear in mind when considering the function of a CTO within your business, and whether you do in fact need one:

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A CTO should have a strategic understanding of current technologies and trends. ‘Current’ is the operative word here - experience is vital, and a proven track record is nice to have, but a good CTO knows what the market and the tech stack looks like today (maybe even tomorrow), not just a decade ago. Depending on the profile, experience and career stage of your potential CTO, this may mean day-to-day execution of coding tasks, and managing strategy, is not possible. Ideally, a CTO can do it all (but there are only 24 hours in a day). We would certainly recommend that a CTO of any level or experience should, at the very least, get their hands dirty if they need to; but don’t necessarily expect them to always be able to code everything from scratch, on their own.

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As your business scales, a CTO can educate stakeholders on the value of the technology you're building. They can also defend your tech team, its budget, and its execution. This is distinct from the hands-on work of coding and development.

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A good CTO looks ahead,  ensuring that your technology stack can adapt and grow with your business.

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A CTO educates customers, stakeholders, and the board about the technology's role and value. This includes managing the tech team, budget, and execution.

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Prioritise leadership qualities in a CTO over mere managerial experience. A good CTO can inspire and lead a team effectively, not just run a project - and there IS a difference.

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As your startup grows, the role of the CTO may shift from hands-on coding to more strategic and managerial duties. Ensure your CTO candidate can evolve with these changing demands.

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Don't expect your CTO to define your product or solution,  manage your business operations, or do design work . Really, don’t. A CTO isn’t a Product Person or a Business Analyst or a UI/UX designer.

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Finding the Right CTO for You

So you know what role a CTO is meant to play within a startup, and you’ve decided that you definitely need one and not just a lead engineer…but now you have to find one. HOW? Here are a few tips to help you get started:

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The most important question of all. Before seeking a CTO,  clearly define the role and the specific skills you require. Are you looking for a strategic advisor or someone to lead the coding efforts? Do you want a partner, or a staff member? Do you have a clear idea of what you are prepared to offer from an equity point of view? Do you even want them to have material “ownership” of your venture? How much can you afford to spend on the role, and for how long? And do you have a good idea of what a ‘good’ CTO will deliver for your business? Having answers to ALL of these questions is vital before you start recruiting - it will save you time, pain, and eventually money.

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A true CTO is a partner to the founder, so finding someone who complements your strengths and weaknesses is crucial. Consider their personality, work ethic, and cultural fit alongside their technical expertise.

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It’s annoying, but sometimes hoary old clichés really are true; networking and attending community events really is one of the best ways to meet potential partners. Establish the shape of the networks in your city, or sector, and…work them. Have conversations, share expertise, make contacts and assess your options - the best CTO hires often come from your existing network.

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It’s important to remember that  there are more traditional recruitment pathways for C-suite hires, with specialist recruiters offering their services in the space; there are also various matchmaking platforms which seek to match founders with potential CTOs. These can be viable routes to explore - but questions remain about the strength and longevity of relationships developed in this manner (oh, and recruiters can be expensive). Similarly there are accelerator platforms - Antler and Zinc are just two (which Daedalus’ CEO is  involved with) - which can also help with the search for partners, but, again, these aren’t always a substitute for deep personal relationships and mutual understanding.

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Daedalus’ CTO (and Co-Founder) is the CEO’s former colleague, with whom he had had a three-year working relationship before he considered approaching them for the CTO position in a new venture  - sometimes the best people are ones you’ve known and worked with for years.

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If you're a pre-seed or seed-stage startup, you might not need a full-time CTO right away. Explore fractional CTO models or agencies that can provide temporary or part-time technical leadership for a less significant outlay in terms of equity or long-term financial commitments.

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Perhaps most importantly, remember that a potential CTO is assessing you as well - you’re not the only founder out there, after all.This isn’t just about what they can do for you - it’s about what you can do for them, too, and assuring them that you’re a decent human being that they can stand to spend (lots of) time with in what might be an at-times occasionally stressful environment… Be clear about what you offer and how you can be a good fit for them, both professionally and personally. What is YOUR reputation? What do YOU have to offer? Be humble, understand what you need and what a potential CTO can bring to YOU, and consider how you can make clear to them that YOU are a good fit for THEM - their personality, their skills and their work ethic and ethos. Consider the sort of CTO you would like, and modify your pitch and proposal to attract that sort of person.

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Compensation and Equity

It would be nice if there was a single pricetag you could put on the talent you need to make your business a success…but there isn’t. Sorry. That said, the following principles are worth considering when deciding how to structure eventual compensation packages for CTOs (and other senior hires).

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Compensation for CTOs varies depending on experience and the funding stage of your startup - but they don’t necessarily come cheap. Consider that a fairly-standard developer position in the US (which can now be done remotely, from anywhere) can command a $250k pa package - roughly EUR 200k in Europe - for what is largely a 9-5 role - this is what you are in part competing against, and it is important to be realistic about the relative appeal of your offer. Be prepared to offer competitive salaries or equity packages to attract the best candidates.

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When deciding on compensation, consider the level of commitment you expect from your CTO. If you want them to be fully invested in the business's long-term success, offering equity is a good option. Just don’t be surprised if they indeed then invested in the business and have opinions about that!

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Don't make unrealistic promises regarding salary or equity that you can't keep. Be transparent about your financial situation and what you can realistically offer.

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Remember, you’re selling a vision, an opportunity, the chance to be a foundational, respected and vital part of a potentially-successful new company…for potential CTOs currently in a more traditional setting, these more intangible qualities can often be highly appealing (as can the fact that, if it doesn’t work out, the corporate world is likely to still be there 14 months later).

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There are, obviously, no hard-and-fast rules for this - but, as a rough guide… at Pre-seed or Seed round, a reasonable offer might look roughly like a circa 50% equity stake for no initial salary and the knowledge that said CTO may be working on other roles/projects for income. Or a salary starting somewhere around £100k pa and up to 30% of equity. With this sort of equity and at this early stage, you are in practice looking at what is more of a co-founder than a ‘traditional’ CTO - this is fine, but worth being aware of and acknowledging.

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Building a Successful Partnership

Finally, a few broad principles to bear in mind as general pointers - frankly, these are useful in everyday life, not just when you’re looking to hire someone.

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