Why You Shouldn’t Hire a CTO

With Jeff Francis | Co-Founder of ENO8

Transcription:

Everyone. We’ll get started in just a minute. I think. It looks like a few folks are still joining in and, joined by Jordan from our team today too as a Panelist here kind of helping us run these. So glad to have her today.
This is our first ENO8 answers of the New Year. So excited to get these rolling again. We’ve picked a pretty good topic today. We’ll go ahead and start diving into and the topic that we selected is why your software startup shouldn’t hire a CTO.
This is, this is probably a topic that’s a little bit more relevant to more of our startup audience.
We can ask about this a lot, enough that we thought we need to, we need to create a ENO8 answers on this and kind of talk about it in a little bit more depth.
And, I think on the surface, some of my opinions on this might, might seem sort of, strange or like they’re a hot take.
But I think once you guys hear me out and I kind of explain what we mean it probably will make a lot of sense that but I encourage a lot of questions or comments from anybody as we go.
So any of the attendees on, if you have questions, feel free to throw those in the question box, I’ll try to answer those along the way.
And Jordan, if you wouldn’t mind, help me kind of keep an eye out for questions by post and where needed, I can, I can answer questions along the way or I’ve got a little bit of time reserved at the and for us to go through questions as well.
So, real quick as always, just a little bit of quick background around me.
My name is Jeff Francis.
I’m one of the co-founders of ENO8.
We’re a digital innovation studio based in Dallas, Texas.
I’ve personally helped launch over 100 successful digital products.
A lot of those with startup companies and onto the topic of the day.
So why startups shouldn’t hire a CTO?
You know, like I said, I, I think a lot of people may see the headline, I think that’s kind of a hot take.
But, you know, don’t get me wrong.
CTO S are, are really often the backbone of a company’s software development efforts.
So why would I suggest not hiring one?
Let me be clear.
CTO S are vital and necessary part of most of these software product businesses, but only at the right stage of a company’s life.
I think that that’s the big distinction is I’m not saying that they’re, they’re not to be hired.
It’s just they need to be hired at the right stage.
So with that being said, the reason, I think most early stage software startups shouldn’t hire a CTO comes down to really three factors fit cost and client.
So we’ll talk a little bit about all of those.
And so, why typically let’s explore this first, like why typically do founders reach for a CTO?
And I think there’s kind of two buckets that come to mind.
One is they feel a little bit in over their head, maybe they’re not very technical themselves, or they feel the need to delegate.
So let’s start first with, you know, in over your head, you know, founders get to a point where the idea and the fundraising is no longer enough, it’s time to execute, right?
They’re actually ready to build something.
And unless they’re formerly, you know, really experienced architects or developers, they need to bring someone on to spearhead the software development effort that has pretty good technical expertise that can actually lead the product development team, right?
Or so it’s not the other option here.
The other element is this need to delegate, right?
And then, and really great entrepreneurs are good at that understanding what jobs need to be done, figuring out who the right person is for that and then delegating it, right?
But related when you’re wearing a bunch of different hats in the early stages of a software startups, sort of life cycle, you reach a point where you simply have to delegate to trusted deputies, right.
Other people on your team.
Again, the mistake I see here in early stage startups is that, that the first technical hire internal being a CTO when they’re not really actually the best fit for what you want or what you really need.
Right?
And so let’s talk about fit, right?
And that’ll kind of address a little bit about what I mean.
So, you know, I think a lot of people, especially those that haven’t really work in heavy software development.
They, there’s a misconception around what CTO S actually are like, what do they do?
Right.
So a couple of things I wanna talk about is CTO S are not what they seem to a lot of folks, let’s talk about what CTO S actually do.
Let’s talk about startups don’t have enough work for CTO S.
And CTO S hate the weeds.
That’s kind of the main buckets here.
So let’s start with what do CTO S actually do CTO S are typically engaged.
They’re typically not engaged in actual coding or product road mapping.
They’re, they’re not typically client facing, participating in sales presentations or client meetings or sales support.
They’re really strategic leaders, very experienced people within the space and, and it’s a very high level, more strategic role.
They set the overall direction of the firm’s technology stack, product offering and then they delegate to trusted staff members that they hire to help execute on their own vision, right?
And so, a good analogy and I’m gonna warn you guys up for, I’m gonna go really heavy on a sports analogy today, but I’m a Dallas Mavericks fan and, basketball fan in general.
And so, I, I, I thought there was a pretty good analogy to be made here.
So use that analogy, they’re, they’re a basketball coach, they’re not a point guard, right?
You need to score points for your clients by building a great product and a coach can’t do that by themselves, right?
There’s nobody to coach startups don’t have enough CTO work typically.
So let’s say that you hired a CTO as your first internal technical hire.
If you’re an early stage startup, there isn’t enough work for them, right?
You’re not to the point yet where you’re building really complex technology stacks, for, you know, a medium or a large enterprise, you’re not juggling a lot of multiple competing development, product efforts.
You’re not hiring out an entire division of the business to handle all things technical, which means that your CTO doesn’t actually have enough true CTO work if that makes sense.
So that leads us to CTO S hate the weeds typically.
Right.
this is down, like, actually doing the work that needs to be managed.
So, if you hired an actual CTO, who has true CTO experience and is expecting to come into a true CTO job, you’re gonna find likely they don’t have enough work enough to work on.
, just generally.
Right.
and at that same point, if they were truly a CTO before, they probably haven’t gotten into the weeds of a product development in quite a while.
Right.
And if they have, they, they, they, it’s very likely that they don’t want to get back into that.
Right.
So, you gotta ask them, when’s the last time they actually coded or actually ran scrums or you did product reviews or dead demos or, you know, a lot of the things that are really like at the ground level of building a product, right.
, and that’s usually not their job as a CTO.
but if you’ve hired a true CTO, this is what the job actually looks like for an early stage startup team.
So you gotta think about what’s the real work to be done, you know.
So if I’m, if I’m, I’m hiring a bona fide experienced CTO, then you know, what is the work that they’re expecting to be taking on?
And are they actually gonna be happy Working on the low level, sort of in the weeds type of stuff that you probably are gonna need if you’re early stage startup.
Right?
And then, you know, fit part two.
The other mistake that I see and this happens a lot, right is that startups will hire someone and give them a CTO title when they’re not really a CTO or even a, a candidate that’s ready to make that leap to CTO.
So an example would be I’ve seen where folks will hire an architect or somebody who’s like a really senior developer and they give them the CTO title right out of the gate.
And so, you know, I’ve actually made that, that same mistake in, in, in our business, in, in, in the past, right?
You know, we’ve learned how to make them, make it really important that you’re properly telling people for the roles and responsibilities that they’re gonna have.
And that’s the same thing here.
If you’re trying to entice what is really a lead engineer or an architect, for instance, by giving them the title of a CTO, you could potentially create some bigger problems for yourself down the road.
Not to mention that when you’re talking about a CTO title, there’s an expectation that there’s compensation that aligns with the CTO title, right?
And that could be especially in early stage startups, that could be not just, you know, salary and bonuses, but that could also mean potential equity which you write, you need to be really cautious with.
So a couple of thoughts there next is what I was just mentioning there on costs.
So remember earlier when I said a CTO is a coach, not a point guard, the inverse is true of how they’re paid.
So back to my Dallas Mavericks example, I warned you about if you’ve watched any basketball, you know who Luke is, right?
Luca is the Mavs point guard and one of the best probably five players on the planet.
And for that, he made 40 year and take Jason Kidd, who’s the Mavs coach who is nowhere near that valuable, not that he’s not a great coach or anything.
It’s just that the compensation for those two different roles are quite different.
Right?
There’s a reason the market values superstars at five X what a coach makes or more because star players impact the game a lot more than a coach does, right?
Coaches put their players in place to succeed, but the players have to actually do it.
But the opposite is true for startups.
We think about it.
CD OS get paid like Luca, even though they’re doing the job of Jason Kidd and I’m not saying they’re not worth the money because I know a lot of great CTO S and they’re worth every dime at the right stage.
Right?
I think the big distinction is here.
They’re just not worth the money at this stage when you’re an early stage startup.
You don’t need a coach yet.
You need players who can really play.
And so that, that’s one thing to keep in mind as it relates to cost next is clients, right?
So get yourself a point guard, ask a A K, a product manager.
And so, you could probably kind of tell from this slide what you very often instead of hiring like a CTO is like your first in-house hire.
I, I, I tend to gravitate towards a product manager and I’ll explain that a little bit.
So we’ve established that you’re an early stage startup.
You need players before you have someone to coach.
So who’s, who’s the players that you need?
As I mentioned, a product manager, your, your product manager is sort of like your point guard.
They’re your on court coach, they set everyone up, they call the plays and they execute the play.
They have the ball in their hands, they’re in the weeds, scoring points or setting up others to score on your team.
And keep in mind your team at this stage could be, you know, internal people, but also partners like, like even folks like us, like where we work with startups, we really work as a pretty integrated team.
So product managers help with working with partners too.
They’re really invaluable hybrid role that can see the whole picture and get into the nitty gritty of the day to day, details like the weeds that we talked about earlier.
But unlike Luca, product managers don’t make CTO salaries, right?
You get a more valuable player that’s more impactful for an early stage startup team.
With what, what in our analogy be sort of the rookie wage scale, right?
Don’t get me wrong.
Great product managers that are experienced are still well compensated, but they’re not gonna be in that in a similar comparison to like what a true CTO would be expecting, right?
But being a point guard is what a product manager does, they can set the strategic vision for a product or two and then collaborate with everyone necessary to bring that vision to life.
So, you know, one of the things that I think is really valuable in a product manager is really good ones, know how to align stakeholders and get everybody on the same page and they can talk multiple languages.
So they don’t have to be developers, but they can be technical enough that they can speak to the technical team and sort of translate that to the other stakeholders.
So they could talk to design or someone who’s involved with making decisions on the product vision, maybe it’s a founder or someone from the founding team and they can help get the development team, the creative team, the founding team, all on the same page, right?
The other thing that I really like a lot I and and this is a bonus, especially when you’re launching your product is depending on what type of product it is, whether it’s A B to B or A B to C kind of thing, but especially like a B to B, product managers can serve a really important role in supporting your sales efforts.
Right?
Because they know the product better than anybody, they understand the problem, they’re trying to solve better than anybody.
They probably understand how your product actually specifically solves or addresses those, those specific needs.
And so I’ve seen a lot of success having product managers involved in the sales process, right?
And you get two benefits.
There, one is, they’re really great at communicating already most likely.
And so they’re great at communicating with your potential customers, but it’s also a very direct opportunity to hear feedback right from your target customer, so that they can decide how to prioritize or evaluate that as part of the future product road map, right?
So, you know, keep in mind, so one of the things that we’re talking about here is that, that, that, that the person that we’re hiring in this early stage of the startup is really focused on the product and how we meet the clients needs.
How do we make it lovable as, as we like to talk about?
Right?
And, and that’s the primary focus.
They’re not talking about a big complex long term technical strategy necessarily.
So a couple of big distinctions there is at this stage of the game the product manager might be a better route to go.
One other note that I’ll throw in is, I talk a lot about, about that as a founding is a founding team.
It’s very valuable to set yourself up to be what I kind of call vendor agnostic in that you may work with development partners.
It’s very common to do that in the early stages especially.
And, you know, the reality is that, that, that sometimes those don’t work out the way you want them to, right?
But by having a product manager, you keep sort of that core knowledge on your in house team and it, it helps make it easier to switch partners if you need to or work with multiple different partners and teams.
And so, that’s a great place to start for that reason also, fill out your roster.
So once you have your point guard, it’s time to fill out the rest of your roster, you’re absolutely gonna need other players on the team who can complement the point guard that you’ve got the product manager because your point guard can’t do it all by themselves.
So you’re gonna need someone who can post up and rebound.
So to say, you need versatile wings who can, you know, play lockdown defense and drain threes when you need it.
So you’ve got all these other needs that are going to be a part of this product team.
You got to start thinking through, how do you start to build around that?
And at what time?
So if you’re building something like you know, say you’re building a a web application, maybe get yourself a lead developer who still loves to get into the code, but can also oversee a team of debs, right?
As, as as a potential next step, maybe they have some experience with architecture but aren’t going to command a senior architect salary, right?
And to be honest, you might not have that much architecture work to go through at this stage anyway.
And so what I mean is that after you have a product manager, maybe the next step after that is in the example we’re talking about here, but let’s say it’s just a web application getting a a really senior dev that has some architecture experience and can kind of keep on the plan in terms of the technical plan, it could be a good, a good good build here, right?
But another thing that I would talk about is don’t be afraid to utilize very experienced, very niche resources as needed.
So I think that sometimes when, when, when I I talk with young software teams, there’s this, this thought that we either hire a developer or we have to hire a a solutions architect, right?
He’s got tons of experience, right?
But they don’t, they overlook the fact that that you don’t necessarily need to have that solutions architect all the time and you may not even need to have them consistently all the time, right.
So there’s options out there.
you know, even from like, like with N 08, a lot of times what we’ll do is we’ll help plug that hole for the client temporarily, why they need it.
And then we, we back away and then when they need it again, we can help in.
So a couple of really niche skill sets that are usually very cost prohibitive for founding teams to have on their, their full time staff early is the architect that I just mentioned, a bona fide architect.
And another one is a design strategist, like someone who is really experienced, really skilled at building awesome user experiences, but also thinking through product strategy, right, where they really understand what’s the point of the product, they really understand the user persona at a very detailed level.
Tho those folks, you know, the, the, the the comp packages for those types of people with really good experience can, can usually be out of the budget range for a startup and they probably don’t make sense because again, there’s not enough consistent workload for what that person is a really uniquely, really good at and b what they really enjoy doing, even if you can get one of those types of folks to join your team and you end up paying that salary, that the line likelihood that the work that meets sort of what they’re uniquely great at and probably what they like doing is it’s very low that you’re gonna have that much work.
So it’s gonna be really hard to retain them anyway.
And in a space where that type of talent is super competitive, you’re gonna probably have a lot of problems there.
So I would recommend identifying those niche gaps and find really good partners to help plug those as you need them.
And then later on, as you get bigger, you can look at whether it makes sense to have them on the full time team or not, right?
Let’s see.
So when is it time for your Jason Kidd now?
So now we’re talking about when is it actually time to hire the CTO?
Right?
So there’s unquestionably a time and a place for a CTO, they get paid Luca money in our analogy for a reason.
They make big decisions that technology strategy for the entire firm, they recruit, they hire, they train, they create processes.
They, they’re responsible for the entire technical staff.
The time for Jason Kidd is when you’re a more mature organization, usually with multiple teams, maybe multiple products, sizable back end requirements.
A technology stack to build and maintain, that’s getting more complex.
Maybe a cyber defense, you know, posture that you need to build and protect, that’s something that may come into play.
When you have the budget and the sustained workload for a CTO, that’s when you hire yourself adjacent kid, right?
And so, or a CTO for those that aren’t following an analogy, a couple other thoughts, there is one other stage, you know, that, that is, this usually coincides with, with these other factors that I just mentioned there.
But if you’re growing to the point where you’re, you’re starting to take on, institutional money or private equity.
a lot of times it could potentially make sense to have someone like this on the team if you’re gearing up for that type of thing, right?
So if you’re gearing up for you to go out to the market and maybe take on a private equity investment or sell the private equity, A CTO could be pretty valuable and, and a couple of thoughts on that is, let’s say that you get engaged in one of those types of deals where you’re gonna take on a significant investment or, or even a potential partial or full exit.
There’s gonna be a lot of due diligence.
Those guys are smart, they’re very thorough and they’re gonna dig into the details of what’s going on with your product.
And so having someone that has already reviewed that stuff is and in touch with it in depth from a strategic view, maybe even someone who’s got some experience from that pe or venture world could probably really add a lot of value if you’re setting yourself up to go through that process.
So that’s sort of a side note.
just to kind of keep in mind also.
So we got through that one pretty quick.
I think we’re almost out of time.
I’ll, I’ll, I’ll pause here for a couple of questions.
See if we’ve got any, Jordan, is there any of them that have come through?
Not just yet.
Let me check if you guys have any questions, just go ahead and pop it into the Q and A.
OK.
Yeah.
So OK.
Yeah, I think this was one that somebody sent you off line Jordan if I’m reading this, right?
So, if not in the very beginning, at what point does it make sense to hire a CTO?
Yeah, I think, you know, we talked about that.
I think hopefully whoever submitted that beforehand, then, you know, they got that that covered.
But I think just in general to recap that it, it, it, the main, the main theme here is, is it’s usually not a fit early on, right?
There’s more valuable impactful places to invest your money efficiently early on that can have a better impact and then, and it can grow that and yeah, we’ll circle back on.
I, I, I have one other thought to some men the very beginning of this.
one of the earlier slides I’m gonna, I’m gonna back up here at the very beginning.
Let’s see here.
You know, this one here, why founders reach for a CTO this first one here, I didn’t talk a whole lot about it, but you’re in over your head.
I think that gets kind of intimidating for non-technical founders.
And I get that, I think that’s totally reasonable.
Also, to the other thing I see is they, they go out to start talking to potential investors and investors start talking about.
you need someone on your founding team that’s technical, right?
And I may go against the grain on this.
I would say maybe maybe not.
I think that it depends on what is your plan for addressing the technical stuff, right?
If you have a really solid plan to address the technical stuff, I don’t know that you need to go take on a co-founder when you’re founding your business just to check the box that you have someone technical in the founding team.
But what you do need to be able to demonstrate is you, you have, you have clear vision and a grasp on the technical elements of this.
And I try not to do too much of a sales pitch in these N 08 answers, but I’ll just sort of plug that like our innovation lab really does a great job for early stage startups in that regard because we’re, we’re, we’re doing the work and when you come out of the lab, it’s very clear you’ve done the diligence and gone to enough depth where you’ve got a grip on even the, the especially the technical pieces of how you’re going to build the product, right?
So I think more than having a technical founder on the team, you need to demonstrate that you’ve got a great plan for making sure that you make good technical decisions as an example.
So so if we don’t have any other questions, do you guys have another minute here while I just kind of talk about like other opportunities to get more of our content.
You, those of you that are familiar with us, you know, we, we really try to just add a lot of value and talk about things that we get asked about a lot from our clients and, you know, prospective clients.
So, if you’ve got any feedback, if you’ve got any ideas on topics you’d like to hear us talk about or if you just have questions, you’re on a journey, you’re building something and you just want some input feel free to reach out to us.
You can email us at info at N 08 dot com or you can find me on linkedin and I’m pretty active there, feel free to send me a direct message.
And you know, we, we we have a couple of, of regular sort of email subscriptions that may be of interest to you guys, we’ve got a week email that goes out that we always try to have some kind of a nugget or some kind of educational piece on some topic that goes out once a week.
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You can also go to our website and check out our Innovation Lab page in particular and drop us a would love to hear from you if we can help out in any way.
And also see if you have any feedback on the N O A answer session today or ideas for other topics you’d like to hear us talk about.
We love the feedback.
So I appreciate all of you joining and, keep an eye out for our next one, which would be in another couple of weeks.
We’ll, we’ll announce the topic of that here in probably about a week or so and, you’ll have a good rest of your week.
Thanks for joining.
Thanks a bunch.


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