The Dilemma of the Startup CTO Title

startup CTO titleYou see it all the time.  A young, invincible hustler-hacker team join together as startup co-founders to pursue a dream of becoming the next Google or Facebook.  The hustler takes the CEO title while the hacker becomes the CTO.  All is good, right?  Well, maybe not.  Many first-time startup CEO’s know there will probably be a time in the future when they will need to decide if they want to be rich or be the king, which translates to a possible need to step down as CEO and bring in someone with more experience.  The CEO learns this by getting asked by investors if they insist on remaining the CEO forever.  What about the CTO?  The dilemma is different but has similar implications.  Let’s explore further.

The Role of the Typical Startup CTO

As the hacker in the two-person team, the startup CTO does everything of a technical nature.  Of course, this means writing the software code or designing the first printed circuit board (PCB).  But it also means selecting the hosting infrastructure for the software to run on, the underlying software stack, the technical architecture, the source code management tools, etc, etc.  No big surprise there.  What about creating a company website, administering the wireless router in the office, helping fix the CEO’s laptop when it gets a virus, and administering the company’s email server?  Yes, the CTO does all of that too plus sweep the floor of the house they work from and pick up the mail from the local post office box.  Founders wear a lot of hats.  That’s just natural.

Growth and Success Presents the Dilemma

The dilemma comes into play when the company grows and starts adding more technical talent.  Many of the things the CTO did in the early days will get assigned to others.  Eventually the CEO and the management team will realize they need someone to oversee the day-to-day development operations (software or hardware) and someone to just be the technical visionary and technical spokesperson for the company.  This translates into 1 VP of Engineering (or related title) and 1 CTO.

Which role is best for the founding CTO based on their skills and future aspirations?  If the answer is overseeing the day-to-day development operations, the “Chief” title goes away and there can be a perception of a demotion when, in fact, both roles are critical to the company’s success and continued growth.  You can up-level the title to “Senior VP” but if you’re only a 30 employee company it might look a little silly to have Sr. VP’s and the truth is any title that doesn’t have “Chief” in it can seem like a demotion to someone who had it prior.

Anticipating the Dilemma

I commonly advise startup founders to have this discussion early on.  If the hacker is going to take the CTO title from the beginning, they need to know that at some point in the future the role will be split and they may or may not retain the CTO title.  But they should also know that any change doesn’t constitute a demotion but rather a celebration that the company not only survived but grew to a point of even needing to split the role.  If the person leading this conversation is the founding CEO, they can use their own situation as an example (in other words, my comments above about needing to face the possibility of being replaced with an experienced CEO).  One alternative some startup founders use is to avoid the CEO and CTO titles altogether for the first year or so.  Their business cards just say “Co-Founder”.  Or they say “Everything Business” and “Everything Technical”.  You get the idea.

Overuse of “Chief” Titles

Maybe I’m the only one that gets annoyed by this but it drives me nuts when a 5-person startup gives everyone a Chief ____ title.  I don’t even think it’s needed if all 5 founders are experienced and with prior successful exits.  So you can imagine my reaction when I see a 5-employee startup with less than 10 years of cumulative experience between then but are suddenly carrying Chief Marketing Officer, Chief Revenue Officer, Chief Financial Officer and Chief Product Officer titles.

Wait, there’s much more!!!

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Author: Gordon Daugherty

Gordon Daugherty is a best-selling author, seasoned business executive, entrepreneur, startup advisor and investor. He has made more than 200 investments in early-stage companies and has been involved with raising more than $80 million in growth and venture capital. From his 28-year career in high tech, Gordon has both an IPO and a $200-million acquisition exit under his belt. Now, as co-founder and president of Austin’s Capital Factory and as author of the book “Startup Success”, Gordon spends 100 percent of his time educating, advising, and investing in startups.