I’ve been around the gritty startup scene for over 10 years now. From San Francisco to New York, I’ve seen many “hot”, supposedly “disruptive” tech startups launch and crash.
Now there are a lot of similarities I have seen among many of them, but the primary focus of this article will be on “CTO,” what it means to be a CTO (in startup language), and why I think one of the red flags of many tech starts is seeing how early they start handing out their “C” level positions.
What Does a CTO Mean to a Startup?
We all know that in large corporations, a CTO or Chief Technology Officer, is someone who oversees the company’s technological side of operations or IT staff. In startup lingo, CTO has a totally different meaning.
Please keep in mind this may not apply to all startups, but for the number of ones I’ve witnessed, helped out in, and seen fail, it has been pretty common place.
Generally, in startup terms, the CTO is the single person who is responsible for most or all of the development of the company’s technology, i.e. their app or website. Sometimes they are paid a moderate amount, but usually I’ve seen CTO’s on-boarded with merely equity and a promise of all the glamorous shares and “disruptive” cash to follow.
So commonly, a CTO is someone who is hired, for little or no pay, merely to build the company’s app. This can be a very cost effective way to build a customized app from the ground up, and I totally understand why many startups would pursue this route.
So What’s The Problem?
The problem arises from two primary factors:
- Giving out C level titles this early can be problematic in the long run
- Often, this indirectly reveals the focus being NOT on the money
C Level Titles Too Early, Specifically CTO
There is a lot of pride, and egos, that bounce around in startups, it’s part of the “grind.” What boggles me the most, is how a founder can be so short sighted, that they believe the CTO will be an integral part of the company even past the product’s completion.
And by completion, I mean, when the technology (app) is developed enough, to the point in which it can be presented to the public and begin generating revenue.
Yes I will say it, I firmly believe that once this stage in the startup has been reached, many CTO’s no longer have a significant or meaningful role in the company. (Other than to fix bugs or update the product.) Their significance to the company is reduced to that of a $12/hr intern.
Another issue, and in no ways am I advocating disrespect, but I find that many founders take the advice and “insight” of their CTO’s far too seriously. Again, not that they are necessariyl always wrong, but often the priorities and ideas of “what makes a company successful,” of a software developer, is vastly different from what actually makes a company successful on the business side.
The problem here, and this is just a generalization, many people who are willing to join a startup as the CTO for little or no pay, often also do not possess any real business, marketing, or networking skills. (Otherwise they wouldn’t be working for free, unless they really believed in the business.)
Now that the technology portion of the startup has been established, many CTO’s are unable to contribute to the actual growth of the business in a meaningful way. This is where I’ve seen the most strife and conflicts in startups, as the CEO begins to blame the technology itself for the lack of customers, and the CTO begins to blame the CEO not developing the business, and bringing on customers.
Revenues, if there are any at all, begin to plateau, the team looses morale and motivation, and eventually the startup crashes and burns.
Missing The Point Of a Startup
The sole purpose of starting a business is to make money! Duh! So what’s the number one problem I see in the startup world. Business focus too much on their app or website, they forget that making money is a mechanical action, that involves humans having a demand for a certain product or service.
Beyond that, it involves persuading and convince that human that they must fork over their hard earned money to obtain whatever it is they desired.
When founders focus too heavily on their app, because the genuinely believe their app is the center of their business model, many will be in for a hard crash landing.
The fact is, in many tech business models, the app is not a necessary facet of the business, but merely a tool to make obtaining the service more convenient.
Take for example, an on demand nursing and care-giving startup, I was once a consultant to, it failed of course. Immediately after meeting the team, I realized things were headed in the wrong direction. This startup was pursuing a business model that could easily have be done via craigslist, phone call, etc… but instead, they were “waiting” for the app to be completed before even taking action to build a customer list or market the service.
By “waiting,” I mean to say that they had absolutely no idea how to acquire real customers, and instead, they truly believed the creation and publication of the app would magically bring in their target audience by the thousands.
The reality was, it is the service that people desired, not the app. The app was merely a tool for convenience, but it was totally unnecessary to develop the business. (Considering most of the competition hadn’t even had an app). They believed that by merely having an app, they would have a leg up above all the competition, and magically people would rationalize that and come flooding in.
Focus On the Money, Not The Tech
Now this is directed towards CEO’s and founders who might be looking to hire a CTO. Do not do it. Just the very act of labeling each other with high level, “C” suite titles can become cancerous to a startup.
If you desire an app or website, I would highly suggest you bring on an intern, a developer, or outsource. I can assure you, that unless your product IS the app or a video game or some kind of specialized software, building the app is NOT your primary problem.
Don’t lock yourself in/give out equity to a someone who may only be useful to the business in the early stages. Think long run, think about the future, and think about how you can focus your efforts towards the bottom line instead of towards a truly unnecessary luxury.
No your app does not have to be perfectly polished and made for you to begin generating SOME revenue. And you probably don’t even need an app anyways. Don’t fall into the “App Trap,” the business model is completely separate from the technology. (unless otherwise stated, video game, software, etc..)
Realistically, the focus, from start to end, is, and should always be, on the marketing. Marketing will influence the trajectory of the startup more powerfully than anything else, the tech is merely a luxury.
Ironically, the startups which I have seen survive the longest, and generate the most amount of revenue without seeking outside funding, are the ones who have outsourced their tech development to interns or firms from overseas. Just goes to show that possibly, when the tech is handled outside of the company, the founders have more pressure to focus on marketing and developing the customer base.