Does Your Startup Need To Hire A CTO? Five Alternatives To Adding A Full-Time Executive Partner
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Despite endless reports that claim every business needs to hire a Chief Technology Officer, the reality is not so simple. Finding a qualified startup Chief Technology Officer in the Middle East and North Africa has become nearly impossible. The startup world of the MENA region is blossoming, according to a report by Bloomberg, with US$3 billion raised over the past year. As more startups launch, the demand for tech talent increases- but not the supply.
A skills report conducted by Bayt.com found that 65% of employers and 59% of job seekers believe a skills gap exists in the region. This talent gap has made it more difficult than ever for startups in the Middle East to find qualified technical co-founders. While the demand dramatically outstrips the supply, this doesn’t necessarily mean a skilled CTO is necessary for every company. For many startups, alternative solutions can be better than bringing on a full-time CTO.
The real job of start up CTOs
It might surprise you, but CTOs of startups are not the same as CTOs at larger companies. In truth, they’re not really CTOs at all. Compare Monster.com’s sample job description of a CTO with the needs of most startups, and the differences become apparent. CTOs of major companies aren’t churning out code, and slamming energy drinks to hit launch dates. They’re real executives who manage “boring stuff,” such as people, policies and budgets. They’re much more likely to sip sparkling water than chug a Red Bull. (I’m going to guess your startup isn’t flush with Perrier.)
The need for someone to code a product is not the same as the need for a CTO or technical co-founder. Startups can build tech without a partner dedicated to overseeing that side of the business. Instead of competing for limited high-level talent -likely paying a hefty price along the way- founders should take a minute to understand their needs and options for solving any tech gap.
Five better ways to meet your startup’s tech needs
Rather than waste your time and money chasing down the mythical “work for equity” technical co-founder, consider these five alternatives:
1. Hire developers and pay them
CTO-level talent might be scarce, but developer-level talent is much easier to find. Hiring skilled developers rather than adding a cofounder allows startup teams to retain their equity and build culture the way they want to. In-house developers also make communication easier, tightening feedback loops, and keeping teams as lean as necessary to make progress.
Like any option, hiring developers does have its drawbacks. Managing more employees can eat up your time, and each new hire needs equipment, insurance, benefits and a consistent paycheck- particularly the good ones. Recruiting and training are a significant investment, and developers might be more common than CTOs, but they’re not bountiful. According to the World Economic Forum, only 13% of MENA graduates have IT skills. You’ll still have to do some digging, but you should manage to unearth some true gems.
2. Negotiate a part-time deal for equity
Negotiate a part-time contract with someone who has the right skills, offering cash instead of equity. This will allow your leadership team to maintain control over the business and keep cash flow strong.
That said, there is always the risk of part-time staffers leaving at any moment for a full-time gig. Most qualified workers might also be reluctant to take on this part-time position without significant compensation. In addition, part-timers definitely won’t be as invested in your company as a full-time staffer might be. If things start to head south, they won’t have any problem jumping ship.
Airbnb, one of the most successful startups in recent times, has managed to get along fine with a vacant CTO slot. Its former CTO, Nathan Blecharczyk, now works as a Chief Security Officer, and only puts his CTO hat on when necessary. In other words, it’s possible (even for late-stage startups) to succeed with part-time CTO help.
3. Outsource the role
Contract labor isn’t just for coding duties- it can also work well for executive tasks. Contractors, especially those outside the country, are typically far cheaper than hired staff members. Outsourcing work allows founders to keep their equity and most of their cash, all while accessing larger teams to accomplish more in a short period of time. Long before it reached a $3 billion valuation, Slack outsourced much of its design work, finishing important pieces such as its website and early product prototype in about six weeks.
However, freelancers aren’t always the perfect solution. Most contractors are more transactional than visionary. They might help founders build specific products, but they likely won’t contribute a lot to your overall product strategy. They will take your orders and execute, but the end product will represent the quality of your initial instructions. Factor in time zone differences, and freelancers can pose a risky proposition. Provided you’re able to navigate this minefield of potential problems, freelancers can be a tremendous asset.
4. Partner with a local agency or development shop
As a middle ground between hiring a freelancer and bringing on a full partner, consider partnering with a strong local agency or dev shop. These companies provide highquality code from experienced workers, as well as pools of resources to accomplish jobs quickly.
They also tend to be expensive and transactional, like freelancers, often showing more interest in getting a predefined project from point A to point B than seeing your startup move to success. Depending on the firm, smaller teams might have bigger clients that push lower-paying people down the priority list. They’re also not cheap. When the final bill comes due, Fueled found that startups could spend up to $1.5 million just to develop an app.
5. Seek out a startup studio
Startup studios provide one-stop shop services for entrepreneurs who have limited tech experience. These studios (the good ones, at least) understand the specific needs of software startups, offering product and project management support and possibly even investment dollars. In addition to tech services, they provide resources for design, content and marketing- along with networking opportunities.
Typically, studios ask for some equity in return for their services. Founders sometimes get attached to studio team members who aren’t their own, which makes it difficult down the road when it’s time to leave the nest. Some studios also outsource development, so keep tabs on how you’re working together, as well as who is doing the work.
MENA startups have more options than ever when it comes to accelerators- some of which resemble the startup studio offering. More than 15 new accelerators launched in 2016, according to Wamda, meaning the region now has more than 52 accelerators for founders to consider.
Finding the sweet spot between business vision and technical knowledge can be difficult. Some co-founders ooze technical savvy but lack business acumen- others have the opposite problem. Instead of buying into the hype surrounding CTOs and the startup scene, consider these five alternatives to adding a full-time executive partner. You can save yourself from a lengthy search process and plenty of potential headaches along the way.