Guest post by Gordon Daugherty

Gordon Daugherty has been a startup advisor for more than 15 years and now serves as Managing Director for the Capital Factory accelerator in Austin, Texas (Capital Factory is an AWS Activate partner). Through his Shockwave Innovations advisory practice, Gordon is an angel investor and active blogger seeking to help entrepreneurs achieve their wildest dreams.

You 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 CEOs 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 one VP of Engineering (or related title) and one 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. VPs. 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 five-person startup gives everyone a Chief ____ title. I don’t think it’s needed if all five founders are experienced and with prior successful exits. So you can imagine my reaction when I see a five-employee startup team with less than 10 years of cumulative experience between them who have titles like Chief Marketing Officer, Chief Revenue Officer, Chief Financial Officer, and Chief Product Officer.

Visit Gordon’s blog for additional startup insights and advice.