Do I need a Co-founder or a CTO?

There are so many reasons why expanding your leadership team with exceptional talent is a good idea. First and foremost, bringing talented individuals in-house is always a smart move.

This is the attitude of successful startup founders. They are self-aware enough to recognize when it’s appropriate to source additional levels of expertise.

Founders are often brilliant individuals – but rarely will you find someone who has the bandwidth to lead and manage every aspect of a growing company. 

In this article we will consider two of the most important roles in a startup – a Co-founder and a CTO.

 

What is a co-founder?

Here’s a question: what do Garrett Camp, Ev Williams, Whitney Wolfe, and Evan Sharp have in common? Well, they’re young(ish). They’re successful. They’re wealthy. And there’s one more thing: they’re all co-founders. 

Without their input, Uber, Twitter, Tinder and Pinterest may never have gotten off the ground, let alone gone on to become the global enterprises many of us take for granted.

However, despite the vital role of these men and women, many people aren’t quite sure what a co-founder is. So, let’s take a closer look at how essential they are to a startup. 

While a founder’s creativity and tenacity will get them so far, they’ll need a whole host of other skill sets and attributes if they’re to succeed.

Skill sets vary depending on the industry. However, regardless of their niche, each founding team has a fundamental list of responsibilities, including:

  • Creator, inventor, entrepreneur
  • Networking
  • Financing & fundraising
  • Recruiting staff
  • Leading and developing a team
  • Creating a company product
  • Understanding their target market

A co-founder is someone who helps to establish a company. They’re present way before the first product/service launch, before the first sales come in and the finances start to flow.

The co-founder role explained

A founder may turn to a co-founder to complement their skill set, or the co-founders might have founded the startup together. The co-founder isn’t just along for the ride. 

Though the original idea may not be theirs alone, they must share the founder’s drive, passion, and determination to bring the product or service to the market. In addition, co-founders will take on the same, or even increased levels of commitment and risk as one another.

 

What’s the difference between an early employee and a co-founder?

Though these terms can become confused, there’s a significant difference between the two roles. 

An early employee is not a co-founder. They are recruited into the startup, rather than joining the founding team; they’re a worker employed by the company, not an investor or a partner, but quite often get equity or options as part of their compensation package.

 

Who gets a co-founder title?

Although one to two co-founders is typical, some startups have up to five. There’s no limit to having more, if it’s beneficial to the startup. But a co-founder title needs to be earned and the person needs to be bringing something of value to the startup. Don’t hand out co-founder titles unless you are sure they are merited.

 

Why bring in a co-founder?

Common reasons include:

  • A founder valuing the skill set and expertise of a co-founder
  • The need for extra financial resources
  • The founder wanting someone to share the risk with
  • Access to the co-founder’s network of contacts
  • Providing support and aiding decision making.

But there’s more to it than that. As they say, it’s tough at the top. And it can be lonely, too; that’s another core reason for involving a co-founder, so there is someone to share the journey with.

Everyone needs moral support sometimes, and good entrepreneurship includes accepting that most successful startups didn’t get there without having a good team in place.

Eighty-seven percent of entrepreneurs credit their success to working with a co-founder. If you’re not convinced, American entrepreneur Sam Altman considers that, “Co-founder relationships are among the most important in the entire company.”

 

What to look for in a potential co-founder

What’s the best way to find a co-founder for your startup? There are some basic steps every founding member can take to find a potential partner. 

First, make a list of the attributes your ideal co-founder would have. And yes, this does mean being honest about your own limitations, so be realistic here.

Next, what is most needed to move the startup forward? For instance, technical expertise? Is money tight? Or is the team lacking skills in marketing or finance? 

Consider attributes such as:

Personality traits: As well as complementary skills, look for a co-founder with the right personality traits; every founder needs someone to balance their foibles and weaknesses.

Honesty: No entrepreneur needs to be told what they want to hear: they need a partner honest enough to spell out an idea’s flaws.  

Confidence: Team up with someone who believes in themselves and their business acumen. The ability to make decisions and share their own ideas is a valuable asset in an uncertain startup world.

Commitment: Establishing a startup means working long hours and sacrificing parts of your social life; it will inevitably eat into the entrepreneur’s personal time. It’s therefore vital that the co-founder be willing to make similar sacrifices, to avoid resentments building.

Fresh perspective and new ideas: A co-founder should be able to help develop an idea and take it to the next level. Seek out someone famed for their innovative thought processes, and who really knows how to deliver a marketable product.

Background: Find out everything there is to know about a potential co-founder: do they have a history of past disputes? A proven track record of bringing products or services to market? 

 

Finding a co-founder

Finding the ideal co-founder needn’t be difficult. Consider:

Former partners and workmates: This can be an ideal starting point; does an existing or former colleague have the required attributes?

Friends: Some advise against mixing business with friendship, but it can work out just fine. If Larry Page and Sergey Brin weren’t friends, we mightn’t have Google. 

Relatives: Brothers-in-law William Proctor and James Gamble came together to bring us one of the world’s biggest consumer goods companies (which is now worth more than $350 billion).

Alternatively, try good old fashioned face-to-face networking, online networking (e.g. StartHawk, Silicon Drinkabout, CoFoundersLab, or Founders Nation), social media channels, or startup accelerators.

Managing co-founder relationships

Things can get complicated. A major reason for startup failure is a disagreement with a co-founder. So, want to know how to avoid legal conflicts and manage the partnership? 

First, ensure good communication from the start and manage expectations. Common conflicts involve:

  • Decision making
  • Equity share
  • Creative differences
  • Changing circumstances
  • Personal roles.

So, focusing on these areas, clealt divide responsibilities at an early stage. For example:

  • Will both co-founders share an equal workload? 
  • Is the co-founder comfortable with their role and what’s expected of them? 

Draw up co-founder agreements (make sure you understand what is in them!). Establish a vesting schedule and set out contractual agreements.

 

Do I need a CTO?

When it comes to product development, you need leaders with a solid understanding of the technical development process. Leaders who know exactly what it takes to get the job done are often more empathetic than those who are only skilled in project management.

Hiring a CTO might be a good idea if:

  • You need a partner to help you push the technical side of your startup forward
  • Your startup is growing and needs more experienced technical leadership
  • You are simply overwhelmed by the technical demands of your startup
  • The existing technology leader is not up to the task.

CTO’s typically play a central role in product development, overseeing all aspects of how a product is being developed to further meet the needs of the end-user.

They will usually be in charge of managing all software developers, both in-house and freelancers, to ensure they are effectively driving product innovation.

With their technical expertise and management skills, they must ensure a software product is ready to meet the needs of the end-user.

 

Does a startup need a CTO?

Not necessarily. The CTO might not be one of the founding team. Powering up the development team with some front end and back end tech talent is key. This can be achieved by hiring a technical lead or a technical advisor before committing the cost and equity to a CTO.

Whether you hire a CTO or a technical lead, these candidates should have experience mentoring software developers and programmers. You want to see a track record of performance across several startups of different shapes and sizes, project planning and developing roadmaps.

 

Can a CTO be a co-founder?

There’s no reason why an existing co-founder couldn’t assume the role of Chief Technology Officer. In the early days, it might make sense for a co-founder to also assume the role of CTO.

In the short term, it might be convenient to let an existing co-founder take on this role. In the long term, if the co-founder lacks the necessary technical knowledge and expertise for the role, does this have the potential to stunt growth.

As you expand and grow, you might want to start thinking about getting some real leadership expertise in this role. If you can make this transition, it could be a game-changer.

Early stage startups experiencing rapid growth in a short space of time may choose to hire a technology officer to fill an urgent need for senior leadership.

 

How much equity do you need for a CTO?

Depending on whether they are founders or non-founders, a CTO of an early stage startup could expect to receive equity compensation in the region of 1-33%.

If the officer is also a technical co-founder, they can expect to receive a large equity stake. It all depends on how many people are currently working on the team and where the company is in terms of investment.

 

How much money does a full-time CTO make?

Some full-time CTOs in established late stage startups can earn as much as £160,000. For many small startups, paying an employee a salary of this magnitude would potentially be unsustainable in the long-term. 

When you throw equity compensation into the mix, you can get a full-time salary down to a more achievable number. The national average salary for a CTO is £121,167 in the United Kingdom.

For startups in the early stage (Idea through Pre-Seed) it is much more realistic to pay a CTO in the region of £70,000-£80,000.

Equity and salary are two levers you can pull in your negotiation.