Does Your Early-stage Startup Need to Hire a CTO or a Contractor?
Just about every startup will need to hire a CTO at some point in its development. With that said, hiring a CTO can be a big investment that a startup, particularly an early-stage startup, may not need to make right away. There are circumstances in which it may be better to hire a contractor rather than a c-level technology expert. How to decide whether you should hire a CTO or a contractor will largely depend on what kind of startup culture you want to create and what your startup’s product development needs are.
Understanding the role of a CTO
First and foremost, and for the purpose of this blog, a CTO is defined as a full-time team member who directs the entire technology side of your company, and who will eventually manage a development team once you are ready to start hiring people. A CTO needs to possess the proper combination of management skills and hard technical skills. And even though they may not be getting their hands dirty writing code, a CTO should have a deep enough understanding of how development works to be able to lead those individuals who will actually be doing the programming. A CTO will also need to be a good fit for your company, as one of your objectives for hiring a CTO is to find someone who will set the tone for all things technology-related and who will hopefully be joining your startup for the long haul. For the above reasons, finding the right CTO for your startup can be a challenging process.
A contractor, on the other hand, is usually easier to find because a contractor only needs to possess the hard skills, such as a certain programming language required to complete specific tasks. You should not expect a contractor to set the technical strategy or direction for your startup. In many cases, a contractor will be with your startup for a set period of time—such as the duration of a project—rather than for the long term.
Identifying your startup culture
In order to determine whether you need to hire a CTO or a contractor, you should first consider what kind of startup culture you’re looking to cultivate. If you want your company to have a “software-first” mentality, then you need to hire a CTO as soon as possible. Otherwise, it will be very difficult to try and create a tech-oriented culture without a CTO who has the appropriate leadership skills and knowledge. You’ll need someone who can direct the development of a culture from the very beginning of your startup’s life and who has the ability to build out a robust technology department.
That said, while every modern company deals with technology at some level, not every company is a software company. If your startup is not a software company and won’t necessarily need an entire technology department in order to accomplish its initial goals, then, in an effort to conserve capital and avoid bringing someone onboard just for the sake of filling a title, you may want to start by hiring contractors with the skill sets you need to fulfill specific technical requirements. From there, you can re-evaluate your needs and decide if you’re ready to bring on a CTO.
Do you need a CTO to build your product?
In addition to company culture, the other thing you should think about is what exactly you’re trying to build and what you need in order to begin development. In some cases, bringing on a CTO too early can actually have consequences for product development. You could end up putting valuable time and resources into hiring someone you don’t need, instead of focusing your efforts on execution and getting your product to the next stage. If you plan on building an app, your first step will be to develop a prototype of some sort that is essentially for testing purposes, or a proof-of-concept. If you’re creating something you’ll most likely be “throwing away” after testing, then it isn’t really necessary to hire someone as high level as CTO to do the job. A contractor should have sufficient skills to help you build a testable prototype, and you won’t have to commit to hiring someone full-time just to complete a short-term project.
If the scope of your product is much larger than an app–for instance, you’re looking to develop an entire SaaS business, a product with both hardware and software, or brand new technology–a contractor or even several contractors probably won’t cut it. You need someone who can do more than just complete a technical project or provide bug fixes and updates once the project is complete. You need a CTO who will be able to set the technical direction of the product, create an execution plan, identify the exact resources your startup needs to put that plan into action, and see the entire process through from start to finish. In this case, the earlier you bring on a CTO, the better.
Ultimately, there isn’t really a “right time” for when you should hire a CTO that applies to all startups. Each startup has its own unique situation and requirements. The key thing to remember is that, whether you choose to hire a CTO right away or start out with a contractor, make sure you think critically about your startup’s needs, and understand the kind of value that both a CTO and a contractor can bring to your startup.
This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.