Confido Q&A: Aspiring CTO? What does it take & how do you get there?
6 minute read
With billion-dollar tech unicorns springing up from startup hubs all over the world, CTOs (Chief Technology Officers) are more in demand than ever.
If you’re in the tech space you may recognise CTOs such as Thuan Pham of Uber and Oskar Stal of Spotify. You might also have heard of Albany Partners – a search firm that exclusively moves CTOs to high growth tech companies.
Few people know more about what it takes to be a successful CTO than James Goodrich, who is the Founder and Managing Partner at Albany Partners. Since 2012, Albany has delivered over 150 CTO successful searches for Seed, Series and Growth stage companies.
In this exclusive interview with James, we cover a range of areas, from what the average tenure is for a CTO, through to how much equity a CTO might expect. Plus, we cover the experience and skills you need to get through the door.
So whether you’re a junior developer just starting your journey, or a VP of Engineering wanting to take that final leap to CTO, this interview could help.
Hi James, thanks for taking the time out today - could you first run us through when Albany typically gets involved in a high-level executive search?
We get involved from pre-revenue through to £200M on venture. In the case of private equity-backed companies, we work with Mid-Cap funds investing between £25m-£250m (predominantly tech), and Large-Cap funds investing between £250m-£1bn. We hire Senior Technology Advisors for the fund directly and permanent Executives for individual portfolio businesses (CIO, CTO, and minus 1).
On the venture side, we typically see 4 stages during this journey where we are asked to find key hires.
Can you tell us more about each key hiring stage?
The first is pre-revenue but that is pretty rare, as the businesses are often raising seed funding from friends and family, and therefore don’t want to spend money on a search firm. They tend to hire directly through their own network or outsource their tech hires.
Exceptions to that will be companies that have an extremely aggressive growth trajectories led by HNWI (High Net Worth Individuals), celebrities or previous successful founders, or incubated businesses built within funds.
For example, we were appointed to find CTOs for 1) DriveTribe which was founded by Jeremy Clarkson, Richard Hammond and James May; 2) Choice, a peer to peer lending platform founded by Octopus Labs; 3) Skwire – a Property tech platform set up by Talis Capital.
The second and most common stage is around Series A. The company has grown either through outsourcing their technology to date, or a team that has been led by a co-founding CTO. Often this CTO will struggle to make the transition from technical architecture and building a platform, to leadership and management to achieve scale, which is a different ballgame and type of skillset.
When we get introduced to CEOs of businesses at this stage, we see 3 types of situations.
- The founding CTO is unaware that we are being brought in to advise the CEO. The CEO tells me one of the following: the team is leaving due to lack of leadership; the team are not producing what I think they should; or I have no visibility in to what is going on or confidence that it will continue to achieve good results.
- The CEO has spoken to the CTO and they have decided they need to hire in a VPE (Vice President of Engineering) to run the function, implement process and get “the engine running smoothly”. The primary justification for this is to protect the founding CTO and his relationship with the CEO. It is virtually impossible to make a good hire here. A senior technology leader, whether a VP or C-level, will want to report into the CEO and not a founding CTO.
- The third and more attractive situation is when the CEO has spoken to the founding CTO and explained the role has evolved outside of his or her capability and / or enjoyment. Sadly, in most cases the founding CTO will move on, but if it is handled well and they are moved to a role that suits them, it makes for a strong management team, retaining the IP and relationships.
The third and fourth entry points are at Growth stage of typically more-established technology organisations that have consistent EBITDA (earnings before interest, tax, depreciation and amortization) and revenue growth. These will be either pre- or post-Private Equity involvement. They need a proven CTO to take the business to the next level and the brief is to find someone that has been through a similar growth journey before, in a similar business, that is culturally aligned to the management team.
What does a good CTO look like, depending on the type of business / stage of growth?
That’s a very open question. CTOs have many qualities. Strong product knowledge, technical capability, or management; skill at hiring and scaling teams; skills at implementing and improving processes that lead to higher productivity or saved costs; commercial savvy in market positioning. All of these could and do come under a CTO’s remit.
Some clients have an excellent VPE in place, which enables them to hire someone that can be more strategic. Some roles include product responsibility, so it is key they can own the company’s product roadmap and take responsibility for delivery. What we see consistently, however, is that a good CTO has extensive experience of hands-on development and engineering in their career. They won’t necessarily need to code or conduct code reviews in their new role. In fact, if the brief requires hands-on capability, the “head room” of that individual to scale as the business grows is often significantly reduced.
Whether a candidate is “good” for the business will depend entirely on the stage of the company and what the company currently lacks in capabilities within their management and engineering team.
Yet a good CTO or VP Engineering has a technical mindset and appreciation, and that background is critical. They can code, but typically it’s not mission-critical that they do so. They need to make architectural decisions; to manage and lead the team or teams; and, critically, be able to command respect from the people working for them.
In brief, then, the most common requirement of a CTO is strong leadership. A natural leader than can create an environment for developers and engineers to thrive and achieve their highest potential. Someone that is a magnet for top talent and can hire the best engineers in a highly undersubscribed pool.
Is the role of a CTO at a start-up different from at a corporate?
Yes, very different.
There are 3 main differences we see:
1) Corporate candidates are used to having the budget to do whatever they need. Start-up candidates are often given a problem without the budget, and will have to work out how to achieve the outcome required. This requires them to be willing and “able to roll up their sleeves”, work long hours, fight hard to get the best out of people. To be clear, I am not saying that people in a corporate environment don’t work hard or have similar challenges; it is only that when candidates move from the corporate world to start-ups, this seems to be their greatest development hurdle.
2) The second is ownership of hiring and team growth. Again, quite often in a corporate setting, there will be an internal HR team that are tasked with recruiting developers and engineers, whereas in start-ups, it’s just you and your team. This means you have to be creative by going to meet-ups and networking to achieve the needed growth.
3) Third, CTOs at a corporate level will be spending little time with the engineering team and more time with the senior/executive leadership.
How do you work out who is going to be the right culture fit for that team?
It doesn’t matter if I’m placing CTOs or Finance directors. Culture is judged by getting a feel for the company and their style – how they do things at that place. It’s a million-dollar question. It is often a gut call and takes experience to decide if someone is going to get on with someone else and be right for a business.
More and more, however, people are hiring for culture over experience. Clients will compromise on experience as they can hire to plug those gaps, but a bad culture hire will never work.
Is there a typical CTO career journey?
There are various routes to CTO but the most common is the following:
Developer/ Engineer – Lead - Tech Lead - Head of Eng. - VP or Director of Tech - CTO.
Sometimes a CTO will come up though a Product route, Project management or Infrastructure/ Ops. In later-stage companies, that works fine, but for early stage the need to be able to review code and make architectural decisions requires the candidate to have a technical background.
I have met CTOs on £30K and £1M. The title never tells the whole story!
An average duration of an assignment is typically two, to two and a half years. Most CTOs specialise in a certain growth period of a company i.e. going from power point/MVP to series A, A to C or through to exit.
Any advice to a senior dev or team lead aspiring to make that leap?
If I had time to set up a CTO academy, where we bring aspiring tech leads together to train them and support them in advancing their careers, I would. It’s something I hope we get to do. For now, I would say ensure that you are working for a CTO that you rate and can learn from.
My advice would be to either work for, or find a mentor in, a great CTO. There is no better way of learning than to see it in front of you.
Clients are often prepared to hire “emerging” candidates who will learn on the job but need to display they have the qualities. Most candidates that are clear emerging talents, of course, are well-protected by their current employers.
We know equity is a common part of a CTO’s package, how does this typically work?
We have never worked a mandate without some sort of equity share. In the rare instances when equity isn’t in the package, we would expect there to be some form of longer-term incentive package. Equity is key for incentivizing and attracting CTOs as it directly links as a reward to the impact they will have on that business.
If you’re talking about a company that has a high turnover or valuation, it makes sense to generally talk about the equity as an amount, roughly equivalent to the above in £ millions.
People often ask me how often equity is realised and I would have to say more often than people think!
In terms of how equity is incentivised, is that around key KPIs?
Equity is something that is provided to you, if you’re there. If you show up, you’ll get it. It’s not bonused or performance related, it’s guaranteed.
It is usually paid over a 4-year period, off a 1-year cliff with equal instalments yearly.
Example for a 1% equity share:
After 12 months they get 25% of that equity; end of year two, 50%; end of year three, 75%; end of year 4, 100%.
But every company has different rules. If you leave during or even after the vesting period, some say you lose it, some say you can keep it, every client is different. The danger of saying you keep it means a CTO will have built up an equity pot within his current business and then thinks he may as well leave and build up a pot in another to hedge his / her bets.
The other thing to watch out for is whether the equity is “accelerated”. This means that at the point of an ‘event’ (whether that is a trade sale, IPO, etc.), if your shares are ‘accelerated’, all your potential shares will vest, whether you have worked the required duration or not.
This was initially drafted as CFOs that were approached with potential offers but were making decisions based on how many of their shares were vested at the point of offer rather than the potential offer itself.
It is more and more common with CTOs now. The reasons why some companies don’t offer accelerated vesting to their C-level is that the valuation is often reduced, as the acquirer should expect the C-level to leave directly after the event.
There are many other aspects of equity that you should question when considering an offer (i.e preference stacks, thresholds, good leaver / bad leaver) as I have had heard of a few horror stories. Ultimately, get the right professional advice and you will be fine.
And finally, can you shed any light on why most people get rejected during interview stage?
There is little consistency because all roles are very different. The common themes are:
· Haven’t seen the scale
· Lacked energy and dynamism
· Wouldn’t inspire the team and be a great leader
· Not confident in their ability to hire top talent / be a talent ‘magnet’
· A lack of product knowledge
· A lack of a specific area of experience for highly technical roles.
I’d actually say culture is the overriding factor in all of the decisions, because at their level, they’re not testing technical ability, but cultural fit.
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