Advice for CTO Founders: Don’t Let Business Kill the Business
Founding a technology company is an amazing thing. I have met dozens of brilliant technologists with fantastic ideas, ideas requiring nurturing, mentoring and support. Too often, however, I have found CTO / Founders paired with business people who not only don’t add value, but frequently detract from the value of the business. And from my perspective as an engaged seed stage venture investor, this makes them unfundable. This is not only sad but incredibly frustrating, because it is so easy to see how a great technology can be developed and commercialized if only - if only the CTO hadn’t been impulsive and insecure and brought on a business partner too early in the game.
I am a business person, not a technologist. While I know I can add value, I also know when and how I can add value. It is generally a soft touch at the beginning of the development process, perhaps identifying 1-2 early alpha/beta customers to help flesh out use cases to be built upon over time. It is gently laying the foundation for a subsequent financing, helping the CTO set sensible milestones to be achieved that can demonstrate execution skill and release cycle management. It is helping with recruiting by leveraging my networks and experience in a particular domain. And it is most certainly not about me, it is about the CTO, the technology and the company. But I am doing this from the vantage point of an investor / Board member, not an operating executive. Because early in a technology company’s life, a true operating executive is NOT what the company needs. In fact, they generally just get in the way.
So why do inexperienced (as entrepreneurs), ultra-skilled CTOs fall into the trap of engaging a business partner too early? Fear? Lack of confidence? Camaraderie? Perhaps all of the above. Many CTOs I know are not that comfortable with the business end of business, directly engaging with customers, speaking with investors and managing business operations. These weaknesses can be addressed in a variety of ways, ranging from engaging part-time, outsourced help to bringing on experienced advisors to help out early in the company’s life. These are not revolutionary suggestions, just not necessarily those acted upon by first-time CTO / entrepreneurs. Selecting value-added angel investors and advisors can also help with the camaraderie issue, as they can provide advice and counsel during the solitary period of hard-core coding and product development. A full-time business partner is definitely not required at this point in the company’s life.
But sometimes, too often, the CTO falls back on hiring a friend or someone to whom they were introduced that sells them on their value-added. They might give them too much stock, and even have that stock not subject to vesting provisions. And if this business partnership doesn’t work out, the CTO / Founder, the engine of value for the company, is stuck in a bad, bad place. Fire the business partner, and the stock they’ve granted is off the table, stock which is needed to attract and retain talent that can actually help build value and sustainability of the business. Keep the business partner, and the business itself might be rendered unfundable, because quality investors will not put money into a venture with a weak business partner in conflict with the founder. Try to get the founder to negotiate a reasonable exit for the business partner, and this can take years off the founder’s life. By the time this point has been reached, the focus has ceased to be the technology and the product, but on organization. And this is one thing that should NOT be the focus of the CTO / Founder during the company’s development phase.
So my advice to CTO / Founders? JUST SAY NO TO BUSINESS PARTNERS BEFORE YOU HAVE A REAL PRODUCT THAT IS READY FOR PRIME TIME. And for gosh sakes, spend the time to find the right one. You’ve spent your entire career working towards this moment. Give it the justice it deserves and don’t act impulsively when seeking to address business needs. Your technology brains got you this far; use some of them to make yourself stop, breathe and think. Seek advice from a mentor. Solicit trusted advisors help with interviewing. And if you do feel you’ve found the right person, by all means make their stock contain standard vesting provisions to guard against a bad fit that takes significant amounts of stock off the cap table.
I don’t want to see any more of you with crappy business guys ruining your great ideas, ok?
