Over the past couple of years, I’ve done fractional CTO work for a number of startups, both in Raleigh-Durham, NC and elsewhere. There are times when this model works really well and times when it’s not a good fit.
In this article, we’ll cover:
- What to consider when evaluating this alternative
- The typical business arrangement for a fractional CTO in a startup
- When to transition to a full-time CTO
Why a Fractional CTO?
Generally the reason someone hires a fractional CTO is that they can’t afford to hire one full time, or they haven’t been able to find the right fit yet. However, most fractional CTOs will not want to be involved in the nitty gritty of writing code all day every day. So, what makes this a good deal for you?
- You’re struggling to attract the right full-time CTO
- You’ve found a lead developer or perhaps a couple more junior developers, but you’re not confident in their ability to make the right strategic or architectural decisions
- Your team is struggling but you’re not sure why. Perhaps you’re consistently missing product deadlines, or the team’s not getting along, or you just have a general feeling that you’re not getting your money’s worth from the team
- You need something more than an advisor but less than a full-time CTO for either financial or other reasons
- You need to hit certain milestones to raise more money or perhaps get to the point where you can hire someone full-time
- You really like a particular candidate, but want to work with them before making a full-time offer
- You need to end your relationship with your current CTO, or your current CTO leaves, but don’t have another candidate ready to step in
If you find yourself in any of the above situations, a fractional CTO might well be the best next move.
How do you structure a fractional role?
How to Structure the Deal
Fractional or interim arrangements are almost always a mix of cash and upside, but definitely more heavily weighted toward cash. The reason is, as a business owner, you don’t want to be giving away equity to someone who may not be involved long term in the business. You may have the kind of business where you’ll only ever need a fractional CTO, in which case a slice of equity is appropriate.
Here are the key components of this arrangement:
- The person you’re considering has to have a track record of stepping into companies like yours and delivering. During the interview / assessment process, you need to get a sense for the level of experience in a company like yours and ability to step in and make a difference immediately
- Don’t structure the arrangement around time spent, but rather around availability and concrete deliverables. Set milestones for your product or perhaps identify specific problems you want to solve and make those a part of the agreement. Most highly qualified technologists don’t like working by the hour or thinking about time spent
- Make the initial agreement finite. You can move to a retainer after you’re comfortable with how things are working, but ensure you’ve got a rip cord you can pull if need be.
- As stated above, err toward cash in the early going of your relationship as the form of compensation. Save equity / upside for when you know you want to continue working together
When to Transition to Full-Time CTO
Unless your particular business won’t ever need a full-time CTO, the answer to this question is ASAP. Make the parameters around this transition known to your fractional CTO. Most people who do work like this for a living understand that their role is temporary unless otherwise agreed to.
If you like working with your fractional CTO, you might want to give them first right of refusal on taking the full-time post.
As with most decisions in business, there are no hard-fast rules on when this is a good fit. However, if any of the situations described here sound familiar, you might want to consider a fractional CTO.