Editor’s Note: Each week, Fast Company presents an advice column by Maynard Webb, former CEO of LiveOps and the former COO of eBay. Webb offers candid, practical, and sometimes surprising advice to entrepreneurs and founders. To submit a question, write to Webb at firstname.lastname@example.org.
Q. I outsourced the building of my app, and now I am looking to bring on someone to focus on the technology, which is something I’ve been told I need to do to get funding. A few questions: What’s appropriate equity to offer for a CTO who would be just a name on a pitch deck to get funding? What’s appropriate when the person is actually doing work? Is it better to have a CTO as a cofounder to get funding or is it better to have one to two tech advisers on my team to get funding?
—Founder looking to raise money
My quick answer to all of this is, “it depends.”
Are you looking for a partner, or do you need to have someone with tech aptitude to show you are a tech company?
Let’s take a look at the situation. We need to consider the candidate you have in mind. Or, if you don’t have someone in mind, the candidates you could be considering. Is the person capable of being the technical leader that you need for the long-term? Or, are you hiring the person to help you get off the ground, but you’re not sure if they will be your forever partner?
If you’re calling someone a cofounder, that is a very high bar. The cofounder relationship is a long-term relationship. This is a soul mate. And in many ways, I think of it like going into a marriage; it must be very carefully considered and is one of the most important decisions you will make in your company’s life. If you bring on a cofounder, you truly are partners, so you will have to decide how to split many things including, duties, responsibilities, focus areas, and equity.
If you are not really looking for a cofounder, or if the person you are considering is not of the stature to be your cofounder, it’s possible that neither the cofounder role nor the CTO role makes sense here. A CTO title reflects real leadership experience—it signifies someone who would be able to manage 10 people to hundreds of people.
If you are looking less for a startup soul mate and more for an expert to meet today’s needs and perhaps grow to meet tomorrow’s needs, you should not be offering up a cofounder or CTO role. Perhaps it might make more sense to start with someone “running technology” with a title such as “head of engineering” or “director of technology.” If you find the relationship isn’t a fit and need to replace this person, it’s much easier. Any investors would be deeply concerned about problems with or removing a cofounder or CTO and they would want to investigate why it didn’t work out.
I might suggest that at this point, it may make sense to start off with a team of people who can serve as technology advisers. You can give each of them some equity, say 10,000-15,000 shares for a year commitment in which they agree to provide advice and allow you to include them as an adviser in your pitch deck.
You are not alone in the situation in which you find yourself. Many people outsource the first version of their product, and once it starts working, they bring on an internal team to take it to the next level. That makes sense. If you are doing that, you will need someone leading engineering to help you scale.
Having technical competence on your team is always a good thing. But so is telling the truth. Being honest about where your company is and where you are headed is always better than being misleading in the hopes of getting funding. It will build a better relationship with your investors, and better serve your startup so it gets what it needs to survive and scale.