Start-up vs large corporate: what CTOs need to know before accepting a role
By Caroline Sands, partner and head of the CIO and technology officers practice at Odgers Berndtson, explains the requirements and responsibilities of a CTO in a start-up, and how it compares to an equivalent position at a more established business
Chief technology officers (CTOs) are vital positions for any organisation; aligning the technology roadmap with the strategic vision, driving innovation, and ensuring products and services remain one step ahead of the competition. But key differences in culture, product and service development, and cross-functional management exist between a CTO role in a start-up and its equivalent in larger businesses. These differences should guide a CTO candidate’s decision when choosing between the two.
Among the most significant of differences is culture. The informal environment of a start-up is often built upon a sense of camaraderie between founding and early members. While this creates a tight-knit community of driven employees all motivated toward the start-up’s success, it does create several challenges a new CTO must overcome.
The first is bridging the engineering, product, and commercial functions. Tensions often exist between all three, particularly from engineering teams who may have been among the original product builders. Having given their time, energy, and creativity to build something from nothing, there can be resistance to evolving it into something that looks very different, even if that drives greater value. Second, is navigating the established relationships (and often friendships) of a ‘garage start-up’ culture. This means managing and influencing individuals with what can be highly entrenched mindsets in order to take their creation and develop it into something profitable.
Getting to grips with a business that resists change and make it more commercial while trying to manoeuvre existing relationships is challenging. But on top of that, in order to scale the business, the CTO will need to hire additional engineering talent at a time where the entry to mid-level engineering market is incredibly tough. Despite headlines about tech layoffs, Bain & Company found nearly three-quarters of engineering and R&D-focused companies report talent gaps; the top skills include data engineering and analytics, cybersecurity, and IoT. From CTOs, it requires a degree of charisma and strong people and communication skills to sell a business to candidates who have their pick of the litter.
While this same talent challenge exists for CTOs in larger companies, the operational tension comes from being in a constant state of evolution. In a start-up, a CTO is there to grow the business. But in established businesses, it’s less about scaling and more about innovating. This means adapting and evolving products and services to stay ahead of the competition, aligning these more closely with commercial goals, and a much larger focus on the customer and UX. It tends to be less about building an original product and more about delivering technology that adds value to the business, where margins for success are much smaller.
From a day-to-day job perspective, start-ups are often a more disruptive, fast-paced environment, prioritising quick growth over long-term strategy. It often means a start-up CTO is responsible for building the technological infrastructure from the ground up. In an established company on the other hand, a CTO might be responsible for reviewing and improving the current technology stack and data infrastructure; in a start-up, these structures might not exist. A start-up CTO role is therefore likely to be more ‘hands-on’, spending more time ‘in the trenches’ with greater focus on creation. Often, they’re also trying to strike a balance between creative freedom and commercial necessity; allowing product teams to be innovative but also providing guardrails to prevent technology sprawl, which may lead to costly debt later in the company’s life cycle.
Scaling is another challenge for CTOs in start-ups, that those in established companies won’t face. Scaling a team from a handful of people to a large team means a CTO’s time allocation will change dramatically; mostly from writing code and being involved in day-to-day operations to hiring and management. When start-ups reach this point, it’s important for a CTO to define what responsibilities they want to hold on to and find people to take on the rest.
Start-up CTO salaries can vary widely, and will depend on the funding stage and maturity of the company and the experience of the leader. At the lower end, for those companies in the conceptual stage of their maturity, they are likely to offer around £110k. Those with a viable product, however, can pay CTOs between £150k to £170k plus equity of around 3.5%. The potential for equity and shares can be a significant draw for CTOs in a start-up. If the company is successful, the CTO stands to gain a significant financial reward, which can be a powerful motivator.
While working environment and responsibilities differ greatly between CTOs in start-ups and those in established companies, both roles require a finely tuned commercial lens, strong people leadership, and the capability to communicate ‘the art of the possible’. In a world driven by rapid technological evolution and change, both roles are critical in providing competitive advantage.