I recently lost a wizardly CTO/architect when, after hours of Skype over the period of a month, he laid it on the line and shared that I would need to cover the full costs of developing the app and offer equity. Ultimately, I understand his position (he's in high demand; has family obligations; etc.), but I was really deflated. I have just consulted with another, very successful software entrepreneur, and he affirms I'll need to pay a reasonable salary and offer equity IF I want to attract a first class architect and incentivize him or her to stay with me. I'd appreciate the advice and experience of others in the software startup space. I'm especially interested in hearing from successful entrepreneurs who have faced and overcome the challenges of securing the technical expertise necessary to hit a home run. Thanks in advance, all.
In my experience placing CTOs in Silicon Beach startups, yes, it takes equity and cash (quite a lot of both - typical is 200-300k in base/bonus plus 1-5%). It’s certainly possibly to try to attract a technical co-founder using some of the sites out there which do that matchmaking, so you might be able to find another wizard for equity, but it’s frankly one of those stars-aligned, blue moon kind of miracles. Some of my clients have successfully brought in a talented Software Engineer who has created their MVP and architected/built the site/app. But that can lead to a few long term, and potentially bring-you-to-your-knees issues: 1) the site will not scale; 2) the engineer used whatever language they are most comfortable with, not necessarily the best technology stack for what you are creating; 3) good luck getting funding without a real CTO in that square on your org chart.
I generally recommend that my seed or pre-seed clients engage a CTO-for-hire. These are seasoned CTOs who have experience making (and breaking) scalable sites. Being an ex-technologist myself, I know that the best way how to learn how to do it right is by doing it wrong and then fixing it. That only comes with time and experience. These CTOs have learned the hard way (but the right way), and can help you to avoid pitfalls that a Software Engineer simply has not had the time or opportunity to deal with yet.
In Silicon Beach, I know several CTOs-for-hire, and simply refer them out. They are all willing to have a conversation, which if nothing else, can be validating to your approach. If you have opted to get a Software Engineer to build the MVP/site, the CTO-for-hire can also be invaluable in validating the architecture to ensure it will scale (and that the right technology for the task at hand has been used). If you decide to engage them, they are compensated in various ways - some are open to equity, some are hourly. In addition, some have their own Engineering resources on deck, and can build the MVP/site for you. Not saying it’s cheap, but it may still be the optimal way to go pre-funding. In addition, many let you use their name on your org chart, which helps you get funding.
I'm a CTO of a startup. I have not taken salary. But I get a large chunk of equity and my wife has a brilliant job so this is a chance for me to play. BUT I've got a deadline from my wife.
I've had offers from other startups where I get as much as 20% equity and 50% of normal salary. Remember a CTO is NOT your #1 developer. Your CTO is the person you bring on to run the technical execution of your idea. That means THEY are not going to pay for the development nor do all of the development. Sure they may do some of the coding - but mostly they are going to be responsible for the architecture, the data schemas, writing the copyrightable specs, possibly filing your patent applications and doing the daily job of running the technical team.
That means they need to have significant equity in the company AND the also need the cash with which to pay the dev team.
Sure they may be responsible for putting together the prototype and the initial website to validate the idea. but yes YOU are going to have to come up with the funding for the development of the MVP. And for that you can expect the CTO to get about 20% of equity.
You want the CTO to cofund the company? make that 40%