Tuesday, February 22, 2011

Startup CTO Salary and Equity Data

An update of this is available: CTO Salary and Equity Trends 2009-2011

Todd Gitlin of Safire Partners was nice enough to compile some data on Start CTO Salary and Equity at Venture Backed Companies for the LA CTO Forum and present last year. He agreed to make this data public which is awesome. Todd is a go to resource for people looking for talent in startups. He was a great presenter to our group. I highly recommend getting to know him.
The data is a bit tough to deal with via a post, so I've shared it two ways:
And you should also take a look at Visualization of Startup CTO Equity and Salary Data.

There's a ton of great data in there that will give you a sense of comps for your particular situation. Here are a few slices of it. Of course, this doesn't really apply to the situations where I'm often involved Part-Time CTO, Technology Advisor, or Acting CTO, but this is still really good to have.
I would be very curious to hear what folks think about this.
Anyone concerned that this is above or below their expectation?
I was recently asked specifically about these kinds of numbers and I'm a bit worried that expectations between CTO candidates

Startup CTO Salary and Equity based on Stage of Company

Note: the rows are a bit out of order.
I'm a little surprised that CTO Founders with growth capital funding only have 15% of their companies. It is interesting to see the salaries of CTOs of pre-Revenue even pre-Launch companies.


Total Funding




CTO Compensation and Equity based on Location

A few items jump out at me in terms of CTO Equity and Compensation relative to geography. Caution - there is not much data for many of the geographies.
  • CTO Founders in India, have a very low equity stake.
  • CTO Founders in UK, US Mid-Atlantic, US Pacific NW, US Northeast, France, Australia have a higher equity stake.
Southern California - my primary location - looks to be about the middle of the pack.

Thursday, February 17, 2011

Poor Software Developers - Pull the Plug Early

There's an old adage in software development that I refer to all the time:

The first 90% of development takes 90% of the time. The remaining 10%, takes the other 90% of the time.

I used this when I taught software engineering.  And I use it all the time now when I get the kind of message that I received:

I'm looking for a web developer to continue work on my website.  It's currently in beta.  I used a company in India to develop the site, and it's mostly done.  But they weren't quite able to get it finished.  Then I found a local developer but it was a truly awful experience.  At this point, I have very little money left, which makes finding someone even more of a struggle. 

My experience is that most often you will find that the project has gone through many of the Symptoms of a Weak Development Team in these situations.  And I say that the most common symptom is:

The team seemed to get a lot done early on, but now it just seems like it is taking forever to get it “done.”

So when you get a note about a project that's "mostly done" - you immediately get worried.  Usually, once you begin to look at what's really going on, the code is a bit of a mess and the system has a lot of work left to get to an actual "done" state.  You may even have as much time left to get it "done" as it took to get it "mostly done".

Normally, when I get this call, it's pretty far downstream (as in this situation).  The funds have been used up on the existing development.  And the person is trying to get it from mostly done to done with little additional cost.

The problem is that doesn't match with reality and likely they need to find more dollars.  Recovery from this situation is hard.  I wish I had a better answer.

But I thought I at least needed to do a post that made a few suggestions on how to avoid this situation:

  1. Keep your Eyes Open for the Symptoms of a Weak Development Team 
  2. Hire a Part-Time CTO, Technology Advisor, or Acting CTO to help you keep an eye on what's going and increase your chances.
  3. Pull the Plug Early - poor developers who exhibit symptoms of weak development will not become good. 

This actually reminds me of another adage:

No one ever tells you they fired someone too early.  They often tell you they fired someone too late.

Wednesday, February 2, 2011

How Investors Think About Valuation of Pre-Revenue Startups

A lot of my time is spent helping early-stage companies get to proof points so that they can raise capital.  They might have some seed money and are thinking or raising a Series A based on success of an early release (MVP).  Because of this, I've always tried to stay up-to-speed on how early-stage investors look at valuation of companies.  What are they really looking for?  What do you really need to prove?

There's a lot out there around Customer Development - read Steve Blank

  • Entrepreneurship as a Science – The Business Model/Customer Development Stack- Steve Blank, October 25, 2010
  • Checklists for Chaos, The Path to Success- Steve Blank, October 28, 2010
  • and reading about Lean, MVPs, etc. is a requirement.  Think about how you can prove your business model with an MVP.  I should try to come back and write about this more, but the point of this post is that it's important not to only think about this aspect.

    Bill Payne is an expert on how early-stage investors should look at valuation.  He just post: Establishing the Pre-money Valuation of Pre-revenue Startups.  It's required reading.  Especially interesting is the Valuation Worksheet towards the end.  He has a bunch of factors that investors should be considering (and generally do).

    A few things jumped out at me:

    • - Experience in sales or technology - considered a minor negative?  If you've not had a C-level but have had experience in sales or tech.  Not sure why.
    • Size of target market $100M is okay.  Interesting that they don't need to see really large markets.
    • - > $100 million (will require significant additional funding).  In fact, really large markets are possibly a downside.
    • -- need venture capital - a significant negative effect

    Key hurdles that you really should be going for in the early-stage:

    • ++ Good feedback from potential customers - that's the key hurdle
    • +++ Orders or early sales from customers
    • ++ Key beta testers identified and contacted
    • +++ Channels secure, customers placed trial orders