The great fractionalisation
In the last few years a new breed of consultant has arrived. The fractional CTO, CMO, COO, etc. If there is a C-suite acronym for it, there is probably a fractional version of that acronym now too. These roles promise to give your startup some of the value-add of an experienced functional operator, at a fraction of the cost of hiring one of these people at the full-time market rate.
But what does it actually mean to be a fractional CxO? There isn't just one answer to this, but in this post, I'm going to give you my answer.
I do fractional CTO and CCO work for startups. I am only giving you my perspective on this, and it is most assuredly, not neutral. My particular mix of CTO and commercial experience, is a bit of an unusual mix... YMMV.
What does a fractional CxO actually do?
My value thesis for these roles is a simple 1-2-3 proposition:
- Startups are solving for speed of iteration. The successful ones learn to iterate quickly.
- There are thousands of mistakes that a startup will go through on its journey.
- A fractional CxO's experience can bypass some subset of those mistakes and speed up the startup.
Why is iteration speed so important? Because your startup needs to base product direction on customer input rather than the founders' prior assumptions. Its as simple as that. The more you optimise towards that goal, the more shots you get at correcting for mistakes. If you have a slow to zero iteration speed in your startup, then probabilistically you have far less chance of surviving to the point of product-market-fit.
What sort of mistakes are we talking about here? Mistakes both big and small. These aren't an indictment, they are just the reality1:
- building something that no-one wants
- not having an actual customer in mind
- not understanding how to build a dev team
- not understanding what good looks like for delivery
- not understanding how to fix team problems
- not knowing what technologies to choose
- not knowing when to buy vs build
- not understanding the technologies that map onto the founder's ideas
- not being able to push back on a not-invented-here syndrome
- being unable to estimate timelines
- being unable to deal with technical risk
- not knowing how to assess performance and capabilities in the team
- not knowing how to run a sales meeting
- not having compelling messaging; being unable to build top of funnel awareness
- being unable to write compelling copy
- not knowing how to prioritise distribution versus product
- not knowing how to build iteration speed
- not knowing how to plan and execute iterations
The value of a fractional CxO is in applying been there, done that experience to a startup that hasn't been through it themselves. Often times this means supplying skills that are missing from the current pool of talent in that startup. Other times, its holding a mirror up to the startup founders as they work through those problems themselves. The key is in being able to apply operator experience to whatever challenges the startup is facing.
The actual input can vary from from advice and feedback through to part-time work and execution. There is a temptation to fixate on the value of the execution side of this spectrum, especially when it comes to fractional CTOs. I see descriptions of fractional CTOs as a cost-effective way to manage and oversee a technology team. If you want that, go for it - its basically a freelance part-time Engineering Manager. However, its not really the value sweet-spot of a fractional CTO IMHO. The real value is in experienced-based advice and feedback: for the minimal outlay possible, how can you make the best quality decisions for your startup with the goal of solving for speed of iteration?
What is the best format for engaging?
I am a massive believer in a weekly face to face call or in-person meeting. In the same slot, every week. As un-moveable as a board meeting. Why am I such a stickler for this? Because half the value is in creating discipline and routine in the founders themselves. If the meeting is adhoc or constantly rescheduled, the founders are learning that its ok to deprioritise these behaviours becoming systematic. In a fight for survival this is a major drag on the startup's potential.
I also think fractional CxOs should be available for adhoc questions on an async channel. Ideally Telegram, Slack or Whatsapp, but email will do if that's the only option. The founders need to feel like they can get unblocked within an hour or so of sharing a challenge. If that means jumping on a call - so be it. You aren't solving for speed of iteration if every problem has to wait until Tuesday at 11am.
Structured meeting types
In terms of what you actually do with your weekly schedule slot, there are a few approaches I have used effectively in the past:
1. Product experiment cycles
A common issue in very early startups is that they have a chaotic, reactive approach to deciding what to do next in the business. A simple, direct way to increase iteration speed is to focus product-market-fit activities into iterative time-bound cycles. A weekly meeting that is explicitly framed in terms of the product experiment we are running right now, at the very least teaches the founders to be thoughtful about what the product hypothesis is, what activities need to take place to prove or disprove the hypothesis and how long the startup should reasonably commit into getting the data to make a decision.
2. Functional planning
This is a standard management team meeting focused on strategic and operational input around one particular function - typically a function that doesn't have a full-time leader in the business. So for example, in a startup which relies on founder-based selling, with no full time Chief Commercial Officer, this might be a commercial meeting involving a pipeline review, a discussion of account penetration strategies, assessment of funnel activities etc. The key is to be nudging the founders towards a set of activities that will move the needle2 and away from tasks that might be uncharitably described as performative busywork.
3. Accountability or mastermind session
This is a structured approach to accountability where the founders record a progress update on the week, in advance of the meeting, and lay out activities they want to be held accountable for in the coming week. This input serves as a focal point for whether the founder or founders are doing the right activities to make progress towards success. Although this sounds very handy-wavey it ends up being incredibly valuable because the choice of what we spend our energy on as a startup founder is the thing that gets most evolved by experience. It is a direct mechanism to bypass mistakes and focus on needle movers if the founders take it seriously.
4. Leadership rubber-ducking
The goal in leadership rubber-ducking is to support a person who is stepping up and into a leadership role that they have limited or no experience with. In technical startups this is often a founder or lead developer who is taking on the CTO role. The value of a fractional CTO to support that person as they grow a more rounded, strategic set of capabilities. Often times, with a developer this is about having input on a wider set of issues than what should we build next3.
I'm not calling this leadership coaching because I honestly believe there is a difference between coaching and operational input. A good fractional CMO will tell the founder what she thinks will improve funnel conversion based on her experience, not just guide the founder through an idea generation process.
What does a bad fractional CxO look like?
I'm only really talking about fractional CxOs for a certain type of early stage startup. That is, venture backed technology startups that aren't deep-tech. Deep-tech, bootstrappers or scale-ups have a different set of factors at play and I don't think this specific advice really applies.
Nevertheless, even within this narrow window of startups there are a couple of anti-patterns for fractional CxO engagement that I think are worth highlighting.
1. Stage of company mismatch
The single biggest mistake to avoid is working with a fractional CxO with no experience of the stage your startup is going through. The egregious version of this is an Engineering Manager or a Sales VP from a corporate suggesting to an early stage startup that them getting involved will somehow catapult that startup to the same levels of success enjoyed by the corporate. This is a lie, and almost nothing in the day to day experience of that person is directly applicable to your startup. They might be fantastic at what they do, but its not going to help.
An easier error to make is where a CxO from a post product-market-fit scale-up in your eco-system wants to get involved. It's more of a grey area, but you really need to assess whether that person still has directly relevant experience to your stage. Scale-ups are so much rarer than startups so you are naturally going to want to learn from these success stories. But remember, a scale-up's challenges are completely different to a startup's challenges. You don't need to avoid the 1000 mistakes a scale-up will make (yet). You might hear this articulated as a desire to "learn from startup founders that are one stage ahead of you". 100% absolutely do this. Just make sure that if you are paying someone money to help you, you are paying for what you need right now4.
2. 10,000 feet advice
A lot of the advice on offer to startups is what I would call 10,000 feet advice. This is either generic, startup 101 that is contained in accelerator programmes and startup books, or high level thought leadership about the shape of your market. Definitely listen to this advice and if you can, synthesize it to your situation. But it probably won't help you increase your iteration speed because its just too far removed from the specific problems you will face. Don't get me wrong, I like both giving and receiving this advice, but I don't think it really moves the needle for founders. It's part of their education but it isn't part of their growth.
Shouldn't this be free?
In a word, yes. In an ideal world this would be free. The perfect model for this is an exited operator who just wants to give back to the community. In some ecosystems there are lots of these people around. In others, there are not. I personally thing 1 session a week with a fractional CxO can and should be a no-brainer for a first time founder, both in terms of adding value and in terms of value for money5. I'll leave out an in-depth analysis of what other people are charging for this but if you are you are interested in seeing what I charge the information is here.
Ultimately, if you decide to go down this route, don't ask yourself if the person you want to work with is worth their rate, ask yourself if you are willing to pay to get a speed boost for your startup. You might find that you are more willing to pay for that than you thought.
- I'm not saying you will make these mistakes... I'm just talking about what is typical for other founders out there :)↩
- If you are ever in a fractional meeting with me, you will hear me say move the needle a lot as a way to filter whether something is worth spending time on↩
- Flippantly it often comes down to having a CTO who is prepared to say we shouldn't be building anything yet.↩
- Equally, there is no point working with a fractional CxO that has never scaled a business (like me) if you are post product-market-fit yourself. In that situation you'd hack off your right arm to get a CxO from another post product-market-fit scale-up involved.↩
- If you are very early stage and genuinely can't afford to pay for this out of your runway, why not ask your investors or accelerator programme if they have Operator Hours - just make sure you insist on getting someone as described in this article - feel free to send them a link and say you want something like this as part of their value-add :)↩