The $500K Question

The Reflex That Drains Your Runway

A founder closes a seed round and the board immediately asks: "Who's your CTO?" It feels like a reasonable question. So the founder starts recruiting.

What follows is a slow hemorrhage of capital and time. Base salary between $180K and $250K. Two to four percent equity. Three to six months finding the right person. Another two to three months before they're genuinely productive. A first-year all-in cost around $400K to $500K in cash and equity, plus the better part of a year in calendar time.

The question nobody pauses to ask: does the company actually need 40 hours a week of that person right now?

In our experience, the answer is almost always no. You don't hire a general contractor to live in your house while you're still picking the lot.

The Title-Need Confusion

The mistake is treating "CTO" as binary -- you either have one or you don't. But the role contains three distinct jobs that emerge at different stages. Conflating them is like buying a semi truck because you occasionally need to move furniture.

Before product-market fit, the CTO is a compass. The critical work is choosing the right architecture, stack, and first hires. High-stakes decisions, but they don't require someone in the office five days a week. They require someone who's made these decisions before and can compress months of trial and error into a few well-informed calls.

With early traction, the CTO becomes an engine. The work shifts to technical debt management, engineering culture, growth architecture, and hiring. More intensive, but the highest-value contributions are still strategic. Daily execution can be handled by a strong engineering manager at a fraction of the cost.

Past fifteen engineers and multiple teams, the CTO becomes an org leader -- the role is about people, culture, cross-functional alignment, and board communication. This is when daily presence matters. This is when full-time is justified.

Most startups hire the org leader when they still need the compass.

The Eight-Question Diagnostic

Eight questions reliably separate companies that need a full-time CTO from those that don't. If you answer "no" to more than four, you aren't ready.

Do you have fifteen or more engineers, or will you within six months? Below that threshold, fractional plus an engineering manager covers the work.
Are technical decisions blocked more than once a week? Often the fix is better delegation frameworks, not a bigger hire.
Do you have multiple engineering teams with different objectives? Cross-team coordination requires continuous oversight. A single team rarely does.
Are you losing candidates because of a leadership gap? A respected fractional CTO with a clear vision can be just as compelling as a full-time one.
Is technical strategy a weekly board conversation? If not, quarterly updates are easily handled fractionally.
Are you spending over $100K per month on engineering? At that level, modest efficiency improvements from a full-time CTO pay for themselves.
Do complex partnerships require regular technical executive presence? If these relationships are core to your model, full-time availability matters.
Is your runway at least eighteen months? If shorter, the financial risk of a major fixed-cost hire is significant.

The Arithmetic Nobody Does

Option A: Premature full-time CTO. $250K salary plus benefits and equity. Six engineers at $150K average. Total technical spend around $1.15M per year. The CTO consumes 22 percent of the budget, but the strategic work only fills two days a week. You've hired a pilot to sit in the cockpit while the plane's still being built.

Option B: Fractional CTO plus engineering manager. Fractional CTO at two days per week, roughly $90K per year. Engineering manager at $180K. Same six engineers. Total spend around $1.17M. Nearly identical cost, but you get a dedicated strategist and a dedicated operator instead of one person doing both jobs at half capacity.

The inflection point arrives around twelve to fifteen engineers. At that scale, engineering spend exceeds $1.8M per year. A full-time CTO improving efficiency by even ten to twenty percent saves more than their cost. Below that threshold, the math favors fractional.

The Path That Actually Works

Phase 1 (zero to four engineers, pre-PMF): Fractional CTO one day per week. Focus on architecture, technology selection, and early hiring. Cost: $40K to $60K per year.

Phase 2 (five to twelve engineers, early traction): Fractional CTO two days per week plus engineering manager. Combined cost around $270K versus $350K or more for a full-time CTO who'd still eventually need an engineering manager.

Phase 3 (twelve to fifteen engineers, proven PMF): Begin the full-time CTO search while maintaining fractional coverage. The fractional CTO helps define the role, evaluate candidates, and ensure a smooth transition.

Phase 4 (fifteen-plus engineers): Full-time CTO with a proper engineering leadership team. The organizational complexity demands it.

This progression matches leadership investment to actual need. You never pay for capacity you aren't using.

The Premature Hire Trap

The most common objection: "If we wait, we'll miss great candidates and fall behind technically."

Three reasons this fear is overblown.

First, exceptional CTOs are rare. The odds of finding the perfect hire when you have four engineers and unproven product-market fit are low. Most great CTOs want traction, not pitch decks. You're trying to attract a Michelin-star chef before you've proven anyone wants to eat at your restaurant.

Second, strong engineers care about interesting problems and technical quality more than org charts. A fractional CTO who's established solid architecture makes your company attractive regardless.

Third -- and this one's crucial -- the builder isn't always the scaler. The CTO who excels at zero-to-one architecture is frequently not the same person who scales a team from ten to fifty. Hiring full-time too early risks paying for someone who can't grow with the company. You end up making two $500K hires instead of one.

The smarter play: use fractional leadership to build foundations, prove the model, and grow to twelve-plus engineers. Then recruit a full-time CTO from a position of strength with real traction to offer.

When Full-Time Is Right From Day One

We aren't dogmatic. If your core product is the technology -- an AI/ML platform or infrastructure tooling -- you need full-time technical leadership from the beginning. If you're in a heavily regulated domain like healthcare or financial infrastructure, full-time makes sense. If you've found an exceptional candidate with two-plus years of runway, don't let the opportunity pass for the sake of a framework.

The Real Question

The $500K question isn't about money. It's about intellectual honesty. What level of technical leadership does your company actually need right now? Not what feels impressive, not what the board expects, but what will most efficiently move your specific company forward at this specific stage.

For most pre-Series A startups with fewer than twelve engineers, the honest answer is eight to sixteen hours per week of strategic guidance. For companies past Series A with fifteen-plus engineers and proven PMF, it's full-time organizational leadership. The expensive mistake is choosing the wrong model for your stage.

Not sure which stage you're in? We help companies evaluate their technical leadership needs and design the right model for today. Let's figure it out together.