test.ical.ly | getting the web by the balls

Dec/11

19

Does a venture capital company need a CTO?

2 Comments · Posted by Christian in Outside the box

This weekend I read about an ex-colleague of mine who recently became the COO (Chief Operating Officer) of a  venture capital firm and the first question that sprang into my mind was: does a VC company need a CTO (Chief Technical Officer) as well?

VC firms or Business Angles and entrepreneurs like that basically look for businesses with a positive market potential. Usually this means startups with and idea or technology or knowledge that promises to be successful. The VCs then offer money to these startups to finance them and often also offer guidance for business processes. In return they get a share of the startup. You could call this a bet as well. The VC bets that a startup will be successful. If it is then the VC earns money from its share. If it isn’t the money is lost.

So does a VC need a CTO?

After all the VC doesn’t do anything productive. There is no technical process within the VC company that needs to support the business goals so there is no need to integrate the technological side in the company board right?

Well if the VC is investing in technological startups which makes sense nowadays then it needs to be able to judge on their capabilities and the technological decisions they made so far.

Is the startup in question ready for the market? Does their technology have a future, will it last or can it be changed flexible enough?

Being the CTO of a VC company is not about telling young startups what to do and how to do it though. It is about the VC company getting a good judgement of its startups, about keeping them from making mistakes and showing them what others did in similar cases.

A technical evaluation of a startup acquisition or investment helps to build up trust. And trust is the essence of an investment.

This little though experiment and a short google on VC companies I know revealing that almost all indeed have a CTO in place tells me that the boundary between geeks and business people is transparent and it totally makes sense for technical people to gain business knowhow which I think is much easier (though not easy) than the other way around.



  • http://dandydev.net Daan

    Good article! I wonder though: The existence of a CTO within a VC firm suggests there is a technical department to lead. Otherwise the whole Corporate ___ Officer is a bit overkill for that area (technical) of expertise. Wouldn’t it make more sense to just have one or a few (depending on the size of the VC firm and the number of investments) technical consultants on board, or maybe even attached to the company on a freelance basis?

    Maybe it’s just that the whole C_O moniker has been degraded in importance and value over the years because it’s been misused a lot.

  • http://test.ical.ly Christian

    @Daan there would be no actual team to lead only the startups to be advised. But I think escpecially for VCs focussing on internet and technology investments it makes sense to have a CTO rather than an advisor a few levels down the hierarchy as the importance of technological knowhow has to meet with the other board members on eye level otherwise it would be easily ignored.

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