From the very first tech due diligence project I ran, this question has come up time and again. In that first engagement, the company in question was a 100-person privately scaled firm without external investment. Their IT expert was a jack of all trades—he had built the internal IT systems, developed the revenue-generating software that powered the sales team, and managed critical order-to-cash systems. After the due diligence, the investor asked: Do we need to hire a CTO?
I was conflicted.
On one hand, the current IT lead knew everything about the firm and was highly adaptable. He wasn’t expensive, and his deep institutional knowledge could prove even more valuable in the future. On the other hand, he wasn’t a bona fide CxO. As the company was bringing in new leadership while the founders stepped back, the inclination was to upgrade all key roles, including technology leadership.
Now, with years of experience in tech due diligence, I know that this decision hinges on three key factors: context, exposure, and the investment thesis.
1. Context: How Is the Business Operating Today?
One of the first things we assess in due diligence is how the tech function currently operates and where the gaps are. In this case, there were murmurs of dissatisfaction—project delays, an inability to forecast accurately, and concerns about whether tech spend was being optimized. This context suggested that a change in leadership might be necessary.
2. Exposure: What Has the Current Incumbent Been Exposed To?
An IT lead’s value isn’t just about what they know today but what they have experienced. Can they manage budgets and growth effectively? Have they worked in an environment of similar scale? If they haven’t been exposed to the size and complexity the business will reach, do they have the aptitude to grow and learn as fast as the company needs?
3. Investment Thesis: What’s the Vision for the Business?
Is the investment strategy one of streamlining and maintaining the status quo, or does it require transformational growth assisted by better technology? If the former, the existing tech lead might be ideal. But if the business needs to improve backend sales systems, evolve its core tech product, and scale the team, experience matters—and that may mean bringing in a CTO with the right background.
The Crossroads: A Judgment Call
At some point, investors and executives hit a decision point: Will the current tech lead drive business growth, and what support do they need to succeed? In the example I mentioned, the IT lead eventually left, and we helped the company find a suitable CTO.
However, to counterbalance that example, we also worked with a firm where the retiring CTO’s former apprentice took over at a young age—and has been highly successful. This brings us to the final and often underestimated factor:
4. Their Natural Skills—Not Just Their Technical Skills
This is where Kolbe Assessments come in. We use psychological tests, a quick ten-minute exercise, to understand how candidates work best and whether that aligns with the company’s needs. In the case of a fast-growth startup, they needed someone pragmatic, fast, and hands-on to a degree (given the young team in place). The Kolbe results indicated that their internal candidate was a great fit—and the company has since saved money while nurturing top talent.
So, Do You Need a CTO?
Before making the decision, consider these three key questions:
- Context: How is the tech function performing today, and where are the gaps?
- Exposure: Has the current tech lead experienced a business at the scale you’re aiming for?
- Investment Thesis: Are you maintaining operations or driving tech-led transformation?
And, critically, I highly recommend a Kolbe Assessment—for a very small investment in time and money, it can transform the productivity of your tech team by ensuring you have the right person in the right role.
