If there’s anything due diligence will uncover, it’s team dynamics and staff that might be struggling. We were working with a firm in 2024 that had a rapidly growing SaaS platform, and a strategic buyer was considering full acquisition.
As usual, before running any tech due diligence, we conducted an outside-in assessment to understand the business structure, how it appears to a malicious attacker, and any ‘people’ issues that could easily be exploited (typically, new starters, elder non-computer-literate staff, or young staff with limited technical knowledge). When we combined the people analysis with the business technology, we identified that the in-house CTO was not a bona fide CTO. Rather, he had come from a tech transformation background in Enterprise rather than an engineering background. It became clear that the CTO might need some help post-acquisition.
During the interviews, we got to know the CTO, and as expected, it was his first time in the role. It was also the first time the firm had created a CTO position. As a result, he wasn’t fully aware of the duties his role required, nor were his employers. He had inherited the codebase, which had been started 15 years ago, and we uncovered cybersecurity concerns that could be easily exploited.
This lack of personal and product knowledge was a concern for us and the buyer. The system had risks and liabilities, but he had neither inspected these concerns (even if he had the tools to do so) nor understood the engineering statistics.
It would have been easy to judge from there and simply recommend replacing him. But that would have resulted in a loss of institutional knowledge, disruption to the team, and a potential impact on value creation from the outset.
Understanding the CTO’s Challenges
After working closely with him, we uncovered the following:
- No formal training as a CTO
- Not fully aware of his responsibilities
- Systems not as secure or optimal as they could be
- A reactive approach to technology rather than a strategic one
- A quiet seat on the board with minimal impact
Although he held a CxO title, in reality, he was more of a glorified BAU (Business As Usual) manager, where the other CxOs called the shots. However, rather than focusing on his shortcomings, we saw an opportunity to add value beyond the traditional scope of tech due diligence.
Addressing CTO Imposter Syndrome
Deals often reveal that team dynamics have more impact on value than the technology itself. Our initial recommended approach was:
- Respect the dynamic and the uniqueness of the situation. This CTO may not fit the traditional mold, but the current management structure had created a profitable business.
- Plan for the future. Envision the type of CTO required to support the company’s growth plan.
- Assess whether the CTO can grow into this role. With increased governance and speed required post-acquisition, could he adapt and evolve?
A Strategic Approach to CTO Development
Many CTOs find themselves in the role without formal guidance and end up shaping the position as they see fit. The best thing to do is to help them understand the full scope of their responsibilities.
Once the role is properly defined, it typically becomes more management- and commercially-oriented. At this point, it’s essential to ask whether they truly want the job.
If they are willing and capable, the next step is to provide coaching and structured support.
For more insights, our Scale-Up CTO guide explains: (a) The common challenges CTOs face post-investment or buyout rounds (b) Practical strategies to overcome them
Based on hundreds of due diligence deals and professional coaching, we hope this resource helps in addressing CTO Imposter Syndrome: Beyond M&A Resources
Also useful to read this article on tech leadership imposter syndrome from Meri Williams, CTO at expense management software company Pleo.
