Fractional CTOs: Driving Sustainable Tech Growth with Armagan Amcalar

Hello, Arman. Welcome to the show. How are you doing?

Hi, Mike. I'm doing very well, very energized, happy to be here. How are you?

I'm doing well as well. It's spring, so we're getting some sun in UK. And if anybody from UK, you know, they will confirm the sun equals happiness. So I'm getting, you know, in a better mood now, in a better mood. So Arman, let us know who you are. How did you end up in the tech industry? What are you currently doing? And what's, you know, what's the future for Arman?

I don't know how I ended up here. I found myself here one day at home. I was out of books to read, and the last book I could find to read was the instructions manual for Commodore 64. I was at the age of 6. I started reading And I started typing those things into my computer, and then they started showing me cool animations and like printing my name over and over again. 10 print Arman, 20 go to 10. And that's how I started, and I practically didn't really stop ever since. It's been over, well over 30 years now, and I figured out that I can use— this is like a superpower. And I can use this for the betterment of humanity and like in the service of other people around me. So what I do right now is I lead a company in Berlin and another one in the US. The Berlin company is a school, so we train people to be software engineers. We work with career changers, and what we do is we give them a 3-month training, very intense bootcamp on the best practices of software engineering, and not only programming because there's so much more. and they get a second chance in life. They get a new career, a new life. This is how they also talk about the, the course. It's a life-changing experience even though it's only like 100 days. Um, and we also have an engineering consultancy department. So with the culture that we create, that we cultivate, we together form teams in a model called CTO and the Team as a Service. And we partner with startups that are about to raise a series of funding or to go, you know, from seed stage to Series A or A to B. We work with them. We usually become their first tech team with a fractional CTO and a full-time team, dedicated team to kickstart their journey because I possess, or have come to possess, let's say, a lot of experience in building startups and building, you know, from zero to one. How do you kick it off with the minimum amount of resources? I was running a startup incubator before, um, I came to Berlin 10 years ago, and there that was the only thing you could do, like, with minimal resources. And now I'm taking that to practically all the other companies in the world, and I'm bringing them to a level where they feel comfortable in the market, where they can survive on their own. And then we slowly roll out, um, with a very smooth transition. So this is basically what I do. I'm a fractional CTO, I'm a teacher, I'm a coder, I code a lot, and I happen to be the owner of two companies, um, in a nutshell.

It's a very strong background, Arman, and it feels like I'm talking with myself. I don't know why, but it's just such a similar journey I went through. I didn't end up running businesses, you know, in that space, but, you know, the coaching, the consulting, the leadership is just natural. And the startup scene in UK is actually quite rich as well. I know it's quite rich in Germany, have many incubators, and it's, uh, it's just like, um, Somehow you end up there. All right, so we have two topics, right? So we have today, we will be talking about CTO as a service and as a team as a service as well. And we're actually going to talk about how that looks like in a remote, decentralized way as well. So let's just jump into it. Let us know what is CTO as a service, how that really looks like.

If I may, I would like to take a step back. Okay. And really understand where this is coming from. This is coming from a point of view of making the most out of the energy we consume in the world. This is from, you know, the natural sources like the, the weather, air, water, sun, or stuff we eat, or I don't know, electricity and, and the world resources that we consume. I think our job, our responsibility as human beings is to do the most out of that energy that we consume. If we can create energy, that's even better, but the least we can do is to consume less. So this is the idea. What does this translate to running a startup? Like, how does it— like, what does it mean in the context of running a startup? When you're kicking off, when you're at the very beginning of your journey, What you need is a lot of experience, and what you need is some sort of a reliability or guarantee that you're not going to lose your company and go bankrupt before you can make a positive impact in the, in the world. And one way to do that is to work with very senior people who have been through this before, right? And that is very challenging because you don't really have enough money to employ them full-time. But most importantly, you also don't really have enough need. So this is where the story begins. This was the context. Gist of it is you need a very experienced CTO. You cannot work with an inexperienced CTO because It's too much risk for your own dreams, for sinking your own dreams. It's too much risk. And you also don't need a full-time CTO. Most of the support that you need as the founding team or your engineers or your technology organization, a fractional CTO, which means someone who's coming on a part-time basis, devoting maybe 40, 50, 60 hours per month, to your company can cover. So this with Company A and 30% of my time with Company B, and to me I look like I'm always there, I'm there at all times because they don't really need me that much. And by doing this, they save on costs. And also, this is some unfortunate aspect of this, a very experienced CTO would not really like to work for a risky startup that doesn't have a past, that's just kicking off. Like, you don't want to devote your next 2-3 years only to that group of people. Of course, if you can find those people, that's great, but most of the time that's not the case. You want some more guarantees in your life, especially if you are after 40. Life some has some other requirements, but there's still a lot of experience that you can bring to the table, and those experiences are really valuable. So What you can do in this case is in the setup, you can fulfill yourself as a CTO with multiple companies, multiple visions, multiple industries, and the startups who need you and your expertise as much as they do, they can benefit from you. So it's a win-win situation, and it is— I call this sustainable or, um, zero waste. Basically, there's nothing that's going to waste. You make value out of every single hour you put in for a company that you're working with, and they practically get as much value as they can out of their investment. And you, by not investing your entire future into a single risky young startup can lead a fulfilling life. Does that make sense?

It does make perfect sense. There's no silver bullet though, it's always a trade-off, isn't it? So all of these benefits make sense why you would, you know, you would go and adopt that module. Um, but what's, what's the challenge of it? Like, you know, because it's always a trade-off. You're getting, let's say, You know, you're getting part-time, you're spending less, you're getting all experience to get, you know, that good start. But what are you losing? You're losing potential future CTO founder. Maybe you have less caring, you know, because startups is a grind in the beginning. Maybe fractional CTOs, you know, they, they in and out, you know, it's just about clocking in, clocking out. Like, what's, what's on the other end?

This is a great topic. Thank you for the question. This has to be sustainable, right? We're talking about sustainability, renewability in terms of energy or in terms of climate and environment, and I'm trying to apply those techniques to building startups because I've been running a startup incubator and I've been consulting tens of startups so far in my career, and this is a recurring theme that I see. Everything that you do as a startup has to have a huge ROI in the short term and in the long term as well. It has to be sustainable. You have to get continuous value out of it. And in a fractional CTO engagement, the risk is— the difficult part is finding the right person to join you, not only for the money but for mission alignment. That is something you cannot buy with money. And you might find a CTO candidate who is mission-aligned to you but who are lacking certain experience or maybe even skill in technology. That is a huge risk for you, so you might not go down that route. But if you go with a fractional CTO, you know, it's easier to find experience, but it's also difficult to find mission alignment. And of course, how do you know that that CTO or potential fractional CTO is really aligned with your values? This is really tricky. Like, this is the trade-off. You need to be really selective here. Um, look at the, the past, you know, which companies did this person work with? For example, as a fractional CTO, I like to work with healthcare companies edtech companies, um, and AI companies that would make a positive change in the world. Now, I don't work with e-commerce companies, for example. That's not where my passion lives. I have zero mission alignment with e-commerce companies, and I wouldn't really take them on as a client. The challenge is finding this fit. That is the first challenge. The second challenge is challenging your fractional CTO to create sustainable systems within the company. You have to create a culture that's going to survive even after you leave, even after you change a CTO. Very boring, typical example, but what Steve Jobs did in his first term in Apple was terrible in terms of continuity and sustainability. The company failed after he left. He came back second time, he did an amazing job, the company thrived after he left. So that was the second, um, term, was a sustainable practice implementation. And this is what you need from your fractional talent as well. They need to come in and create long-living sustainable systems. And normally what I typically do is I work for about a year or two with a startup, and I bring on a team, of course, and I slowly hire replacements, first for my team members and then for myself at the end of that process. And then I hand over a culture, codebase, products, vision, way of doing things, and understanding of the world, vision, and then leave. And then whoever real long-term CTO you bring on can take it on and do a good job.

So we bear responsibility as fractionals then, right? So we should care about the longevity and sustainability of that startup because if I'm thinking about the founder and I'm not technical, I'm probably not going to know that that's important. I'll just care about someone coming in, you know, getting things done so I can go to the market, and that's, that's where my concentration will be. So if I'm coming as a fractional, I should be effectively bringing all that skill. At the same time, I should be saying and explaining why it's important to look in the future, you know, what I'm doing over here to make sure that, you know, your startup survives and is sustainable, all the changes. Okay, that's a, that's a very very good positioning. I mean, I would imagine when fractionals come in, they really care about, you know, I'm gonna be here for 3, 6 months, you know, what's the status quo, how do I maintain where the business is, you know, get some things done, off to the next one. I think if we get the fractional who actually cares a lot more about longevity of the startups, yes, that's— you're getting a bonus, you know, you're getting almost like a premium on that fractional. So which leads me to a question: can I actually choose if I have budget limits? Like, you know, we mentioned alignments and mission. I feel like all of these things, um, you know, it's choices, and choices come at a cost all the time. So if, if I'm saying, you know, I need a healthcare fractional, I need that fractional to have some, some skills with the startups, you know, I need them to care about, you know, me and longevity of my business, like all of these checkboxes in my choice list, it just clocks, you know, a cost, right? Sometimes maybe I can just go like, I have, you know, £500 a day, like what do I get? And you just take what, you know, the best you can get. So when it comes to like pricing modules, like what's the range? Like, you know, what, like what do you get at the lower end and what do you get at the higher end?

I have had the opportunity so far to sit at practically all chairs at the table, like as a founder, as a CTO, as a CEO, as a startup incubator, as an investor, as someone bringing in services. So I kind of have a rough idea of how this should work in, in the world. And my thinking there is you have a lot of uncertainty in your life with your startup and with your business as it is. Whatever engagement you're in has to be super clear and super simple. So what I prefer to do in this case, like, there are a lot of fractional CTOs or, or service companies who would like to take, for example, equity from your company. If you don't have enough cash to pay them, they can take equity. That arrangement is something I don't really prefer because that is disadvantageous for the startup. If it's going to be a unicorn, you're going to give a lot of future value for a service that you needed and a service that had a fixed cost. And that's very important. Talent, even though it's very experienced, has a fixed knowable, predictable cost today in our world. And to me, what this should look like is a fractional CTO should come in and charge a specific hourly rate or a monthly rate, whichever you agree on. And it's very specific way of working. Like, are you devoting 40 hours of your time that month? Is it like 2 days per week? Is it 1 day per week? Is it like 4 hours every day? What is the access that the founder should have? Like, resolve those issues. The pay should be very simply your hourly rate. And if you can boil it down to that, it makes it much better, much easier to talk about like mission and passion alignment as well. And typically you look at maybe, you know, $100 per hour $150 per hour, up to $200 per hour, um, of, you know, a fractional CTO's time depending on their experience level and so on. And if you're really frugal, if you really find, you know, the right person— and usually these people, when they have, you know, 20, 30 years of experience, are more realistic about these things— they know that you don't need them full-time, and you can get so much value for a fraction of their time. It's so Like it's incomparable to a freelancer that is only there to create value today. A fractional CTO would create value for tomorrow. So whatever you're paying should have a huge ROI. That's why I'm also talking about like sustainable practices and building systems. You should not have a fractional CTO to build your code base today. There are other companies, outsourcing companies for that, if you will, or team augmentation companies. That's not the point. A fractional CTO should be there to make sure you're not losing energy, and if possible, you're creating energy with your practices. You have the right team in place, right process in place, you're building the right thing that your users need that will keep your business growing. Um, that is basically what you're paying for. In a fractional CTO.

I like that. And you're absolutely right. I mean, they would likely do a lot in just like 1 day a week, 2 days a week. That's, that's a, that's a heavy involvement because that's a couple of hours a day. They can oversee remote teams, you know, build strategies. And that's a huge value, huge value for startups. So did you ever work on deferred payment type of module? Just because we talked a little bit how they can get paid. You know, it is a service at the end of the day. It's like an hourly rate. In UK, you know, sweat equity was popular when we had, you know, a proper bull market and there was a lot of startups. You know, there was a lot of venture capital money around and everybody were raising money. So sweat equity was actually quite important. You come in, you join, you know, you're effectively just not getting paid, but you're getting an equity. And then when that market starts sort of toning down a little bit, we had these like deferred payment models where you come in, you know, you're getting paid maybe a fraction of your hourly rate, and other payments are effectively deferred to the future, where if a startup raises money, they can pay out the deferred payment. If they don't raise, you can convert the deferred payment into equities. Is that something like, uh, you know, you see that happening in Germany, Berlin?

There are only like large companies that can do that because they can afford to do that. And here's a bit about how capitalism and the economy works in the world. If you're working with someone who can afford that, you're either very, very lucky and they're going to join you for mission alignment, and this is really their passion and hobby, which is very rare to find, or there is some sort of a weird thing going on there, they probably won't really care that much. So it's very difficult to talk about, but here's the thing: if I don't really need the money right now, this is not how our world works in If I see this as an investment, I might have— or a fractional CTO or whoever, you know— might have other deals in mind or have their own agenda or might not care enough, you know, might give you— if you're gonna pay them 1/3 or 1/4 of what they're worth, they might give you 1/4 of their attention. And the problem is, how are you going to know? With CTOs, it's very difficult. With technical people, it's very difficult. How are you going to judge them? If you could judge them, you would be the CTO yourself. So how do you know you're getting the most out of it? They might be okay with this, but they also might be giving you 1/4 of their attention as well. And then you would end up paying 4 times the value at the end when you raise money, which may or may not be a problem for you because that, that could, you know, get you across the bridge until you get funding. But I don't know, it's very weird. This is why I don't really like any of these arrangements, because it always leaves a door to think, am I being duped here? Am I getting the best value out of this engagement? So what I recommend people is, or startup founders, is if you absolutely don't have any money, don't do it. First, raise money. Friends, family, I don't care. VC, I don't care. This is the practice of building a startup. You don't need a CTO until you raise some amount of money. You have to be able to convince people to buy your product and your service or whatever your offering is without actually having that offering. And if this sounds unreasonable to you, just stop working right now. You're not going to make it. Your offering has to be that good that people will start paying you even before you have some solution. And then you raise the money, and then you find the CTO, and then you take things big time. And this is basically what I tell people. If you cannot afford me, let's wait some more time and you raise a new round, and then I'm going to be more useful to you.

That makes perfect sense, Arman. It should be simple. If the agreements are tricky and there's a lot of turns in agreements, it's just not going to bode well. for you for the future. You know, you want as simple as, here's my hourly rates, that's what I'm bringing, a very simple exchange, right?

There's one more thing. Last week I got an offer for exactly what you said, sweat equity, and I was like, no one will join you for that because a technological person, a CTO, or even a junior developer can find job anywhere and they can be paid full of what they're worth. Why should they join you? This is what I'm trying to tell. There's no reason to get paid very little or nothing until you get investment. Yeah, everyone's time is valuable. So like, the, the scarcest whatever, um, resource is technical people. Scarcest, I think.

Yep. And, uh, so equity is disappearing, you know. Um, it was very popular, but it was there because of the bull market. You know, there was a lot of money and it was popular. You know, people wanted to join big ideas and then, you know, be part of something huge, unicorns. But I think, you know, there's a real grind when it comes to startups. And eventually, after a couple of months, you realize that, you know, you can't just go on, spend all your free time. Like, how are you gonna buy food and, you know, pay for house, and it's just, it just doesn't lead anywhere. And after many, many failures like that, people just, you know, made 360 and went like, yeah, that, that's not, that's not working.

So in my life, I have had the opportunity to get a lot of shares from a lot of companies, um, a lot of startups. None of them worked out in the end. Only one actually worked out. So, like, it's all hopes and promises that amount to nothing in the end. And I know as a CTO that my contribution is very valuable, if not the most valuable thing in that startup. And, you know, there are terms to bring that to your company.

I mean, even if you have equity, right? Having 10% of nothing, it's still nothing, right? So it's—

Exactly.

Better get, you know, the to pay for the service and then use that money to launch your own thing or actually invest somewhere. Okay, so we've been unpacking this for a couple of minutes here. Let's just get into success stories. So, you know, you've been part of many startups, you know, you're running the CTO as a service and a team as a service. Can you give us like a real use case where you guys came in, in a picture, in a startup, and, you know, you effectively flipped things around and it ended up being, you know, a good good use case success story?

There are several. And again, I feel really, really fortunate for the opportunities that I got. I worked with startups in the Valley, in Silicon Valley, in the UK. I actually now have two, and probably next week another client from the UK, and companies in Berlin as well. I think One that makes me super proud is a fractional role that I'm holding right now for a company in the UK. It is a talent network, but the talent that we're talking about has an average of 19 years of experience. So super exclusive creative people that have worked with the most impactful brands in the world, mostly nonprofits as well. And we're building an AI-enabled talent network for them and for our clients to find the best fractional talent, basically. And when I were talking to them, I guess a year and a half ago, they were business co-founders, designers, and product managers. I guess, 5 co-founders, but they didn't really— 4, 4— they didn't really have a technical person. And we had a lot of talks and I came on board. I brought on a team of 6 people immediately because they needed an immediate short-term solution. Like in 3 months, we need to have a product. So what we did was we worked with 6 people, a senior architect, lead developers, junior developers, and myself, and then we became actually 8 people. I brought on a product manager and designer as well. And after 6 months, we started reducing the team because we released the initial version of the app, of the platform. You know, hiring a team takes a very long time. Hiring a single engineer takes about 6 months, and, you know, making them productive at work Bringing on a team of people who already know how to work together is like an immense difference. So fast forward some time, our designer decided to join that company full-time. Designer that we brought on was in love with the company and decided to join full-time, and we were also okay with that, of course. And then we started hiring, just as I told you before, hiring replacements for the people that we brought on. Now that we have an established culture, a product, a lot of code that we can use as reference, a good understanding of the business, the team, or, um, being really closely tied to the rest of the company. We were able to onboard new engineers. And now, after a year and a half, we are only down to 3 people: myself and 2 other engineers. And this month— I, last month, I hired a senior engineer there. This month, I hired another senior engineer there. So we're slowly handing it over. This worked great for ourselves. One thing, I love investing in people and keeping people with me. The fractional CTOs that I'm working with at Koyotev are my students from 2011 and '12 and '13. After, you know, 12, 13 years, we're together again doing the same business. And my team members who are working with me at Koyotev, my engineers, are with me for 2, 3, 4 years since when they joined. And if I give them the opportunity to switch companies and switch roles and switch visions and industries every year or two, so it works great for my team members, works great for the clients because they get a very solid beginning, zero stress, zero risk. They have the audaciousness to focus on the business. They don't have to care about the technical aspect. I have that part covered. And it works for them long term as well, because in the end they are able to hire really senior people and onboard them without even a worry. Again, they don't really need someone to care about their onboarding because I'm taking that on as well. Because we have an established team. So it's a very, very smooth handover. And this works because I guess in the US there's a statistics like employee tenure at the startup is 11 months. After 11 months, you already lose an employee. So keeping a team for a year or two and being able to hire replacements and embedding them right away is you know, super natural, super straightforward, and great to work with. And this enables us to launch a lot of products faster. What we also do is, of course, we have our collective consciousness and culture at Coyote. So when we're building, for example, we're building AI products for ourselves, and now that's a capability we bring it on to every single startup that we're working with. And now immediately without having to search for AI talent, they can build AI products because we have that ingrained culture. So there is this aspect of biological cross-pollination, if you will, between these companies through us, and that is also super valuable.

There's a lot of values, Arman, honestly. So from the beginning, until, you know, all that end where you start replacing people. It's just, uh, there's so many challenges if you try to do it yourself. And, you know, you guys covered this. It's a big success stories. What about, you know, challenging stories? What about stories which didn't end up being so successful or so, you know, sweet to share? Uh, any real, like, reasons?

Yes.

You know, so, so it's like I'm sure you have some challenging cases, but, you know, like if you reflect on it, what was like the main reason where things just didn't work out?

There are a couple. I think the easiest one is the startups run out of money or they cannot find the next round of funding they wanted to have. So that's a very easy one, right? And then you have to look for new clients and you have to like find out what you want to do with your team. That's very easy. More challenging bits are coaching these startups on being a better startup, and that starts with the founders. The biggest trouble of like make-or-break decision-making points, and if this is going to end well or not, is the attitude, the approach of the startup founders. Now I'm gonna give one unsolicited advice here to everyone who's listening to us. As a startup founder, you did not get funding to build your dream. You're basically employing the money of the investors. The investors could buy real estate. They decided to invest in you. Your job is to earn them more money. And I know this is heartbreaking, this is ego crushing. You had your own dreams for sure, but in the end, this is a capitalistic society and this is what it is. Otherwise you wouldn't have funding because this is not a loan. So put aside your ego. You have to build a company that's going to scale, that's going to grow, and everything that you do, including first and foremost, taking care of your employees has to be in line with this goal. So the biggest problem that I have with startup founders are like first-time founders or second-time founders who are bringing on their egos too much to the game. The company will not build what you think is a great product because that might not match your target audience. The company has to build things that will work well with your audience and that will sell. That is the only way to grow. So this friction is something I'm constantly having, and I'm trying to, of course, like coach the founders into changing their thinking a little bit. But when it doesn't work, it doesn't work. And it has happened in the past, um, at least once I can tell off the top of my head, where we had huge friction and misalignment in the direction that the company should go. And I personally don't care, right? It's their company. This is where like having no equity comes into play. I don't care at all. I'm just trying to help you here. And if you don't like me helping you, then we can part ways. Unfortunate, I believe, because I built up this experience through a lot of failures myself. I created 8 companies, 6 of them failed somehow, and I learned a lot. I learned more by consulting others and by learning from mistakes of others. And, you know, if you don't value this, it's fine, we don't have to work together. But I have zero stake in the game, know that. Like, I don't care, I can find another customer. But this is your own company, this is your startup. And, you know, this is usually the last meeting I have with them, and then we part ways. This has happened again at least once in the past, and it's fine, it's business. But I'm trying to bring a lot of passion to this, and sometimes we have heated debates on what is the best approach forward for a company.

So when I was asking this question, that's exactly— that conflict exactly was in my mind. It's like You have founders who have a certain vision for the product. They want to do something, and you come in and you go like, that's not really gonna work, and there's reasons why I'm telling you. Why would you pay me and not listen to what I'm saying? It's like, you hired me for a reason, right? Just, just take the feedback. But not everybody, especially founders, can consume that information. And you're right, it is an ego. It's like you know, I created this business, I'm hiring you, don't tell me what to do. And at the end of the day, you know, you like it, right? Because you bring in so much experience from, rightly mentioned, other businesses and just years and years in the field, right? Okay, so, so that's main one— running out of money or effectively just misalignment and how things should, should run. And then you go like, well, if you're not gonna listen to me what help I can provide to you. And then it just sort of becomes an end. Okay. So let's say we are working together and I want to understand how can I measure the success you're bringing to me, or maybe not you in particular, but that, that, that business process of, of that CTO as a service. Like I know I'm paying you this, you know, hourly rate so I can forecast the cost, but how do I measure the value I'm getting back?

This is very, very important. Two weeks ago I joined the company and they had a CTO before, an interim or fractional part-time CTO, and he had a vision that would take months to build. And this company doesn't even have a logo yet. So now that's a scenario that is doomed. Like, you are very— yes, you have money, they have raised money, okay, they, they can cover the costs of development for 6 months, it's not a problem. But it's a problem for me. I have to deliver immediate value. Like, the first month, cultural change. Second month, some results. Third month, there has to be something out the door that your real users can use. Otherwise it's not a good investment. That's too risky. How do you know that there's going to be an ROI in the end? You cannot commit to a certain vision that's going to give some fruits after 6 months. It's not working really. So you need to challenge your fractional CTO to have business impact and deliverables. You know, give them 2-3 months, okay? It's fine. They can start producing value after 3 months. But as soon as that happens, there has to be immediate value for the company, for the customers that we have. And I don't like measuring anyone in the company by what they're doing, but the outcome. And the outcome has to be business outcomes. So if your business is not growing, you're failing altogether as a company. It doesn't matter if it's marketing or if it's engineering. There's no need for the blaming game, and you will have concrete understanding because that's the business that you're running. Like, if you cannot judge the effectiveness of your business growth or whatever you do in, in product, then again, you probably should not be running that company. Like, you should be able to tell your team, hey team, this is the goal that we have. We're going to get this many customers doing this many things on our platform. Now do that, and they might tell you, okay, this is doable, and it's this time frame, hopefully 1 month or less, because anything more is again too risky. Break it down and try to see, measure business impact. I don't know, with analytics, with user interviews, quality, um, over quantity. Maybe just ask 1 or 2 people. In your network of how they use your tool, your, your platform, or your offering. You have to measure everything in, in business value. Even if it's a very, very technical product, you're a startup. Your existence relies on your users. Without any value from the users or feedback from the users, you are in the dark. And even if you're like, everything is great you might be failing. You don't know that. So you need to challenge your people to give you tangible results that you can measure in business outcomes. And don't worry about technical implementation or detail. That's not your job. Those people will take care of it. Okay, I get it.

There's an element of perceived value then, isn't it? So it's, maybe it's not quantifiable, or everything is quantifiable. But if you, if you have a fractional team or a CTO as a founder and as a business owner, like you have to have this perceived value where you go like, this arrangement is, you know, it's working. At the end of the day, the business needs to be growing. You know, revenues are beating hard. And if you're not really selling your product, it's like it's not happening, isn't it?

There is always an element of common sense in this. Of course, as a founder, you need to have a common sense of like whether this arrangement is working or not. But a good way to, to do that is breaking down your goals into approachable milestones and getting buy-in from your CTO or whoever. Like, it doesn't matter, any fractional talent. If they tell you, wait things, that's a no-go. This has to be super clear because you're like a 5-year-old. You don't really understand anything about what they're doing, but you still need them. So they have to be super clear in what they can do. And once they align, make them agree to one-month deliverables. I'm not talking about sprints or like 2 weeks. I think that's kind of nonsense. But every month we should see some incremental value. Like feel it and see it and touch it, and use your common sense to decide whether that's good for the business or not. It may or may not lead to profit. Maybe that's not your, your jam, but it should give you a solid sense of progress. If you don't have any visibility, you should end that agreement. That's not working in your favor because you're in total darkness. You cannot evaluate the code base, you cannot evaluate anything technical. How are you going to know? The only thing that you can do is to trust what you hear from them, from your fractional talent. Um, it's tough. Again, I've, I've sat on both ends of the table, so I understand how difficult it is for the founders as well. That's why, like, what I really value is, like, open communication. And I tell them, you know, I can do this or I cannot do this. This can be done or this cannot be done. There is no team on earth that could do this, or, you know, this would cost us this much time and money as an investment. You need your CTO or any fractional talent to see every move as an investment. What is the ROI in that thing? Are you picking a library? Are you picking an infrastructure, a way to build things, a cloud provider? Everything should have an ROI, a return on investment.

Okay.

Your CTO cannot quantify the ROI, even like in a t-shirt size, whatever, it's not a good arrangement. Because how do you know they're deciding on choice, like between choices A and B or C? Like, how do they— what is the process of making that choice? It has to be ROI because we are a very early stage startup. And we're running against time. We don't have a huge runway. You have to let that runway for the sales team to shine. If you have like 18 months of runway, you cannot build your product for 15 months. That doesn't leave any room for sales. You have to give them something off the bat in the first 3 to 6 months so that they have at least a year to sell the product.

Very good. Very good shout out, Arman. I fully agree. ROI is a language which commercials and the founders and investors, everybody understands. Like, there has to be a success measure, return of investment of any big initiatives. And, you know, having a fractional, you're gonna be put on the lens and looked at a lot more in the sense of what value you are providing than, than full-time employee, you know, who's effectively coming in, clocking out. Because you're fractional, like, you have to have frameworks where sort of go like, I'm going to do this because of that. And, you know, here's the success metrics around that. 100%. How do you see— so just future, you know, future-wise, let's take like next 5 years. How do you see this module, CTO as a Service, evolving with the changing tech trends and just general market trends? Let's say we're going through recession. Do you see fractional, you know, going up or down? Let's say, you know, we've got AI change, like with all the trends which are currently shaping How does the future look like for this module?

So I think this also ties in well with the shifting trends in economy and in work as well. Like, a topic that I'm most interested in is future of work. How are we going to work in the next 10 years? In 2035, what are we going to be doing? Like, what does work look like then? There's a statistics again from the US that by 2030 more than half of the workforce will be part-time freelancers. That's a huge change, and we're not ready for it at all. Like, onboarding an employee takes 6 months at an enterprise, at a corporate, and you won't have that time. No one will have that much time. And since it's fluid talent They're going to come on board for 3 months and then maybe leave. They're going to come on board for a year, 6 of which you have already spent, and they're productive only for half the time. So these trends are already emerging and we have to catch them. Couple that with some near-term stuff like recession, right? This makes the most sense. You have to be frugal as much as you can, make the minimum amount of investment that is reasonable. I'm not saying like be cheap. You have to invest the money that you need to, but be cognizant of your— of the money that you're spending. And there I think fractional work will grow, because why are we really paying for some lost productivity? Um, I'm not sure. Like, again, I'm now at Talent and also company owner, so I'm seeing it from both perspectives. I think the best combination is as a talent when I feel fully immersed in what I'm doing and fully passionate and not mundane tasks. And as a CEO, I would like to pay only for the most passionate people and only for the most passionate hours that they have. And I think this is where AI comes into play. Like last night, I was writing a new AI framework for one of our clients where I'm the CTO, and we had a huge brainstorming session with my top engineers for 7 hours. We also started coding by the end, but we were very tired, brain melt, and we didn't write the code. There's an AI assistant that can write code for you. and it's not the best, but it's good enough. And our brains were only at a capacity where we could, you know, just tell what we want and not code it ourselves. And we sat together in front of a screen, 3 of us, 3 top-level CTOs, minimum experience level is 13 years. We let AI write the code for us, and until we could recuperate Right? And after an hour or two, we're like, okay, now I have my energy back and my brain back. Now I can take over and take it to the next level. So these mundane tasks, coding involved, I hope will be covered by AI, so people will have more time and more opportunities to work on stuff they're more passionate about. Because like, it's— I guess it's common sense, if you don't like something it's gonna— you're gonna drag it along. Like, it's gonna take you ages to finish a task that you hate. So hopefully we're gonna give all of that to AI, whatever task that is. And right now I'm also building an infrastructure for autonomous AI agents, teams of agents that can fulfill certain tasks. So hopefully I'm going to be part of that revolution. And then the real humanity is in bringing out your creativity, your passion, your personal touch. Here's a different perspective. With the Industrial Revolution, we are just fulfilling the places of machines, future machines. Capitalism, industry, or the world is treating us employees, talents, as cogs in a big machine. Most of the companies are soul grinders, and that's not what's being human. You might think that having a full-time job is what's making you human, but it's not. Most of the time is actually a grind. What is human is your personal element that you're bringing in. Very simple stuff. Are you a delivery person? Saying good morning, smiling, your personal touch, even that, or your ideas as a, as an architect, as a CTO. Those are the valuable things. I think the prices for those skills or expertise or offerings will go up, whereas the mundane tasks will be covered by AI. That's why it's important for people to figure out what they can do best how they can bring in their own touch, soul, existence into the work that they're doing and go with that. I think this is the world we're going.

Okay, everyone's part-time, likely decentralized. Well, not everyone's, but big chunk of it, especially in the, you know, tech industry. So I, I have one challenge with this because I, I've been doing remote and, and, you know, uh, decentralized for about 6, maybe 7 years now. So one of the biggest challenge for me is the leadership. And, um, I do like to have people close because it's just so much easier to make sure that the teams gel. You know, anything you do around, uh, peopleware and, and just working with people is just so, so much easier if you have them in, in an office nearby. How did your approach to people and leadership changed with, you know, with distributed teams, or how it evolved actually.

So the first time we went remote, fully remote, was 2014 when we had a startup incubator. We had a huge office, 5-story building belonging to us, a lot of employees. Overnight we decided to go remote and we operated for a year and a half remotely. Then I came to Berlin and worked for a company at an office, full-time at the office. Then another company. Then the pandemic happened and we went full-time remote again. What I'm seeing here is locations don't matter as much as alignments do, as much as passions do, as much as energy does. You have to give space and room for your people, everyone, another's company. And as long as you do that, as long as you have space for that, I think it works. In terms of leadership, you have to have strong voices and a way to collaborate online. I'm not talking about meetings online. I hate meetings. But what is precious for me in an office setting is collaboration. Like, I can easily sit next to someone and we can easily collaborate on whatever is on their screen. Or grab coffee and just talk about your idea. These collaboration sessions need to happen online, and there are certain tools that you can use to do that. Zoom is definitely not one of them. Zoom is great for meetings, not for collaboration. Give people enough purpose and time and room for them to grow, and clear direction. It's very difficult to do all of these things at once. but, you know, do your best. And then you really don't have any issues with motivation or with producing work. It also helps if you can get together every quarter or so. With a company that we are working with, there are regular meetings throughout the year, like every 3 months we get together and spend a week together. With all the employees. And, you know, it's fine because there's no office costs or anything, so there's money to do these sort of things as well. And it's a huge energy boost, of course, when you can be in person. That's like unmatched, of course. But then, you know, it's not always realistic, and talent will be more and more fluid. I can now give you my secret to this, which which is not shocking, but it's culture, shared culture. You need to create that sense of owning and belonging to something that's bigger than all of us, and that is an understanding, a culture, a way of doing things, a way of being human. And in fact, I had a crazy startup idea 2 years ago about this future of work thing. In the future, I think we're gonna have a theme called culture as a service. You will be able to submit to a certain culture as a company and as employees, which will maybe reduce your onboarding costs by half. Instead of 6 months, you're going to be able to onboard people in 2 or 3 months because you're going to be sharing the same culture, shame, same understanding, same values as a company, same ethical principles. And we're— maybe we're going to have like our manifests in terms of like these categories so that we can find better work and better alignments in, in work. I don't know, this is very difficult, but Whatever you do, you have to be preemptive and you have to be preventive as well as a leader. Like, don't be reactive. Don't react after problems come up. Set things up from the get-go to be sustainable with a solid culture. Focus on your team members, employee development, personal growth. Coaching, mentorship, and you're not going to run into many problems. This is how I was able to keep practically all my people for like 10, 15 years.

That's a great—

there's of course like certain things that break between some people, but you know, I'm very happy with the people that I am with today. I, I don't think I could be happier at any other company in the world because I'm working with my people, and that matters.

It matters a lot. At scale, it's difficult. So I feel like as long as you have a, a smaller group of people, you know, startup, say until like maybe 40 to 60 people, it's actually a lot easier to get that depth in the culture happening and that, you know, that remote gelling is actually there. But once you go to that, you know, like a much, much higher scale in hundreds of 4,000 employees, you know, you dilute the culture. Like you're not going to have ability to hire everybody who aligns with your, you know, mission goals. You know, people will come work for you because, you know, it's work.

I have a challenge for this. This is something I'm telling all of the startup founders that I'm advising. Like, as humanity, as societies, we have figured out ways to manage and rally millions of people, hundreds of millions of people. So we, we know the ways to do that. And here you are telling me that you cannot do that for 1,000 people. I think that's just lack of leadership and understanding how society works, like the fundamental mechanics of society. Fractions inside societies are normal. Monoculture is not really something that works. And if you're pushing for monoculture, and especially if it's your vision as the founder, that's dictatorship. It does not work. It's not long-term, it's not sustainable, it breaks. Look at the most successful nation in the world, all of them, all over the world, whichever you pick. They have very similar implementations of similar ideas, of arrangements, of fractionalization, if that's a word. How they break up power dynamics, responsibility, authority, what it means to be a citizen. You know, there's a lot that we can learn from sociology, from politics. And as a leader, regardless of whether you're a CTO or not, you have to know these things and you have to apply. And then I'm not really sure if you're gonna run into this problem.

Well, let's take another example. It's definitely possible, but let's take something which is very big in, in, in any workforce, right? Things like working for banks, uh, retail shops, something which is very hard to say that there's a, there's a real, like, like, mission, you know. Like, if you're coming in, like, you have the, the, you know the energy, sustainability, you know, climate changes, healthcare, they align a lot more to, you know, the depth of like who you are as a human. So it's a lot easier. But then you have these like, you know, mundane works like, you know, electricians and things like that where it's really hard to say, you know, I was born to be a banker or something like that, right? So, but people still will go to that work because it pays good. Like, you know, it's like it's capital society, money flows through banks and then, you know, people want to be part of it. And in these ones, if you go through interviews, you go like, you know, well, why are you here? Well, you know, reality is I'm here because it pays good, right? And you get that a lot. Can you blame like people choosing work like that and just looking at work and go like, I know it's work, like I know it's 5 to, you know, 9 to 5, but, uh, I'm doing this because I want to get paid. But eventually I think they end up in a situation where I hate my job, right? Like, I don't, you know, I don't want to be here no more. And, uh, and it's sort of like, um, you know, catch-22, a trade-off, right? Yep.

You usually— people don't hate their jobs, they hate other people around them, and mostly their managers. I hate the concept of middle management. I hate it. Middle managers exist as a weird jelly gateway between upper management leadership and the actual workforce. And I have seen very few middle managers who actually make a difference. So I think, I hope AI will set its eyes on their jobs first, because I want people to create value at any organization. And middle management is there to keep everything running, which is ironically not a problem if you just leave your workforce alone. Like, whenever someone joins a company, yes, they mostly join for the money, but they also don't want to waste their lives. And they would like to still do something good and contribute. It's— in my experience, it has been always like the middle management that's messing things up. That's where the real power struggles happen because they want to be promoted and they're doing all the dirty tricks humanity can imagine to undermine their opponents because it's a pyramid and there is, you know, less chairs one step above. The thing is, if you have good fractions, um, you can bring down your 10,000-people company into smaller companies of autonomous units that will give them way more autonomy and way more, let's say, reasons to exist and to do good, even if it's a bank. They're gonna have more responsibilities, and we have evolved to bear more and more responsibilities as a species, and we like having responsibilities, even though some people say they don't. And you just need to find a way to give more authority to them. Centralization is not the way to go. Centralization— getting all the power, decision-making, and responsibility and authority in a singular team of people or a single CTO is detrimental to your health. If you can break up your organization into autonomous units of, I don't know, up to 100 people, they're gonna have so much fun doing whatever they like doing. And, you know, give them complete autonomy. Imagine you're a holding collective of different companies. Let them even service your competitors. While doing so, they may learn new things. So you just need to come up with a framework to do this. And this is why I'm saying a lot of the governments, like them or not, have figured out ways to do this. This is how most countries in the world are run. That's why I'm really finding it really hard to understand. Like, of course, if you try to centralize everything, it's not gonna work. Like, what worked until very recently? I guess like 20th century, central governments were not a thing. You know, when did Italy get together? 1870 or something, something like that, right? Germany, 1840s. Maybe something like that. Before then, they were decentralized, and yet there were still superpowers in the world. And even now, you know, the US consists of 50 states— 52, 50, I don't know— and California, for example, is bigger than Turkey in terms of economy, which, you know, Turkey is also a nice country in the world I guess in the first 20 in economy, but California is bigger. They, they have millions of people living there. Looks like they're doing kind of okay, better than an entire country. So we have found ways to manage groups of people if we don't let ego get in the way, and democratic elections is a way to ensure that. Now, I'm not suggesting to run your company democratically with elections, but I think we can get some inspiration from real life. And this has been basically the staple of my journey in technology. Get inspiration from real life, get examples from real life, and apply it to your work. And, um, I don't know, I never ran 1,000-people company before, I worked at a huge company with 17,000 employees, with 2,500 engineers. I have been a middle manager in that company, and I have seen all of the inefficiencies of this entire system. And work isn't happening, productivity isn't happening because there's not enough authority. But there could be. Because the people on the ground, the engineers, the salespeople, repair people, whatever, they know the best. They're on the ground. You need to listen to them and work with them. This is how battles are won. I'm talking about real-life battles. You have to have a very strong leader, a visionary leader for each team, and then, um, they are one with their moves on the ground in the battlefield, not from like some hypothetical scenarios or simulations from the HQ, right, the headquarters of generals. It's one on the battleground. And I don't know, I really don't know a good answer to this question other than inspiration from life, because I believe these are solved if we're not utilizing the learnings of past former generations and thousands of years, I think we're doing a disservice to humanity as well by trying to solve the same problems over and over again.

Yeah, I can resonate with that. You know, as people playing games online, they don't see each other's faces, but they, you know, they're driven by the passion for the game, and, you know, they become best friends and meet in real life eventually. You know, you have fans of big sports teams which comes united when, you know, their favorite teams play again across the globe. And, you know, they're best friends. It's definitely powers which gets people together and gets them moving leadership-wise. You know, I think what we're talking about is that, you know, you have that control and command type of old-school management/leadership and you have that new school which is trust and inspire. Type of leadership, you know, sort of clashing. And one is a lot more aligned to that future of work and how people would like to be treated, you know, how they would like to be trusted and left alone to basically, you know, do their thing. And I do see this being played out. And I was recently part of acquisition where French company bought UK company and, you know, and they tried to merge it, and, and it just basically didn't work culturally speaking, because UK has a lot more of that middle layer management and a lot more of structural and, and command and control type of flow, where, where French companies is all about just work to your strong sides, just, just gravitate towards what you're doing best, just find yourself within the company and, and do that. So there's no like titles, there's no like, you know, this is your defined responsibilities. It's like, we hired you because, you know, we see something in you, you know, here you're being dropped in this big pool of people, just find your way in it and how you're gonna, you know, be a value add. Which was like so, so different, right? So UK teams just like, we don't get it. And, you know, French company was like, we know you don't get it, so it's not gonna work out, right? So the acquisition just took the clients and the tech but left people alone. Right. So which was for me, that was a very strong exposure where different cultures actually doesn't work. And the cliché that, you know, we're not hiring you because of cultural fit or we letting you go because of cultural misfit, it's very, very real. Like, you know, people sometimes go like, I got let go because I didn't fit culturally, whatever that means. It's very real. Like, if you ever run different cultures across the globe, like, it's very, very real. That was interesting. I mean, that was interesting, Arman. Very good points. I think, you know, we'll see how the world pans out. And you mentioned Future of Work, which I just want to leave a note that that's a book. I can't remember who actually wrote that book, but it's literally the title is Future of Work, and it goes into some statistical data. And, you know, some visions around the future. It's a very good, very good read. So before we close, we have this question in the spirit of the show. What is one, in view of you, one factor most important to any company's tech growth? Small, large, doesn't matter, but one factor.

I think it's sustainability. I know it's not that sexy.

Yep, just what you mean by, you know, what you mean by sustainability.

Find ways to regenerate value from the energy that you spend. Regenerative energy. Um, this is the only way you can be more and more successful because the pie is getting smaller. It's not really growing. But the people who want a piece of the pie, the number of people is growing. So, um, if you can train yourself to be very effective with your slice of the pie, you're going to outperform and stay alive longer than the other folks.

Okay, so When we talk about energy, we're talking like a physical energy use, or we're talking as well, you know, how we as a human convert energy to, you know, to an actual, you know, product?

Yes, yes. Like when I, when I say energy, I mean practically every single bit of thing that you consume, time that you spend, electricity that, that you run, um, the stuff that you eat. The water that you drink, the sun that you get, um, also to your plants that you grow and then you eat. The, the time that you spend with your employees, with your managers, in your coaching sessions, for example, that's also energy. We're basically burning oxygen and glucose to keep ourselves alive all day through. We need to create a lot of value, and everything has to be, has to give us a lot of return on investment. I'm always cognizant of ROI with everything I do. That's why I'm talking about sustainable and renewable energy sources. You need to— this is why I have a school, right? I am creating engineers out of thin air. That is new value created. Now with those engineers, I serve other companies, and none of this existed before. So we are creating new energy, and we're not only training them and letting them go— that will be a waste— we're trying to hold on to them and work with them to create more value for the future that we believe in. This is basically what I'm talking about. Like, if you do everything to save the day you're gonna die real soon. You might, um, struggle today, but you have to look out for the future, like build everything for the next year, for the next 5 years, 10 years. If you don't have a sustainable vision for your product or your company, you're wasting energy. And I don't really want to go into too much detail here But certain internet companies, for example, doing online deliveries, they don't have a sustainable business. They don't. The unit economics just doesn't work out, even though I love their products and I use them. It just does not work out well. No one can do instant deliveries. It's, it's not realistic unless you're burning investor money. Then that's what I see as you're losing energy. Like, if I were in such a position, I just really wouldn't start such a company. I wouldn't do that business. I love that.

It's awesome. Sustainability. Basically, it's just, it's just taken from real life, isn't it? Because you mentioned that, you know, you try to apply real life to work. It's, yeah, everything in nature takes in and gives out, right? So, so effectively, when we think about the business, we want to take all that we need, but we want to give out something as well. So it's not just that we take and we don't really contribute positively, you know, with product, with the service or whatever is the business about.

Exactly. And I have a very good example. As a company, Apple is doing great, I think, in this aspect of growing sustainably, whereas every major company in the US is talking about laying off thousands and thousands of people. Or asking them to do weird policies, working from home or from the office. Um, Apple is cool. Like, they don't really hire that much. They're practically under the radar when it comes to hiring or letting people go, and they're growing sustainably, like, at a remarkable rate as well in the business. They don't have any AI product right now, right? Like Siri is a joke at this point. I'm not talking about you. I have a lot of Apple devices here. They're like all, all like turned on. No, please. Um, but it's a joke. Apple does not really have an AI product right now. Microsoft is years ahead of Apple today. But is that sustainable? I'm sure Apple is working on a sustainable way to still create much more value out of their engagement with AI. That's what they did with watches, right? Smartwatch industry was a thing, it wasn't bringing any profits, no long-term products that could go like 9 generations with a strong vision. Apple did it. How do they do it? It's all in, in sustainable, smart decisions. Not being flashy, not being the best. The first versions of their products are always a joke, like iPhone 1, Apple Vision Pro, I don't know, Apple Watch. The first iPod was revolutionary, but it was still a silly device. But they have a sustainable way of growing. Now they, they are the only company who are making their own chips. Google isn't making their own chips, entire SoCs, I, um, CPUs for their phones or, or their laptops. Microsoft isn't doing that. Samsung isn't doing that. But Apple is, because they had a different worldview and they started investing in their own facilities, in their own teams and ecosystems to bring sustainable value. And they surpassed every single CPU maker out there— Intel, AMD, whatever— in performance. That's like unbelievable. Is it magic? How is it happening? The answer is very simple. They're being smart with their investments. It's a sustainable practice. They're not after big flashy things. They're just there to make a long-term impact. And to reap long-term rewards, because in 10 years you reap 100x. So I don't know, I think that's a very good concrete example.

I love that. I learned so much today, Arman. And I mean, we touched on some good topics on Apple specifically. I feel like, you know, they are a publicly traded company, and a lot of traded companies, they do care about the stock price. But it has been proven— I can't remember the paper exactly— but it has been proven that laying people off during the recessionary times to, you know, to manage your finances so you don't have, you know, you don't lose market share, you know, you don't have your stock, you know, tanking, is actually counterintuitive. At the end of the day, losing people and then rehiring is actually a lot more expensive, and then training them up So going through recessionary times and actually not letting people go will have a hit on your earnings report, which means, you know, your stock will likely, you know, tank. And Apple just goes through that like that. Like, they don't aim to let people go. And there's some other businesses, you know, who basically similar picture. So I think it's as well a good sustainability approach where you actually invest in people. And, you know, culturally speaking, you go like, you know what, We okay, you know, to stock have volatility, but we're gonna put the energy in the people. We're gonna make them know that good times or bad times, you know, that there is some notion of job safety, you know, with Apple. And it's just generation after generation that builds up into the products and the value they get from people and everything just creates this, you know, this brand, which is just different.

100%. And this is why I'm saying run your business in a sustainable way to also generate some money that you can use in terms of crises, in times of problems. Um, but if you like build like crazy and invest all of your money into your current operations and have no buffer— I'm like, this also applies to small startups, right? Then of course you have nothing but to fire your people. When you face tough times. And that is just unfortunate because, as you said, rehiring, training them, onboarding them, it's so much more expensive. Like, I don't want to afford it. This is why I'm always playing a very long-term game. Whoever I train today at my school, I know in 10 years' time we're going to be together and they're going to be CTOs of their own companies. Maybe we're going to work together, maybe they're going to be my clients. I've had several clients who were formerly my, my students. Like, it's— it plays off so well. It's just not immediate value, which is fine. It's also how startups like turn some profit after 10 years or so, right? Like that is when you get your investment back.

Play the long game.

I don't— exactly. I don't understand why people do like invest, um, something today and expect an outcome tomorrow. It's not gonna work. That's not how life works.

Very good shout out, very good shout out. So much information, so much value. Um, I just want to thank for coming on the show. Sharing all of this. You know, hopefully that was tremendously useful to our listeners. It was for me personally. So thanks again for coming to Mastering Tech Growth.

Thank you so much.

Thank you for having me.

Thank you.