#371 Balancing CTO-CEO Relationships and Mastering Due Diligence: A Talk with Hutton Henry

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Mehmet: Hello and welcome back to a new episode of the CTO show in Mehmet. Today I'm very pleased joining me from the UK, Hutton Henry. Hutton, the way I love to do it, I keep it to my guests to introduce themselves. Just I gonna give a kind of teasing to the [00:01:00] audience. Hutton, like he can speak about multiple things.

Mehmet: So we're going to talk about CEO CTO relations. We're going to talk about due diligence for founders. But Hutton, The floor is yours. Tell us a little bit more about yourself.

Hutton: All right. Thank you, Mehmet. And I'm really pleased to be here. Thank you for the invitation. Uh, so my simple pitch is that, uh, we help.

Hutton: I'm the founder, by the way, of Beyond M& A and the managing partner. And we help investors and founders maximize the value of their business. Which, um, which I can, I, you know, I always get that question about well, well how, and there's lots of different levers, which are obviously around the business and market people and technology.

Hutton: And I have a background, um, keeping it very short, I have a background of a tech and m and a starting with very big companies. When Ford bought, um, Jaguar, HP bought Jaguar, um, compact and, um. [00:02:00] In the last seven years i've been running, uh due diligence for investors of every type So i'm really pleased to be talking with you

Mehmet: also my pleasure to have you with me here at hutton today, so You know, there are multi place we can you know, uh start with but something, you know Which I like to ask every guest, you know with your current journey and you know with the background so There must be some inspiration that led you to focus on You know helping, you know, both sides of the tables in preparing for either.

Mehmet: So, you know, in the world of, of, uh, uh, funding and fundraising, they say like it's a marriage, right? So either they get to have a good marriage or maybe they're going to have a bad divorce later. And it's complicated. But what draw you to to this side?

Hutton: Yeah, I was very lucky, man. I mean, first of all, you mentioned the [00:03:00] marriage piece, and I would say I had a VC say the other day, you know, this is a marriage, but it's actually more difficult than the traditional one.

Hutton: You can't get rid of us, which was said jovially. But it is, I think, a very important thing to consider that you are going to get into something that's going to be there long term and we can talk about that. Um, what got me into it is there's, there's really two points in my career. Um, so when I worked on that Ford Jaguar, uh, I ran a tech project, uh, and it went wrong, um, as tech projects do.

Hutton: And the learning was that we'd focused a lot on the tech. Um, and we hadn't really thought about. to, uh, you know, I worked for a big corporate when we didn't really think about the people and, and how it was affecting them. Things have changed an awful lot since then. Uh, and then what got me, that got me into post deal.

Hutton: So [00:04:00] mergers and acquisitions and merging people, technology, and businesses did that for a long time. And I really wanted to get pre deal because I wanted to understand how the dealmakers, um, get there really, uh, and to cut a long story short, I worked for a company in 2015 and we bought, um, over 50 companies in two years and integrated them.

Hutton: And that gave me my thirst for assessing companies. Um, I, I think it's a really exciting piece of work. Um, and that it really went from there.

Mehmet: Fantastic. Now, before I go to the due diligence part, you mentioned something about technology going wrong and so on. And I know like you, you help, you know, um, CTOs, you do coaching and transactional analysis, uh, for them.

Mehmet: So from that perspective, Hatton, what happens to you, what goes wrong, you know, between the CTO and the CEO usually. Now I'm asking this question because [00:05:00] not all the time you have the CEO role. Who would be the technical guy at claiming the CTO position at the same time. So there will be a CTO, there will be a CTO at least at the beginning before they start to hire like more people on, on, on the board.

Mehmet: So what, what, what is the, what are the main problems you see? What are like these clashes about?

Hutton: Yeah, I think there's an underlying pressure that that's what's so basically the very common scenario I see is, um, we all attract each other to build something that is of interest to the market and therefore investors.

Hutton: So number one is the market. Trump's tech. If you've found a really good market, your, that your life is going to be much easier. So they, so they have attracted to each other. They're building something. But as soon as that money comes in, it doesn't matter what, you know, whether we look at a startup or a corporate, we find that.

Hutton: I [00:06:00] mean, most cases, when that round comes in, you've got new people to be reporting to and a separate set of values that are starting to kick in. And for the CEO, there's a lot of pressure to, to, to deliver very, very quickly because they'd spent a year or two years saying, we will hit these commercial numbers.

Hutton: But for the CTO, they're scaling really fast. And they want to do things right and, and that creates, um, one of the most common friction areas that they're operating in different speeds. Um, and also the, the common problem I see for the CTO is they find it very hard to see the change in the team, in the leadership team.

Hutton: And so, um, So I, you know, that's the main thing. So what does that mean for a business? We are starting to look at ourselves rather than our customers. [00:07:00] Um, we're starting to see dynamics that we weren't used to pre deal and it, this can go, you know, as I say, after a private equity deal, they've been together for a long time.

Hutton: Um, and, and we just have to be honest, right. Things are gonna speed up. You're going to have to put more reporting in. You're going to have to put more robust tech in and you're going to have to do it quickly. And what we can't do is take it personally. And that's, that's the thing that I try and unpick between the two of them.

Mehmet: Quick question here about that, Hutton, like why, you know, isn't like the CEO role and mission, bring everyone in the room up to speed that guys, Probably. And you know, like maybe I can understand this and I know that it happens still today, but maybe if this is we're talking about, let's say during the dot com bubble and so on.

Mehmet: So not many people knew how you know, investment investors will [00:08:00] think how they will behave. But nowadays, I think with, you know, the knowledge is almost open source. I can call it why the CEO He or she, they don't bring the team up to speed and say, Hey, listen, team, we're going for a round, whatever this round is.

Mehmet: It's a seed series A. So expect moving forward. This will happen. Is there a communication problem, Hatan? Are they shy to tell their, you know, co founders and their early people what's happening there?

Hutton: I personally think I have a strong opinion on that. Um, generally cause we do the psychoanalysis of the team as well.

Hutton: These two people are at different ends of the spectrum on risk, innovation, build, all these different things are our opposites. And that should be like a yin and yang. But what really happens is they both go into overdrive in their different directions. So one becomes more risk averse. They're still building technology.

Hutton: The other one is, is pushing [00:09:00] even more speed in commercials. They, they don't actually realize that both of them own the problem and the CEO isn't, isn't prepared. They're not sure because they, they've spent so much time, especially in this climate. trying to attract the investor. Um, and then they get the money and it's like, okay, we've got to deploy, you know, we've got to get a bigger engineering team.

Hutton: We've got all these things. Um, personally, I would love them just to rest for a month, you know, and just operate as they were and then, and then start to, to do things. It's quite exhausting raising as well. Right. So.

Mehmet: It is. Yeah. I know it takes not only months or sometimes it might take years to, to, to get that funding.

Hutton: Yeah.

Mehmet: Do you, do you think like this will happen to first time founders? So probably if a founder is like a serial entrepreneur, he or she did some exits before, so probably they would [00:10:00] know what's going to happen after that. So, Is that a problem that is more happening with first time founders and even like i've talked first time father on both sides co nct Yeah,

Hutton: yeah It's a good question.

Hutton: Mehmet. Um I personally would say It's like you've got a different pop band each time. So, you know your first one might go really well Your second one might have this problem because it's a fusion of personality, you know, and so it can be you have a really easy ride on the first one, the second one, you get all these dynamics.

Hutton: And I think it's a bit like having children, you know, like, you know, some people, their first one doesn't sleep, lots of things, and then they understand how to deal with that, and it gets better. Or, They're the other way and everything was really easy with the first one. The second one is like, Oh my gosh, it can't sleep.

Hutton: It's all, you know, she or he can't sleep, not it. And, uh, and like, so yeah, that's the thing. I think it's about a [00:11:00] fusion of a team. So it can change, but the leader should try and mature if they can.

Mehmet: Now, I know it's not much related, but let's take the third party here, which is the investor.

Hutton: Yeah,

Mehmet: now till now and you know, like the generation of investors, you know, I read about and I see them, you know, here and there they were founders.

Mehmet: So now we have a generation of VCs and, you know, angel investors that at some stage they were themselves founders and they must, I, I, I tell this to myself, they must know how hard it is. To take a company from point A to point B and they have raised funds. So don't you think that these guys should show like more, I'm not saying, you know, go easy with the guys.

Mehmet: Of course you invest money to have returns, but then also they need to, to prepare also them because we were talking about just now, like they are partners, right? So they're not like the two sides of the tables and [00:12:00] you know, they take revenge. Why does this not happen? Why is this not happening, Hutton? Why the investors are not playing this role to You know, keep things on the pace that it should be.

Mehmet: Sometimes

Hutton: they're not aware of those early conflicts because the CEO has to hide it. It's like, you know, the instant thing they're going to do is they're going to expand the team and are those new people the right people, right? And so, and that's their job is to navigate that, you know, find what's the thing, the three things of the CEO, right?

Hutton: Set the vision, find the money. Get the people off. You go, right? That's the, that's the, the, the, the recipe. They're doing all those things. They got the money. They've set the vision. Now they have to get the people. And I think the, the investor would help. I feel every investor we've worked with is interested.

Hutton: You know, it's not, it's never, I've never seen his just some money. Um, but they, it's a bit like, I guess, going to a therapist. And if you don't [00:13:00] announce what the problem is, you can't help.

Mehmet: Now, coming back to the CTO. Yeah. So do you think there are CTOs that they are more flexible to work in such, you know, environments?

Mehmet: I mean, a startup environment where, you know, these fund stages will come. Whereas like, there will be some kind of CTOs that they cannot handle. So, and they are just, you know, kind of CTOs who can, you know, act, uh, in their best when they are into a big corporate world. Have you seen something like this?

Hutton: Um, so the, the, you mean like there's the difference in their delivery and how they, depending on the scale of the business or yeah.

Mehmet: Yeah.

Hutton: Okay. So, so the, yeah, I've, I've written something about this. So, you know, it, it, it's like, um, the, the maturity of the business, you know, you've got your early stage, you know, so like startup VCP, right. That's how I see the world then corporate buyout right there, the four stages. And I [00:14:00] can see, I can see the CTO, Going across those in maturity.

Hutton: Yep. So you have that I'm working with quite a young, you know, CTO right now, and I can see where he is and he's very open for change. Right. But, and to me, my wish for him is as he grows, he can learn how to do start up mid cap corporate. They all need different skills. Um, where you might have problems. And I see this is another one, which I think you might be alluding to is I'm a enterprise CTO.

Hutton: Um, I've got a lot of people working for me. I'm not necessarily hands on anymore if I was. And then now, now it's exciting to come to a startup and in the startup, you need to be more resourceful. You know, you've, the pace has to be there. You're doing a lot of experiments and so you can have a clash there.

Mehmet: And you need to keep your hands, you need to keep your hands dirty as well as they say, right? So sometimes you would need to go do the things by [00:15:00] yourself because in the corporate, you might have huge teams that you just give the instructions to them and then, okay, maybe you would see what the results you, you evaluated, but in startups and even scale apps.

Mehmet: Maybe you need to to get engaged more. I mean even on the technical stuff and you know Going into more details, I would say right

Hutton: Yeah, I mean, I you know as as you talk to so many cto's yourself, right? They come in many packages sizes and flavors, right? Um, so it's hard for me to sort of push the brush on everyone But what I see are the scale ups, right?

Hutton: I definitely see the dream makers I'm, I get like this front seat view of these dream makers and who are they in my world? They are the investor, CEO, and they've all come up with this thing. And then I watched this thing happen. I don't want it to be a car crash. I want it to be a Disney film, you know, and, um, and, and really deliver.

Hutton: Um, [00:16:00] so I, I just think that. It's being adaptable, it's being mature when there's issues. Because there will be faster, faster pace, faster issues, you know, quick to turn around really.

Mehmet: Yeah, now I saw you talk, uh, Hirton, about something called transactional analysis. Mm hmm. Can you just explain to us what is it exactly and how this affects the behavior of the CTO?

Hutton: Yeah, well and and to be fair the whole management team, right? So it's from the Byrne Institute. It's a psychological, uh a way that we can understand our behavior. Um, so you've got three modes that both of us have in primary which is parent adult and child and You know, you can you can tell from those Those notes, right?

Hutton: If you're a parent, you're, you're caring, you're giving, you're understanding, you're empathetic. If you're in adult mode, you're, you're, you're in [00:17:00] analysis time. You know, it's sort of, I'm looking at things and I'm very much simplifying and child is, this is joy. And, you know, I want to build and explore now.

Hutton: Um, I, does that make sense first before I, yes,

Mehmet: it

Hutton: does.

Mehmet: Absolutely.

Hutton: So if you take To those people CTO and CEO or CTO and CPO, right? You know if if we're matching our roles if we're both being empathetic and helping that can help But if one is being a child and the other one is being like a even an adult, right?

Hutton: That's that's the hard one, right? Because yeah, I can often see sometimes the CEO It's being like a child, very excited for, you know, selling everything. It's like, we're going to do everything. And this clicks the CTO into analysis paralysis. We can't do that. Well, how, why did you sell that? We can't even, you know, it's going to take us months to build that.

Hutton: Right. [00:18:00] And, um, so it's sort of, we're trying to match each other and, and in reality. In my job, I tend to be the parent. So I'm watching what they're doing and trying to level them in, in their communication. And you mentioned earlier, um, you know, is there a communication problem? I think that's, that's the main problem we all have today with working from home.

Mehmet: Okay. That's interesting.

Mehmet: It's like managing this balance between flexibility, you know, being wherever you want, like sometimes having your startup, uh, multi regional in the sense of the founding team, right? So maybe someone's in the U S someone in the UK, someone is in Dubai. You never know. I hear it a lot from, from a lot of people, which makes sense actually that, yeah, like all this good.

Mehmet: We can do zoom calls, steam calls, all these things, but at some stage there's Few things that would not be [00:19:00] replaceable. Uh, I mean, especially. Uh, some tasks that you need to have a face to face. You need to see the other person they need to be. They need to be in the same room physically, not virtually. So they can they can deliver, which is, yeah, it makes sense a lot.

Mehmet: And I like this approach of being the parent. I imagine like it has a lot of headache for you as well, right? ?

Hutton: Um, why do you imagine that? I, I, I'm just out of interest. Why, why?

Mehmet: Yeah. Yeah. You know, like, because I'm sure like, I mean, and, and I, I put it like in a kind of a ric sense. Yeah, yeah, yeah. Yeah. I mean, the Ct O would be saying like, Hey, Hudson, like this guy, he's so demanding.

Mehmet: He keeps overpromising. I don't know. Maybe he's doing all these things. Yeah. On the other side, if you sit with the other. side, they'll say, Hey, they are slow, you know, like, yeah, I'm waiting on this feature for months now and it's not coming. So, so, you know, like you need to have this, you know, kind of patience yourself, I [00:20:00] believe.

Mehmet: Right.

Hutton: Yeah. So it's a, I it's, it's sort of cutting through the dynamics. So going back to your zoom thing, right. Sometimes we need to be in the room because we need to have a challenging conversation and we need to get over it. You know and when so The worst thing for me for a cto is to take something really personally You know, because they, they're normally very good.

Hutton: And you remember the parent, adult child thing. Most of us came into tech as children, right? We love it. We love building it. When we go into the workforce, we have high value in a very short time. You know, within a few months of being your first job, you will have provide value. It's quite unusual compared to say a salesperson.

Hutton: And I tested this some time ago. Um, I'm in my mid fifties now, but you know, maybe 10 years ago, I, I went on a course for a non tech course. I went on a telesales course [00:21:00] with all these 18 and 19 year olds. So I was like around coming up to, you know, 45, 50. And I was this old guy. Sitting with all of these 18, 19 year olds and, uh, they were not tech people.

Hutton: They're very outgoing because they're sales oriented. They were picked for that and they, they were gravitating to that. And what I found really interesting is in that training, they taught them how to deal with people, how to read them, how to hear things on the phone and understand them. We do not get that.

Hutton: as tech people and what ends up happening, we can stay on that, on that, that ladder of being the child until we finish our career. No one picks us up. So it's, um, a really interesting issue. And then, as you were saying, with the, the dynamic between them and sitting in between it, usually I can see a cut through, I can see where the mistake is.

Hutton: Will both of them listen? And, um, so I, and I hope you can see, I'm not [00:22:00] blaming the CTO. I actually think both sides own 50 percent of the problem and you got it in on the, you nailed it, right? It's that we're not shipping fast enough.

Mehmet: Yeah.

Hutton: It's the thing, right? It's on every company. I went to dinner with a load of founders last night, all of them saying the same thing.

Hutton: Um,

Mehmet: I'm, I'm, of course, maybe I'm biased, but, um, sometimes CTOs if they have kind of an imposter syndrome that they want to ship the best, you know And we talked about it at the beginning actually, you know We want the product to be flawlessly rolled out zero bugs, which is not possible. Of course, we all know this, right?

Mehmet: Uh, you know state of art. Yeah, of course you should aim for the best but this is why there is something called lean And I think if, if we [00:23:00] apply the lean more, we would have like less issues like that on the same side, you know, I don't want to put the blame on the CTOs again here. Um, I believe, you know, if, if, uh, they come, And I agree on a common ground, which is basically let's for I shared a video a couple of weeks back, you know, about the founder of box dot com.

Mehmet: And he was talking about they were shipping one feature at a time, right? One single feature and people are saying you're crazy. You should put all these like He said, no, we were shipping one feature at a time and see, look, they are a very successful SaaS company today because, and he's, and he's the CEO, by the way, he understood that.

Mehmet: So I think, you know, back to your point, Hatton, about the communication and I think the vision. So if both of them, both parties sit down and they agree, look, this is the vision. This is the [00:24:00] timeframe. We think logically they, if they agree, of course, you know, uh, between them, we should like have these milestones and then, you know, we'll see how, how it goes after that.

Mehmet: I think, you know, this, uh, common ground that, you know, because what you explain, and I think that's why I told you like your mission is a little bit, uh, Not tough, but challenging because you have to be to hear like both sides of the tables. So very interesting. Now, I don't, I want to shift to the due diligence part, right?

Mehmet: And due diligence, you know, you just mentioned we do due diligence. I mean, in general, before merger and acquisitions, um, sometimes, uh, you know, investors before they go to startups. So there are Multiple types of, of, uh, due diligence. Now from the area where you specialize more or you have the most experience, you know, if you can walk me through the process of a due diligence and what [00:25:00] usually goes wrong there.

Hutton: Hmm. Okay. Yeah, no worries. So, um, typically an engagement with us is two to three weeks. We understand the entire business tech stack, the, you know, the whole thing we will understand within two to three weeks, which is why I love this job, right? Because if you remember the other side of where I used to work on post deal, the same type of discovery might take nine months.

Hutton: You know, it's, you know, because you're looking at all this detail here, so it's a high level of pressure on the team to give us everything we need. We need a lot of documentation, even on a startup. Um, we interview people, we look at the code. Um, we also do a cyber assessment. That's one of our USPs. And the other thing is if we're allowed, we'll also do a psycho analysis of the team.

Hutton: It doesn't happen as often as I would like, because people are nervous around that assessment. Then they're happy of everything being assessed, [00:26:00] but when they go to people's brains it's like, oh, that's maybe a bit too sensitive, and I get their, their thing. So that's the first piece is assessment. Um, We then look at that as a team.

Hutton: So there's always, so it's a small business. There's like, you know, um, 13 of us and five specifically CIO CTOs. All of them have exited a company. So they've been through the whole life cycle and we don't have any junior people. So, but you know, I can code still, you know, so can a few of them. So it's not like, um, where number one is, it's not an audit.

Hutton: This is a collaboration between the startup, the CTO and the investor and us. And we're trying to understand what have you made? And we basically take the growth plan, understand what they've made, and then work out whether it will sort of reach the goals that they've stated. And then we'll find the, the common [00:27:00] sort of problem.

Hutton: So you have a set of common problems versus unique to them. And when we find unique issues, we will set some challenges for them. Can you do this? Can you try that? So, um, that, that's the, the overall piece.

Mehmet: Yeah, Hutton, so what can go wrong in this process?

Hutton: Yeah, so I think, first of all, don't be nervous, right? This is an opportunity to find out what's, you know, what can be fixed, right? And so the money's coming in and we find issues. Generally, on average, we find, um, Oh, on average, 10 new opportunities, different ways to do things, and then around 250K of extra spend, which has like, if you multiply that by 10, that's 2.

Hutton: 5 of EBITDA that is affected, right? That's on average. So 2. 5 million. Anyway, the, the kind of typical things, number one, cyber. Yeah, it doesn't matter [00:28:00] where you are on the stage. We can be looking at a corporate around the world or mid cap in UK or in startup in Germany, the, uh, cyber tends to be an issue, which is a real shame.

Hutton: Um, and you know why that is it's, um, it's usually because of, um, the focus on the revenue side of the company. So we're building SAS. We're not, we're not fully secure. And if you're going to get investment, they will want you to be better. So it was perfectly fine while it was under your remit. As soon as under the investment remit, we need to make cyber better.

Hutton: So there's lots of ways of maturing that. Um, that's the number one, but then everything else is quite varied. Um, and we're not a cyber company. It just happens to be, that's where things are. That's on top of mind. Um, uh, the, you can imagine code is always an amber in our reports because there's always better ways of doing things.

Hutton: So, you know, but generally [00:29:00] with, there's not usually a problem there. One of the things that we find a lot of the time is that the CTO is quite self depreciating about the architecture and we have to help them increase their, their, um, attitude and their positivity. about what they've made because they're so open with us and they go, Oh, I wish it could do this.

Hutton: And the most normal one is the monolith to microservices. Oh, I really wish we built it in microservices. We see, we see companies with, you know, 200 million turnover on a, on a monolith, you know? So, so you have to think with an investor's hat on, do you really need to go down that journey of, of changing everything because that's changing the business they're, they're investing into.

Hutton: Really, um, the, so they're, they're the sort of the high level things, technically, um, there often is a lack of some skills, [00:30:00] DevOps, QA, QA is so common as an issue, you know, not testing, or everyone's testing, or no one's responsible. There's so many variants on that one, but it is very common. And, um, I, I mean, the list goes on.

Hutton: In fact, to the point that I have two things really to, you know, I have a lot of material available on this on what the common issues are. Um, and we do that on the, on the tech stack and also on the person. So there's common issues with the CTOs as well. Um, and, and we also have a platform where people can learn what goes wrong and they just fix them themselves, really.

Hutton: So

Mehmet: how, you know, how easy for the team to accept, you know, this let's, let's call them the Amber, not the red flags. I'm sure that flag would say, Oh, you know, no, I don't have that flag. So they would take it maybe a little bit aggressive. [00:31:00] So, you know, how have you seen, you know, teams accepting that they have done something?

Mehmet: I would not say wrong, I would say not in the proper way.

Hutton: I honestly, uh, most are very accepting. The occasional one, where it depends how you do this, right? So if you put them all in the boardroom and then the CTO is there and it's the first time he sees it, that's unfair. Right. Because, you know, he needs time to do it.

Hutton: So when we present back, we always think that he's going to read it or she's going to read it. And they're going to like the investor view. And we also put a tech view in the report and long story short, we work with them to work through these and like, are they fair? Are they, you know, are we correct? And in most cases, you know, it's very seldom, but we also warn them at the beginning.

Hutton: It's very common to have an all Amber report. [00:32:00] And it's also common to have red flags.

Mehmet: It's coming. Yeah, of course like no one can do especially if they are like first time they are doing this I believe They will have because you mentioned something very interesting and you said like this is number one about cyber security, right?

Mehmet: So um Because i've seen a lot of people like they have brilliant ideas. They they have the technical know how but they They get so excited that they forget about This part like I mean and when I go and I ask them guys like I used to do this like Last year a lot and I said tell me about for example some of your cyber You know cyber security measures that yet you take like are you using like simple tasks?

Mehmet: Like, are you using multi factor authentication? Are you, have you implemented this? And look, I didn't go yet to ask them about if they are SOC compliant or SOC2 compliant. I didn't go to all this stuff. But [00:33:00] really, I'm not sure what happens, but it's good, like, Hatton, like, there are, like, People like yourself who also you're not acting to do due diligence for the sake of due diligence, but you're actually trying to be kind of an advisor for them at the same time, right?

Mehmet: So, so, so from the investor's point of view, like After you know, what do they look at the report that you you bring back to them? Like what what do you think is the first thing they would do? I

Hutton: know so I have a like, you know, a general report from us is like 30 to 40 pages They only look at three of those pages How soul destroying is that right?

Hutton: I write every single report. I I oversee it anyway, and um, So they look at the high level Which is always about, you know, the team, the tech stack, um, and cyber. That's the high level page. Then there's a detailed overview of their, and really, they wanna, because remember these [00:34:00] reports go to the banks. They go everywhere, right?

Hutton: So, you know, what they're really trying to do is, how does this come across? You know, is it a general reg because we're never going to get through the investment. Um, and then the last page that's really important is the remediation page, which is all of the things that they, we think they need to do a well architected review, backing up code, all these different things that we add to the list.

Hutton: And the thing is, they're not worried too much about the detail. They're worried about the OPEX spend. Impacts the value of the business, not the CapEx spend.

Mehmet: Absolutely. Does that differ Hutton from sector to sector, vertical to vertical, I mean, like, and also does it differ from size to size just to give some example and numbers.

Mehmet: So does the process for a FinTech startup. goes in the same way [00:35:00] that you do it for, let's say, an e commerce startup, or maybe a startup with 10 employees versus a startup with, which is they are now like, let's say a hundred employees. Like, are there like different also approaches and, you know,

Hutton: Yeah.

Mehmet: The ways of doing this.

Hutton: Yeah. Yeah. So, so there is, um, the, the ethos is exactly the same. So the three parts to our thing, we call it act, you know, assess, challenge, transform. They're the three stages of what we do. Um, And, and you still need a reasonable amount of information on the very small startups. So, you know, that they don't get away with less really, unfortunately.

Hutton: Um, but to answer your question, it's how our head assesses it, you know, right. So you mentioned FinTech. So we have like a maturity index and anything that's towards, you know, zero to 10. Um, and if you're in financial services, we will be harder on that. You know, you [00:36:00] have to. You really, there's no way you should get away with that, you know, and we see a lot in FinTech and there's a lot of problems we see, which is quite surprising.

Hutton: Um, the other on a, so basically it's learning, earning. It really is the different things and what we're looking for is early stage is the ability to learn. And one of the things I'm noticing is the, there's a massive divide going on right now. I think with the whole thing with AI, where we are either working with AI or in it.

Hutton: And most of us are working with AI. We're taking something that's been packaged by AWS or, you know, Microsoft, we add a Python module, off we go. We've done something really cool with it, but we're not building AI. But these guys over here, they're young founders, PhDs, you know, 10 people in the team, and their first round will be like 20 million.

Hutton: because they need that to start. And that's created a class system of the people who can raise that type of money. [00:37:00] So it'd be interesting to hear what that's like in MENA and the VC world with you in your, in your region, because that's what I'm seeing is that, um, this is around how risk averse your country is with investment.

Mehmet: So, you know, this is very, really, really interesting, but the question that came to my mind, uh, Hatton, why. As a founder, I don't start to do this before even I go out and I start to look for funding. Isn't like more reasonable that I do this even before like, um, I start to talk to investors. So when I go to them, I said, Hey, and by the way, like, this is the, you know, kind of, I don't want to call it audit, but I mean, you know, these things that usually the investors will look for.

Mehmet: So look, I have all these done. So why they don't come early and do it.

Hutton: Yeah. Yeah. Okay, great. So [00:38:00] there's two things that I totally agree with you is number one. Uh, and number two, um, the, I think we're human beings and we need to, we need a deadline. And when you go for an investment, you know, the, the energy that goes in is high and they end up doing all the paperwork to be frank, you know, everyone we meet is never prepared.

Hutton: And I do believe we should turn it around quicker. And I also think that a company where. Selling or investing in is one that's worth you keeping if you can do it. So why not learn these things? Early before you need investment and then you have a better company, right? It's so much more polished. You can walk around being confident Um, which is you know I don't know if i'd shared this that I spent seven years helping the investors with this And then I flipped it and now i'm helping the founders Just like go for a very low cost.

Hutton: It's like, I want you guys to win. And I've been to the investment community and said, [00:39:00] would you have a problem with me doing this, you know, giving away all of the secrets and everything that's common. So at least we're only dealing with the things that are unique. And they're like, yeah, go for it.

Hutton: Happened because the investors on their side, they really don't want it to go wrong. They've spent, they put a bet on to think, right. I really believe in you, Mehmet and your startup. I've been talking to you for six months and now I'm going to spend some money on due diligence. So what they don't really want to find out is it's not investable.

Mehmet: True hundred percent.

Hutton: Yeah

Mehmet: You know, I I like this because you know This will shorten because we talked about like how hard and you know, it's a long journey to find uh, you know or to close the the round For founders nowadays, especially it was very tough last year, 2023. So I think this is also will, will, will help in shrinking the time of at least closing the deal, you know, instead of waiting weeks and [00:40:00] months, so it can be done maybe in, in matter of one or two weeks.

Mehmet: So

Hutton: I think to be honest, though, we have to look at the other side of this is if I was the investor, I would do what's happening in the last two years, if the deals are taking longer, and so. Do you remember there's this pressure that happens post deal with the money?

Mehmet: What's

Hutton: happening is this pressure is kicking in earlier because we're taking so long to like, so you came in the old days, you promised something to me.

Hutton: I'm like, wow, I believe in you. Here's the money. Let's go. Right. We take the chance now, the diligence and everything taking so long, we can test whether the things that you're talking about actually happened in those months. So it's like a very cautious thing. So the pressure on the founder on the CTO is much higher pre deal than it used to be.

Mehmet: Yeah. Yeah. Makes sense. Um, as you know, [00:41:00] we, we almost coming to an end, uh, just, you know, final advice that you want to, to, to give to fellow founders and fellow CTOs also as well, any final words of wisdom, I would call it. And, you know, uh, If if people want to get in touch where to to to find you

Hutton: thank you memet.

Hutton: Um, I mean the yeah So the the final thing really is is think about value not cost Right, and so that's the ultimate thing that helps everyone including your customers um, and What we do have, uh is a cto scorecard. It's 50 questions It gives you half of all the problems that I see Very, very, you know, I spent a lot of time on it and it would help you.

Hutton: And it's not for me to mock at you. It's for you to learn these obvious things and get them, get rid of them. Right. And it would take you five to 10 minutes max. And, and [00:42:00] you were saying, let's do this early. This is a very quick way of getting that done. So, um, and I, in terms of connection for it is a link tree.

Hutton: And if you know that system with Hutton Henry as the, as the, um, the, the URL.

Mehmet: Yeah, sure audience. They don't need to worry. They will find it in the show notes. So, so if you are So if you are listening on your favorite podcasting app, you will find in the show notes If you're watching this on youtube also, you'll find it in the description of the video Hutton like really I enjoyed the conversation.

Mehmet: I learned a lot about that side of the due diligence Thank you very much for sharing this and of course also the the conversation about the ceo cto, you know How They can have kind of, uh, resolve the clash that, that might come up, uh, post deal. So this is also very, very, very important. Thank you for sharing that with us today.

Mehmet: I really [00:43:00] appreciate it. I really appreciate the time. And as I said, You know, you can connect with the Hutton. I will share the link tree command, uh, the link, sorry, in the show notes and in the description. So you can go and check it out there and, you know, don't miss the, uh, scorecard that Hutton mentioned.

Mehmet: I've seen it and it's very good. So again, this is how I usually add my episodes for the audience. If you just discovered this podcast by luck, thank you for passing by. I really appreciate it. If you like it, please subscribe and share it with your friends and colleagues. And if you are one of the people who keeps coming back again and again, sending me their suggestions, comments, and your, you know, questions, please keep doing so.

Mehmet: I read all of them. I come back to you and I try always to fix. If there is something wrong, if there's a good suggestion, I take it into consideration. So please keep them coming. I really appreciate all of that. And as I say, always, thank you very much for tuning in. We'll meet again very soon. Thank you.

Mehmet: Bye bye.

Hutton: Thank you.

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