[karmajunkie]

I function in this role for many of my clients.

1.) Definitely pay them. There's a lot of reasons for this, but most importantly, much like you pay a lawyer to be your most vocal and aggressive advocate, your virtual CTO is the person who has your company's back. His job is to provide you with good advice, vetting other technical staff and work, understand business climate and where your position is in the market, as well as augment your vision for your company.

2.) use them where its appropriate. The right person (or sometimes a firm) isn't going to be cheap—you're looking for the proverbial unicorn. Don't waste the budget having them work on perfecting CSS. When you have them working on code, have them build a foundation and show other team members how to leverage it. What you're paying for is their knowledge and experience. Have them review code, provide feedback, make sure you're getting your money's worth out of an outsourced team. Let them give you advice when you need it (and most importantly, take the advice! I can't tell you how many clients pay a lot of money for the advice then throw it out the window.)

3.) if you have a friend who can fill the role, that's great, but don't trust their technical skills just because they're a friend and will talk to you over beers. Advice is very much a get-what-you-pay-for kind of thing.

[curbenthusiasm]

Do you get paid hourly then as a virtual CTO? Also, what are the upsides of having a virtual cto versus an on-location guy?

[karmajunkie]

I usually bill hourly, but sometimes as a day rate, almost always with a retainer that we bill against.

Typically, having a full-time CTO is the "ideal" situation. For a company who can't afford a full-time CTO, however, having a virtual CTO means that they get access wealth of experience that they'd otherwise never be able to afford. A startup who's business is based on technology in any meaningful way absolutely needs someone to fill that role—you can't (or shouldn't) just trust that a run-of-the-mill contractor is going to deliver what you think you're getting, and you probably aren't qualified to determine whether they are or not. This is the main reason outsourced projects end badly. Having a virtual CTO isn't as good as having a technical cofounder, but its a damn sight better than having no technical members on the team at all.