In the world of finance, debt is a tool. You borrow money to buy a house or expand a factory, knowing you will pay it back with interest. In the world of software, the same principle applies to code. This is Technical Debt.
Tech Debt is the implied cost of additional rework caused by choosing an easy (limited) solution now instead of using a better approach that would take longer. It is not necessarily bad code written by bad engineers. It is often a strategic decision to prioritize speed over perfection.
For a founder, understanding this concept is critical. If you demand perfect code, you might never launch. If you ignore the debt, your product will eventually collapse under its own weight. Managing a startup is largely about managing the interest rate on your tech debt.
The Iron Triangle
#Technical debt exists because of constraints. You cannot have software that is fast to build, high quality, and cheap all at once.
When you tell your engineering team, “We need to launch this feature by Friday for the big demo,” you are forcing them to take on debt. They will likely hard-code values, skip writing automated tests, or copy-paste code instead of refactoring it.
This allows you to hit the Friday deadline. The “loan” is approved. But on Monday, the interest starts accruing. That messy code makes the next feature harder to build. It introduces bugs that take time to fix. Your development velocity slows down.
Good Debt vs. Bad Debt
#Not all tech debt is created equal.
Good Debt is taken on intentionally to validate a hypothesis. If you don’t know if customers want a feature, spending three weeks engineering it perfectly is a waste. Hacking it together in three days to test the market is smart. If the feature flops, you delete the code (and the debt). If it succeeds, you rewrite it.
Bad Debt is taken on through incompetence or laziness. This happens when engineers don’t know how to write clean code or when documentation is skipped for no strategic reason. This debt has a high interest rate and zero upside.
Founders need to encourage good debt and punish bad debt. You should explicitly say, “Let’s do this the quick way to see if it works,” while also allocating time later to fix it.
Paying the Principal
#The problem arises when startups get addicted to the speed of debt financing. They keep borrowing against the future to hit quarterly targets.
Eventually, you reach “Tech Bankruptcy.” This is when the interest payments (fixing bugs and maintaining spaghetti code) consume 100 percent of your engineering time. You can no longer ship new features. The product stagnates, and competitors overtake you.
To prevent this, you must service the debt regularly. A common rule of thumb is to allocate 20 percent of every sprint to refactoring and debt repayment. This is not “wasted” time. It is maintenance that keeps the engine running efficiently.
The Communication Gap
#The biggest friction point is usually between non-technical founders and engineering teams.
Engineers hate tech debt because it makes their job painful. Founders often ignore it because it is invisible. You cannot see the messy code; you only see the feature working.
Founders must trust their CTO when they say, “We need to stop building new features for two weeks to refactor the database.” If you deny this request, you are like a driver refusing to change the oil because you are in a rush. You might save an hour today, but you will blow the engine tomorrow.