Vacancies for chief technology officers (CTOs) are proving hard to fill as the demand from internet startups outstrips an already limited supply.

In an industry characterised by skills shortages, CTOs are becoming the rarest commodity. This is leading to an increased level of headhunting.

The CTO title originates from the US but is catching on in the UK. It encompasses a particular set of skills needed by companies eager to do business on the internet.

Anthony Miller, an analyst at Richard Holway, said a CTO's job has three elements: a knowledge of web-based technology, management know-how and business know-how.

"Today you cannot just be an IT person. You must be aware of what is involved in the development of the company's business strategy," he said.

"The problem has been exacerbated recently because of the new technology skills demanded by web-based companies, and the large number of companies in startup mode. CTOs are a scarce commodity."

Miller said a CTO is "top of the shopping list" for a company wanting to get a dot com presence.

However, companies often "can't afford to pay them real money so offer them share options instead".

Mark Dinner, a business researcher at recruitment agency Best International, said "every startup demands a CTO".

He said companies do use headhunters but many find their services too expensive. "They want to invest in the best CTO but as a startup their level of funding can be prohibitive," he said. "Word of mouth plays an important part."

Dharmesh Mistry, CTO for online commerce company Entranet, said that since mid-January he has been receiving at least two calls a week from companies wanting to recruit him, one including a leading free ISP.

"There are not enough people who can do the job," he said. "Traditional IT directors manage a budget for items such as staff operations and hardware. They don't know enough about the link with the business. You need knowledge of the internet space and a vision of the future technology.

"When you are a dot com company, your only channel is through the internet. There can be no closer link between the business and technology than if the technology fails you don't have a business. A CTO's neck is on the line."