It sounds to me like you're misdiagnosing the problem. The problem isn't too much hierarchy, it's too little! Your CEO friend needs to grow a pair and demote his CTO co-founder. Ideally, he would sell his co-founder on the idea of doing this voluntarily. This will not be an easy discussion.

Titles and hierarchy matter in a startup because someone has to be able to make decisions in the face of disagreement. Decision making by committee leads to a lot of really mediocre decisions--like keeping a co-founder as CTO despite being unqualified for the job!

This decision-by-committee dynamic happened early on in my current startup. Mostly, the problem was engineers having an equal say in marketing and financing decisions––a topic they were not focused on or very familiar with, yet had strong opinions about. This was dumb. It took one of the founders of Netflix giving me/us a swift kick in the ass to get over it. No longer. We now divide and conquer. The company is much better for it.

Every company needs a CEO. And if the CEO is not technical, then the company is eventually going to need a CTO as well. But that's about it in terms of C-level officers. A small company should not have 4 chiefs. What that really means is the company has NO chief.

Being a C-level person means being responsible for long term big picture shit and management and leadership, not just coding. For myself, I am extremely fortunate to have a visionary co-founder and CTO with real leadership qualities. He is a partner in the true sense of the word. I expect him to stay CTO for a long, long time––unless I decide to demote myself and make him the CEO. (Might happen, who knows?) Regardless, the buck has to stop somewhere. And that somewhere is the CEO. There can only be one.