Eden Chen

Why You Should Outsource Your Startup

Eden Chen December 24, 2016

Why You Should Outsource Your Startup

After reading Joel Gascoigne’s article, thought I’d respond with some counter points.

I agree with most of what Joel says, I just don’t think it paints the full picture. I must add the caveat that I run an agency that makes money by doing exactly what he says startups shouldn’t be doing. My views are clearly biased. In the same way, he built a startup that succeeded without the use of outsourcers.

Counterpoint #1: Your goals and a freelancer’s goals are completely misaligned

The assumption here is that all agencies use waterfall development. An agency that uses agile development is compensated and incentivized in the same way that an employee is. That is, we are compensated for the time that we work, and we are incentivized by the success of our client because each success story equals a story that we can tell additional clients. No one at our company wants to build defunct startups. It’s demoralizing.

Counterpoint #2. It gets you into the wrong mindset of what it takes to get a product off the ground

As a product development house, we often suggest to our clients not to do a website but to start with a Google form, Square Space site, etc. Real product development houses spend time doing discovery and research before building product.

Nevertheless, as a non-coder at some point you need to build a MVP. So you can either do that by convincing an engineer to take equity, paying an engineer, or hiring an agency. There are pros and cons to each. If you can convince a top quality engineer to take equity, then by all means that is usually the best option. Hiring an engineer increases both your run rate and execution risk but some times turns out great. Agencies are more expensive because of overhead and the need to make profit but there’s no ongoing run rate risk and typically the best agencies have executed in the past, limiting your risk. I could give dozens of examples of companies that have come to us after working on a product for 6 months with nothing to show for it because the engineer they were working with duped them.

Counterpoint #3. The founding team should wear every hat

We actually have taken the opposite approach to our business. Where we can outsource something we will do so. We’ve outsourced some of our content creation, our social execution, our finance team, and even some of our engineers (QA team).

You can extend this “do all” philosophy to software as well. Instead of using a tool like Buffer, why not just build your own social media tool? Because it often makes sense to outsource your software and any function that you don’t need to be doing. There are some startups that aren’t in the software business. They may be in the travel business for example, and spending time hiring and managing a software developers doesn’t make sense for them. Blanket statements like this just don’t apply to everyone.

I’m all about hacking things together and there are a lot of businesses where outsourcing your startup is a huge mistake. It’s key to find a group of advisors and partners that you trust to give you honest advice, and are able to turn down work where the fit doesn’t make any sense. The agency business is like any other: over time, those who are trying to make a quick buck for short-term gain will ultimately fail, and those who do well for their customers will succeed.

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