How to Avoid Failure When Building a Startup With a Software Development Company

At Altar, a large part of my work revolves around talking to entrepreneurs about the topic of outsourcing to a software development company.

Whether that’s on social media channels with entrepreneurs who are looking to discover more about outsourcing and its associated risks.

Via email with entrepreneurs who’ve found us recently and are interested in learning more.

Or entrepreneurs we’ve worked with for a while, telling me about their experience building a project with us, and the successes and hurdles that came with that process.

I’ve seen how badly outsourcing can fail when you choose the wrong partner for the job. From startups that have had to start their software development from scratch due to badly written code to situations where there is simply no alignment between the founding team and agency.

I believe it’s one of the main reasons why so many people within the startup world will tell you “don’t outsource”.

But, instead of tarring everyone with the same brush, I firmly believe that the outsourcing model is not to blame.

As the CMO of a product house, I may be biased in my perception. But I’m also quite experienced on the topic so bear with me. I’m bringing some information to the table that, by broadening your perspective, may save you from a world of pain.

Rather than focusing on the outsourcing model itself, you should focus on the specific people you choose to work with.

At its core, it’s all about complete alignment with the technical partner you choose.

Having an internal team is usually the best scenario to achieve this. Alignment, motivation, shared vision, etc. are all easier to nurture.

With an external team, such as a software development company, it can still be done — if the external team is able to mimic the behaviours of an internal team.

It’s how we helped people like Philip from Apiax raise over 8.1M, or Jacquelle from Fave raise $2.3M in less than two years and win awards like Fast Company’s Most Innovative Social Media Companies in the world.

So stick with me for a few minutes more and I’ll break down exactly how we did it.

Mimicking the Behaviour of an Internal Team

Successfully working with a software development company is all about how both you treat them and how they treat you.

When it comes to onboarding a software agency, you should treat them with the same parameters as you would an internal employee.

They should tick all the boxes not just for technical hard skills, but the all-important soft skills as well.

You should find a team that will make you want to say this at the end of the project:

On the other side of the coin, it’s vital that the software development company challenges and supports you. It’s one of the best ways to improve a product vision and increase the chances of success.

It’s what you’d expect from a CTO or internal development team. So why shouldn’t you expect it from an external development partner like an agency?

Take Haider Baig as an example here. He’s CEO and Co-founder of Curve — a SaaS-based communications platform revolutionizing customer experience.

Here’s his account of working with a software development company:

As a founder starting out, I was challenged, I was pushed and I was given support. In the same way, my other co-founders pushed and challenged me throughout our journey.

At times we truly felt that they cared more about our success than maybe we did. Not only do they have a deep understanding of the field of software development, but they possibly have a deeper understanding of what a successful product should encompass.

This is the result of an agency mimicking the behaviours of an internal team.

And Haider isn’t alone, here’s what ex-Managing Director of HSBC, turned entrepreneur, Adil Kurt-Elli had to say about the importance of an agency mimicking the behaviour of an internal team.

The biggest thing is the culture of the team that we work with. At no point, do we feel that this is a customer relationship. What we feel is we have an extension of who we are.

So whether that’s me reaching out to the marketing team on the one day, talking to the development team on the next day, or talking with product management every other hour as the case sometimes is.

That’s the relationship that we have. We might as well be sharing the same office space. That’s a key differentiator for us because it means that they’re taking our process as seriously as we are taking the process.

That gives us the confidence that the output is to the standards that we need it to be, which gives us the confidence to sell a product, which is, we think, at the right level for our customer base.

Adil and his team are in the process of revolutionising the bond industry by building a single, curated platform for bond professionals to source and analyse bonds with relevant, reliable and up-to-date data.

With such a complicated and data-heavy platform to create, anything less than a group of people who can mimic an internal team would’ve led to an MVP that simply didn’t get the job done.

To achieve this, here are two critical factors that a software development company needs to focus on if they’re to mimic an internal team. So before you onboard them, make sure you see the signs.

Full Alignment with the Software Development Company

The first step here is to ensure you’re talking to a group of real people.

You should be looking at how willing the agency is to introduce you to the people who’ll be responsible for building your product.

Of course, you should have a main touchpoint with the agency — via a product owner, project manager, etc. But that doesn’t mean you can’t meet the people in the kitchen — even if it’s in a quick, informal video call with the dev team.

This will help you identify if everyone working on your startup is fully committed to what you’re trying to create.

The other key factor to achieving full alignment is having a shared vision between you and the software development company you’re working with.

You need to find a partner who’s obsessed with creating a shared vision. This starts with aligning your business vision at a high level — then challenging you and pushing your vision to improve it.

It’s as my CEO and Head of Product, Daniel, says:

Entrepreneurs usually come to us with Vision A, we come back to them with Vision B. Then we work together to reach Vision C — a refined combination of the two that takes the best parts from each.

One of the ways we try to achieve this at Altar is to invite the entrepreneurs we work with to join us at our HQ in Lisbon. We call it the “Founder’s Retreat”.

It gives founders the opportunity to take a peek behind the curtain at how we operate day-to-day. But, much more importantly for us, it means founders can meet the team behind their projects and ensure we’re on completely the same page.

Not only are we able to work together presentially, but we’re able to socialise, go out for a nice meal, show them around the city we call home and essentially just get to know each other better.

The other, vital, factor in achieving full alignment is transparency.

Transparency Between You & the Software Development Company

More than good communication, complete transparency (both to and from the software development company you choose) will give you far better odds of success.

Often when building a startup, critical hurdles appear when you don’t know about a problem until it’s too late to solve it. Full transparency cures this.

Moreover, having everyone on the same page ensures every brain cell is focused on solving the real problems you’re trying to solve with your business.

Take Dudley Gould as an example here. He came to us with the vision of a platform that leverages Open Banking and AI to provide auditors with real-time insight into their client’s transactions — automating audit tests and identifying high-risk transactions.

No mean feat when you’re working with an industry that’s historically worked with excruciatingly manual processes.

As with any new product, it came with its challenges. As Dudley said himself:

When it comes to building a startup, you’ll face more than a few bumps along the way — prepare to be persistent.

Ultimately, the secret to surviving the roller coaster is surrounding yourself with people you can trust. People who believe in your idea as much as you do and are upfront and transparent at every step of the journey.

That trust and transparency paid off, as just one year and two months later, Audapio was acquired by Circit. A fully integrated product for auditors, that’s used by some of the biggest financial institutions in the world, like AIB and PwC.

So, as you start talking to software development companies, look for complete transparency.

Are they completely honest and upfront about roadmaps, allocation of resources, etc? Are they willing to, or even enforce that you have a peer-to-peer understanding of what it’s like to work with them by speaking with former clients?

If not, walk away. Without complete transparency, you’ll never reach full alignment and the agency won’t be able to mimic the behaviours of an internal team.

Wrapping Up

I deeply believe that the main reason why our clients are raising money, bringing in thousands of users to their platforms and generally making the world a better place, is their ability to execute their product with a team that has the same level of commitment, transparency and alignment as an internal team.

My main advice when it comes to searching for a software development company is this, find a group of people just as committed to your projects as you are — truly mimicking the behaviour of a great internal team.

Adil summed it up beautifully when I asked him what his advice was for entrepreneurs looking to onboard a software development company:

Outsourcing successfully is about the joint ownership of the outcome of your product.

It’s about you coming away from the experience with a product that you’re proud of. It’s about the agency feeling proud that they’ve delivered an amazing product to you.

That is a successful relationship.

At each milestone, you should be able to look back knowing you’ve achieved something better than you expected.

Good luck and thank you for reading.