Tech startups, move fast and burn less with partnerships
Here is a quick recap of the introductory article.
Partnering with the right software agencies allows startups to focus on the core business problems. Partnering offers other benefits over building in-house solutions. However, startups have multiple concerns over outsourcing. Having worked with startups and software agencies, I firmly believe startups will benefit significantly from partnering with the right software agencies. A series of blog posts on the subject will elaborate on the benefits of partnering as well as address some major concerns of startups.
A few years back, we were setting up a startup branch in new geography and hiring seemed nearly impossible. Our main challenges were
- candidates found it risky to join a small engineering team
- time was split between delivery and recruitment (small team)
- no recruitment brand
- high hiring bars and specialist skills
- candidates rejected us because there were no interesting engineering challenges to solve readily available
- without a reasonable capacity, we can’t take up interesting challenges.
The last two put us in a catch-22 situation.
And how did we break it?
We partnered with software agencies and brought in consultants to kickstart the teams. This gave us instant access to engineering talent and helped us secure interesting engineering work.
On another occasion, we brought in mobile automation consultants who helped us set up an initial test suite and upskill our QAs.
Eventually, we hired 50+ engineers over 5 years with the help of 3 amazing software agencies. They helped us overcome the inertia and added momentum to our journey, which once looked impossible.
Having worked for software agencies before, I was aware of the benefits of engaging in partnerships. This may not be apparent to many startups and product companies. Hence, I have put together some of the challenges startups face and the benefits partnerships can bring.
Startup Challenges
- time to recruit engineering talent (to reach critical mass)
- time to mature as a productive team (storming to performing )
- limited engineering support system (typically a small team)
- difficulty in finding specialist skills
- inability to handle surges in demand(eg: additional requirements from a newly found target market segment)
- attrition rate and cost of lost knowledge (eg: Bay area reports 2 yr average tenure)
- recruitment costs ( consultant costs, channel costs, signup bonuses, etc)
- equity dilution (employee stock pool)
Benefits of partnership
- instant access to engineering talent
- formed to semi-formed teams
- mature engineering practices
- on-demand teams (for short-term spikes in demand)
- a larger engineering support system (much bigger engineering pool)
- managed engineering teams
- vast experience working with startups and digital product companies
- specialist skills
- more stable teams
- no recruitment costs
- equity value preservation
The Equation
From the challenges above we can equate the cost of product development to the sum of direct costs and the time to market. Time to market is synonymous with opportunity cost, in a competitive market with alternatives.
Cost = Direct Cost + Opportunity Cost (Time to market)
The challenges mentioned above increase your cost and the right partnership helps you control them better. Below is a diagram summarizing this concept. Note that the upper right quadrant is omitted as it’s often chaotic and dysfunctional and is not within the scope of this article. Nevertheless, the right partnerships can help startups to move out of the dysfunctional quadrant.
Does this resonate with you?
I am keen to hear about more experiences.
Also, would you like to be interviewed as an expert in this area? Drop me a note on LinkedIn
I help connect startups to matching software agencies and with partner selection. You can reach out to me for a deeper discussion.
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