As a new entrepreneur, you’ve decided that outsourcing your company’s tech build is a great way to save money and timeresources that can be diverted to other areas of your startup.
If you have investors involved, you will need to win them over to the outsourcing idea before getting started. Investors each have their own temperaments, and will likely run the gamut from loving the idea and needing no convincing, to fearing the idea of contracting out any facet of the business to an unknown entity.
Since you may not know ahead of time how your investors will react, it is important to do your homework so that you can pitch your idea with confidence. Investors want to see a return on their investment, and you must prove to them you are capable of delivering.
Here are some relevant points to make when presenting your case to your investors:
Everybody’s Doing It
Investors who are not tech-savvy may not be aware that outsourcing some of your build is a time-tested way to get startups up and running. Remind them that Silicon Valley startups pioneered the idea of outsourcing, and point out that many successful tech companies such as Alibaba, Skype, and Github initially used third-party contractors to help with their tech needs.
It’s not only startups that use outsourcing services. A 2014 study by Deloitte Development showed that worldwide, more than half of established businesses outsource at least a portion of their tech departments. Of those that haven’t yet taken the plunge, more than one quarter indicated they will do so in the future.
Outsourcing Saves Time and Money
Paul Graham, co-founder of tech business accelerator Y Combinator, says it best:
Every startup’s rule should be: spend little, and work fast.
Your company needs an app or website built quickly and inexpensively in order to create a satisfied customer base. Outsourcing tech helps you achieve this goal by saving time and money.
The savings can be phenomenal. Last spring, app developers were estimated to earn an average yearly income of $134,000, including benefits. That means your business is looking at paying one qualified individual roughly $2,600 a week to be part of an in-house team.
Compare that to the $50 paid to a Pakistani developer by AppSumo founder Noah Kagan, and the advantage is obvious. A small, one-time investment got Appsumo off the ground without the ongoing salary burden of a full-time hire.
The Outsourcing Project Will be a Good Experience
Your investors trust youand your judgment. While they may feel secure that you will build an outstanding in-house tech team, they may not have as much confidence in the outsourcing strategy.
Put their fears to rest by assuring them that you will be in control of the project every step of the way. Let them know you will be vetting contractors to make sure they are qualified and reliable. One way to do this is to give freelance developers a trial run so you can ascertain whether they have the knowledge and talent your project needs.
Make sure the contract team you use has an open communication system in place. For example, Gigster uses a Project Manager for every project, assuring that each client is kept in the loop and that problems are resolved quickly and to the client’s satisfaction.
Outsourcing Won’t Preclude an In-House Team
Let your investors know that contracting your tech build is an adjunct to creating an in-site technology teamnot a replacement.
Finding the best developers, engineers, and programmers takes time and energytwo resources that become more plentiful when you have reliable contractors helping with your build. Some necessary work can be outsourced at the same time that you are creating a great on-site team, one step at a time.
Building your own in-house tech team in parallel with outsourcing has two distinct advantages that your investors need to know about.
First, it allows your company to start marketing a product quickly, meaning you can start making money. This cash can fund the creation of your in-house tech department. This means you won’t spend tons of your investors’ money hiring your own team before you have a revenue stream to pay their salaries.
Second, it is less expensive to find out what works and what doesn’t when you are paying by the outsourced project. It will be easier to get your in-house team up and running when you already have a profitable product to work with as well.
Allay your investors’ fears by letting them know that your in-house team will handle the most important aspects of the business, and that outsourcing will be used for tasks that don’t represent the core of your startup venture.
Show Them They are Valued
Investors are businesspeople, but they can be emotional too. Let them know you want and value their input and opinions, in addition to the financial backing they provide. Make it clear that the outsourcing project is open for discussion and not a done deal.
They can also be very concerned with how their actions are perceived by business partners and other investors. Making a practical argument in favor of your outsourcing plan will go a long way toward persuading your investors that backing your strategy will not make them look foolish.
Investors who are kept apprised of your plans will feel less anxious about their investment. When they see that you make rational, well-considered decisions time after time, their trust in you will grow.
Your investors are just as motivated to see your startup succeed as you are. Keeping them happy means continued access to critical advice and guidance, as well as introductions to other investors and talented candidates in the tech field. When it comes to another round of funding for your venture, you will want these people on your side.
Treat your investors like a good neighbor. Take the time to develop good relationships with them, keeping in mind that investors backed Airbnb not because they thought the concept had legs, but because they really liked the founders.
Outsourcing Makes Good Business Sense
Giving your investors good, solid business reasons for your decision is the optimal way to win their approval.
Since they have funded your venture, you know your investors are committed. Now it’s time to convince them that outsourcing is the next logical step on your startup’s path to success.