How Smart Startups Stretch their Funding
This blog post has been researched, edited, and approved by Wayne Hippo. Join our newsletter below.
How Smart Startups Stretch their
Funding
By Wayne Hippo
May 14, 2019
When startups reach the key milestone of securing Angel or Venture Capital, their new partners are looking both for a series of deliverables but also a great return on their investment. One of the many questions they ask during the pitch process is generally ‘how long before you’ll need another infusion of capital?’ They love it when the response is … “a long time.”
Once that infusion is safely secured, how do smart entrepreneurs make the most of it? STRETCH. Find the best value for the money on every project. And that includes custom-developed software.
In the early 2000s, the key to this savings was off-shore development. Fast and inexpensive services sprung up across Asia and Eastern Europe, putting hundreds of thousands of software engineers to work… outside of the US.
“Americans are just too expensive,” was the cry.
What we learned, however, was that it’s not really American developers that are so untouchably expensive, but the US major cities that pushed up the prices. The developers in rural areas and small cities are actually quite affordable. Plus – they speak your language, understand your culture, and live somewhat near your time zone (if not in your time zone).
The Whole
Entrepreneurs often judge the viability of outsourcing based on hourly rates they are paying. This can be misleading. When you pay for the least expensive person to do the job, you seldom get the best. Then you wind up paying more for senior team members to work through the problems created by the less-experienced.
Here are three other ways that the whole can end up bigger than the sum of its parts (ie: it’s more expensive to offshore than it looks):
- Miscommunication = Time Lost: Yes, they speak English. No, they don’t understand your colloquialisms, the cultural impact of the work or how it relates to the industry as a whole. So when the project is delivered, it’s wrong or incomplete. Re-scoping, re-scheduling, re-writing. All take more time, and as a start up it could cost you that window you have to beat your competition to the market
- Intellectual Property in Lost & Found: When a team of developers works on your project, they get to know your business and understand how the software gives you a competitive advantage. More profoundly, they are actually creating some of your intellectual property. It appears to us that keeping your IP in the US is pretty critical.
The Where
Where you are does make a difference. If your developers are in major cities with high cost of living, you’ll simply spend more than you will when the teams live in places where the cost of living is lower. It’s just logical. And it’s been proven out time and time again on projects we’ve delivered.
But it’s not just the cost of the developer. It’s the cost of your time. That’s why we encourage you to take advantage of our US-based developers, and keep from going:
- Time Zone Zany: I’ve never met an entrepreneur that wasn’t exhausted. Burning candles at both ends, they manage their business, their product, their employees… they have a hard time managing developers who live 12 hours away.
- Partner Panicked: I’ve also never met an investor who preferred that the code she just invested in be developed or stored over seas in a distant land, subject to different law and different court system.Just because you need to stretch your investment dollars, don’t cheap out on software development. Be responsible. Keep development in the US by working with rural and small city teams. Consider the whole of your investment, and give us a call.
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