TLDR: Building your startup with an agency is a proven model. It costs more short term but, because they have multidisciplinary teams, they solve your go to market timing issue. This puts you in a position of strength by letting you hire and fundraise after you have metrics. For the best value look for agencies that know Product deeply, not just Development.
Having ran my own startup, a social restaurant reservation system called Table & Friends, and discussing every day with first-time founders we work with through Altar.io & 10kstartup, I quickly realized a few things about running a startup without previous experience in tech.
Building a team from day one for a startup can be a great experience with a lot good things but it can also an uphill struggle, especially so if you’ve had zero previous experience in managing a tech team. Also it’s more expensive than you think, it’s extremely time consuming and a lot will go wrong with your first hires, especially if you are trying to find a “rockstar CTO”. On top of it all, hiring early removes your focus from using your time where doing the things you are best at: Proving that you can disrupt an industry.
Fact is that once you have good metrics you are in a position to show your product or service works. That’s a better time to hire and share equity with hires and investors in a position of strength, not of weakness.
There is much misunderstanding about the role of technology in startups, because startup schools vaunt the ideal of the multidisciplinary team of founders (tech, business, marketing, development).
Startups are often started by specialists in one field who have a pretty good idea on how to disrupt it with the use of technology. But that shouldn’t mean they should go on a hiring spree before having an MVP (Minimum Viable Product) ready.
MVP? The Minimum Viable Product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.
Now that I’m a co-founder of a Product and Development agency, I primarily work with people who are exactly that: Specialists in a field looking to bring disruption.
My advice is to be honest with yourself, what you can and can’t do and focus on achieving something meaningful sooner rather than shopping for talent endlessly in a shrinking pool of tech talent. If you actually can successfully hire well motivated technical people in your venture’s first days then it is an opportunity not to be missed. In any other situation you will find that agencies can be a good option, assuming you find the one that has the right fit for you and the right experience to plug your talent gaps in terms of delivering Product and Technology.
So how is it that agencies can really help a startup?
Who doesn’t love Slack?
- It’s a proven model. From early 2000 names like Skype and Alibaba to startups that are now hot such as Slack, Upwork or GitHub have relied on agencies and freelancers for their early days’ first builds...Among many many others. Don’t take me wrong, also legendary companies like Apple, Microsoft, Airbnb were started in a garage with a mix of Product and Tech people: having a “Soulmate CTO” from day 1 is of course the most idyllic option. Unfortunately having a “Soulmate CTO” from day 1 is rarely the case though. But you’d be surprised with the amount of successful startups started with outsourcing, see a few here: https://www.startupgrind.com/blog/these-8-successful-companies-were-built-using-outsourced-developers/To get an MVP done, you have several options in your hands: Learning to code, Hire developers, Outsource to an agency. In the article CTO, Developers, Agency? What’s the Best Way to Build Your Startup? my co-founder highlights in depth the advantages and disadvantages of each option that you should be aware of.
- Validate your value proposition first, validate that you are a great people/startup manager and fund raiser second.Does it sound reasonable that you should be managing a board of directors and large team of developers before you actually know that your product stands a chance? Not in most cases, unless what you are developing is very complex and you are packed with hundreds of thousands of dollars worth of funding already.
- Money is short.Money is always short unless you belong to the olympus of second time founders who’ve exited and have the confidence of investors to back their new ventures. Hence in running a startup with under $/€ 1 Million is always a challenge and at anywhere between $/€ 50–100k per employee. Time and cash flies.
- You always need the best talent but you don’t need it all the time.It’s easy to calculate the premium of having an agency to build something for you for say 3 months with a multidisciplinary team that will deliver design, development, product and that is already used to working well together (and that you will not need to manage yourself). Whereas if you hire yourself you will need to be the maestro and dedicate a reasonable amount of time to managing the development team in a SCRUM setting.
- Hiring on a rush is counterproductive, especially so for the first key hires.Hiring badly is worse than not hiring. Doing it quickly and clumsily in the beginning is such a big startup killer that there is a ton of literature about it and how to do it properly. There are, however, many ways to mitigate this. Starting with applying a vesting schedule to everyone (including you of course and avoiding 50/50 splits in equity that stop decision making processes).Do have a look at the Seedhack’s vesting contract done by the folks at Seedcamp: http://seedcamp.com/seedhack-founders-collaboration-agreement/Hire slowly but surely, look out for great people with a good culture fit and (if hiring developers) great work done that a developer you trust can validate by looking at the prospective hire’s github code.
- Not having all the design and tech skills in the founding team is not a big problem, not knowing how to manage time and priorities is.If you are a single or a couple of business development executives trying to disrupt an industry via technology that’s not a problem, that’s an asset. You know your customer, you have the right relationships, you’ve possibly even pre-sold prospective clients. You are on the right track and you just need your idea and project neatly designed and executed. At this point you’ve just got to weigh what your available options are in terms of building a team or getting quotes to build your project in outsourcing by agencies with the right skills.
- Don’t underrate HR.You might carry on with an Agency as you start headhunting but are you confident that you can headhunt and hire well? If the answer is maybe or no, then you definitely should consider the peace of mind that hiring an HR firm to advise you on interviewing and searching for key hires. Most portals don’t offer a comprehensive service. Some, like landing.jobs, do.
- Look for people who know more than you do about UX, Tech, Product.. And are keen to learn more with your challenge.Agency people build a portfolio of work fast, which means their UX and UI guys never rest in the search for tomorrow’s eye candy and functionality. Their client facing Product people become specialists in the businesses they advise, from Fintech to Online Travel, Marketplaces and E-commerce there is a wealth of expertise to bank on.On the other hand, if hiring a team do look for people with a track record in your target field of expertise so you can capitalize on their experience, avoid mistakes they know to be commonplace and enhance your company’s profile.
- Pick their brains all the time, for your benefit.Assuming you’ve found an agency with smart people it is healthy and highly advisable that you not just ask to execute on your ideas but also rely on them to come up with ideas to answer tactic and strategic questions that will impact your business positively:
- How can we improve our conversion?
- How can we know what works for our customers and what doesn’t?
- How can we get more traffic?
- How can we have a leaner investment in tech keeping or enhancing results?
- How can we solve problem X?
- How would you come about creating feature Y?
- Which feature would be more meaningful to be built now and why?
- How can we build a meaningful roadmap to stay ahead of the competition?
Be wary if on the other side of the line a Product Manager says yes to all your ideas. Great PM’s are not Account Managers and will often see differently from you and come up with candid advice and often contrarian ideas on how to be more meaningful to your target audience, for your own good. After all great agencies have highly experienced people who care deeply about the success of their projects -> your projects, your success. Success is shared and it means mutual gains: For the agency client’s success means better portfolio, excellent word of mouth, larger contracts, etc.
- Protect your assets.Just as with a employees if you are building tech you must generate and protect your Intellectual Property assets and know exactly what belongs to your company. Do exchange a mutual NDA with a prospective agency and Do use a good lawyer to read a proposed agency contract or redact yours. In most cases an agency will be using a good percentage (40–80%) of code that belongs to the agency or to open communities and you will be entitled a free perpetual license to use it. For all that’s unique to your product you should negotiate shared or exclusive rights to its Intellectual Property.