Should My Startup Outsource Development to an Agency or Hire a Freelancer or Two?


Dave’s answer to this question:

I’m sure you’ll get a few responses that explain how outsourcing is not a viable option and you should do it all in-house. I’m not going to jump into that debate, so I’ll just say that in-house is always nice but it’s not always feasible so many companies outsource their initial development successfully.

Can You Manage It? Are You Sure?

Ok, so if you do decide to outsource the development for your startup and you’re trying to decide whether to go to an agency or a freelancer, the primary consideration should mostly be based on the degree to which you can manage and lead the project on your side.

If you have serious tech chops and know how to manage a software project, you’ll usually save quite a bit of money by hiring and managing freelancers to build your app without the overhead of an agency. However, if you don’t have the ability to attract, hire, retain and manage a great freelancer or two then going the freelancer route can be extremely risky.

If you can’t manage it yourself, you’re left with the agency route. Be realistic about your ability to manage – it’s easy to say ‘sure I will manage the project’ but if you don’t have real experience managing tech projects you may be in for a wild ride.

Agencies vary wildly in quality, but if you can find a good one you can expect them to provide some project management structure in addition to developers and that’s a big winner. I’m talking about things like source control, quality assurance, and a workflow process that will get you where you need to be.

As you mentioned, finding a technical co-founder in the SF area is very, very hard and most qualified candidates will want cash in addition to equity. If you reach out to other parts of the country you may have better luck, but it’s still going to be tough.

Offshore Can Work, But Be Careful & Smart

Sending the work to India or another overseas destination can be a way to get your prototype out the door on a small budget, but it can be very risky so be sure that you’ve vetted your overseas team well. Be sure that everyone is on the same page and that expectations are consistent, and make sure you have a very clear engagement model (i.e. agile, T&M, fixed-bid) in place.

At SourceSeek we deal with startups all the time, and there are three things that we really focus on when helping a startup to outsource:

  1. Make sure you go with a company that understands how to work with startups, and has lots and lots of experience doing it. This is critical – working with startups is difficult and a group that isn’t well versed in startup culture is going to struggle with it. When your outsourced team is struggling to maintain your satisfaction (and their profit margin), your quality goes down the toilet.
  2. Choose the right engagement model. It seems like a good idea, to some, to go with a fixed-bid arrangement so that you’ll know your exact budget. In reality, it rarely works that way and fixed-bid can be a nightmare. Agile/hourly can be successful, but requires a degree of discipline and trust that is not always there. Spend some time figuring out which way to go on this.
  3. Start small – very small! Most MVP’s could use a little more ‘M’ – they are too big. Bite off the absolute smallest piece you can and send it out to the team.

If you need any objective advice about outsourcing for a startup, feel free to give us a call. Be careful and good luck – it can absolutely be done!

Originally published as SourceSeek’s answer to the Quora question: Should my startup outsource development to an agency or hire a freelancer or two?
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Dave Hecker

Co-Founder at SourceSeek at SourceSeek
Dave is a seasoned technology executive focused software delivery, quality, process, and helping clients succeed at international software outsourcing.