“We want you to outsource your product engineering forever” said not a single VC partner to a startup founder ever.
For technology startups, there is nothing more valuable than their own product: built their way and controlled their way from end to end. Having your hands on the wheel while “driving” your product development vehicle is vital for the sake of project ownership. It is also highly valued by the business partners who put trust (especially in the form of capital) into your business idea and growth strategy.
What are some of the popular scenarios while deciding what to keep in-house and what to let your external partners to work on?
1. You have raised a funding round and your investors expect you to deliver a market competitive product fast. Let’s assume your founders team consists of a technical founder who can build a 1st product version with help of other team members or freelancers. Sprints move, weeks and months pass and you are reaching expected milestones with your product. Meanwhile you also keep playing the fundraising game as obviously you are going to need more funds to build an ideal product your team has dreamed of from the very beginning. You collect tons of positive feedback from early users and tons of ideas for improvements, your product-market fit and business model are being polished and your team feels you are on the right track to take it to the next level.?
2. Let’s assume you have met all the necessary criteria and you successfully raise Series A round. You’ve made it! What next regarding your product development? Things seem easier when you have a substantial amount of capital in your bank account, but at the same time you have your investors who watch how you spend their funds. You have to scale the operations while keeping it lean and optimal cost-wise. Your co-founder who acts as a CTO is hiring new members to his core team to control all the mission critical aspects of product development. That’s the backbone of your R&D team who will make massive decisions along the way when it comes to the final shape of your product. But guess what?
You quickly realise that in order to keep the desired pace of the product development, you will need to double down on engineering resources with specific skills and know-how to execute on your R&D team’s vision. To stay lean and avoid going on a hiring spree too fast not to affect your company’s culture, you decide to join forces with a development partner that will work as your external R&D engine. You’re up to speed now. In fact you’ve never shipped things that fast. Your team and your investors love how fast you move. That’s what startups are made for, right?
Product grows, teams grow, your development partner blends in perfectly with your culture and principles, becoming a major contributor to whether your company succeeds or fails. You are grateful for what they did for you over the months/years of working hand-in-hand, BUT your interest it’s not to keep it that way forever even if it’s cost-effective. Your partner’s interest is to keep the status quo as long as possible. Why would they help you in transition to 100% in-house product engineering?
3. Fast forward, you’ve reached the point where you are starting to consider various scenarios, let it be 2 main ones: do we keep raising or do we exit?
In both cases, it will be vital for your new investors or buyers to have a guarantee that all product know-how and patents are safe in-house whether you stay or leave. Or whether your development partner vanishes overnight. VC is a risky business by default therefore mitigating all unnecessary potential threats is what helps you get extra points from VCs in the fundraising game. You are about to sit down with your external development partner to have a serious discussion on the future of their engagement. They’ve been at your side since like…always?They know the drill inside-out, some of their employees may even identify more with your company than with theirs (quite often it happens with long-term projects), they possibly own some processes as they created them especially for your project’s specific business environment.
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Have they ever suggested they could help you strengthen the engineering management capabilities inside your internal structure? Or to assist in building a hiring and up-skilling plans? Or planned how and when they would transfer the entire know-how and make sure the plane flies without them on board? They should.
The above narrative is a step of our planned journey to become a go to partner for building strong engineering competences IN-HOUSE for our clients & business partners. Not the other way round focusing on adding new "billable" team members on their end.
Having gained hands-on experience working on long-term projects through various stages, we aim to use it to ultimately help you become vendor independent. In order to collect market insights and build an informative summary of market state and demand for in-housing support, we invite startup founders to take part in our research survey. Treat it as an open invitation for an informal no-strings-attached conversation to share your so-far experiences with building your in-house engineering competences.
For any additional questions feel free to reach out in private message to me or Peter Kolka .
P.S. I'm happy to share I've joined Exlabs to work with a bunch of wonderful software & consulting experts driven to deliver absolute exellence without cutting corners. Let's go!