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Should I “outsource” my startup–yes, the whole thing? Contractor equity?
I've been running a little startup since February, and I've committed—and continue to commit—the "cardinal sin" of outsourcing development for my product. Despite all the hate around outsourced development, I can only say that I've been extremely satisfied with my experience. I work with an awesome team of outsourced developers, designers, etc. and get along really well with the co-founders.
In light of this, does it make sense to outsource all of the other major functions of an early tech startup as well, providing I can find similar partners and still take the helm as CEO—e.g., marketing, accounting?
Should I consider offering these outsourced workers equity, signalling an even more serious relationship?
- new_guy 7y agoThe more you outsource the more disposable you make yourself. Make sure someone can't just cut you out of it and take your business for themselves.
- pyang6641 7y agoAgreed! I never signed an NDA with my current contractors, mostly because I felt that doing so was unnecessary. I still don't think there's any reason to since we have complete trust in each other. But what do you think—just to be safe?
- greenyoda 7y agoIf your workers are independent contractors, you may be deluding yourself if you believe that you're in a "serious relationship" with them. If they find a client that pays them more, they'd be stupid not to dump you. You can't demand that they work exclusively for you, work extra or unpaid hours to meet your deadlines, etc. (If you could do that, they'd probably meet the legal definition of "employee".) Offering someone like this equity seems like a strange thing to do. When equity is offered to employees, there's usually a vesting period to give valuable employees an incentive to stick around. Contractors, on the other hand, tend to be short-term. Also, statistically speaking, equity in most startups is worthless, since most startups will eventually fail. The chances of your company becoming the next Facebook and making its shareholders rich are tiny. So your contractors would not be smart to accept any less payment, no matter how much equity you offer them. Finally, there's all sorts of tax law that grants favorable treatment to "employee stock option plans" that probably wouldn't apply if giving equity to non-employees. You'd really need to figure it out with a lawyer and/or a CPA.
- mfbx9da4 7y agoI think offering equity is a good idea. I have been on the other side of the table multiple times. Often the temptation to guide the client into more work is hard to resist. Having equity can reduce this conflict of interest. Agencies can be damn good at what they do and product development isn't everything. Sales, marketing, fund raising etc play a huge part in execution too! I can recommend https://www.crowdform.co.uk/ https://www.crowdform.co.uk/ - Disclaimer I work for them!
- relaunched 7y agoThere are lots of stories and 'silicon valley truisms' that we are told are the right way to do things. However, if what you're doing is working for you, keep doing it. We're seeing all sorts of un-conventional wisdom becoming conventional. Remote workforces. Paying market. Direct offerings. It was all wrong, before it was right. If you need motivation, google duckduckgo's history. Good luck!
- codnee 7y agoOr better yet, duck it.
- EnderMB 7y agoThere's nothing wrong with offering a contractor a full-time position. I've worked with CTO's that started out as contractors, who turned down the extra money to work on a project and business they believed in. If they say no, you've got nothing to worry about. Use them as a contractor, as you do already, but ensure that you're prepared for them to walk away if a better offer comes along. It's shocking how so many businesses are not prepared for the day when a contractor gives in their notice, and ultimately a contractor should be handing their work off to an available employee to take over.
- pyang6641 7y agoI guess the problem, however, is that it's a large commitment/risk for the contractor to give up on their own business in favour of yours, right? Could you expand a little more on your experience with those CTO's, how you got them on board, etc.?
- EnderMB 7y agoThat's true, but I guess you'll get a feel of what that person values after working with them for a while, whether it's money, freedom to choose their projects, the ability to work on tricky sub-problems, etc. In my experience, it's always been down to what that person values. At my last company my "boss" was a contractor, and although he was given the ability to build a team however he saw fit, he didn't want to sacrifice his freedom. Before that, my CTO took the role because she believed in the team and the projects we had - and we did some fantastic work. The roles were almost identical, but the people were different. My hiring experience is limited to developers, so I've never been a part of the actual hiring process, but I've bonded with a handful of people that were offered the role, and it's always been down to belief in the long-term vision and whether they'd value that role over what they value from their current role as a contractor.
- 100-xyz 7y agoWhat does your startup do? If interesting, I could be interested in working for equity. leisenming AT protonmail DOT com
- pyang6641 7y agoHey, we're a UGC software specializing in product reviews. Basically, we create a system where customers are rewarded discount points for reviewing online purchases. A couple things: 1. Like most competitors, we send review requests via email. But unlike most competitors, we also use a personable Facebook chatbot to solicit reviews from customers. 2. Discount points can be spent at any store connected to our catalogue, creating a global points system no other software has.
- cm2012 7y agoI run a marketing agency that serves b2b start-ups. At least 25% of the time we're managing all the marketing - that is, it's outsourced to us entirely. So it's not crazy for marketing at least.
- pyang6641 7y agoYeah, I was thinking about hiring a growth hacking agency. Would you be willing to share the name of the agency you run? What's your experience with doing all of the marketing for a startup?
- cm2012 7y agoRightPercent.com. Normally we manage the top marketing layer of paid ads, but if you have the budget we can manage everything. Normally we charge 15% of ad spend with a minimum fee of $6500 a month (but no minimum time commitment), which covers all ad stuff and assistance downfunnel. We would put another person on the project to manage all of your internal marketing work (landing pages, etc.) on an additional hourly basis.