What should be my first step to building a technical team for a start up?

I expect a large scale software project to come in which must be delivered successfully for us to get more business. I don't have enough in house resources to accomodate this project but I do have good experience with project management and processes to support a project like this..Challenge is I am a start up and I can't pay crazy big salaries plus benefits cause we are not big enough to offer a benefits program ..I know I need resources to work inhouse not remote and I don't know what to offer to get a team on board..I keep meeting these senior guys who are asking me to compete on salaries with larger companies. How can I motivate them to work with with me? How should I go about building this technical team..Should I bring people on a consulting /contract based basis? I think I need a strong team leader, should they be my first hire? Suggestions please?

I would recommend finding a technical partner or co-founder who is experienced (by that I mean many years of experience and not the same year of experience many times), articulate and who spends a great deal of their time studying the profession of software development and successfully mentored others in that profession. You will likely need to give them some share of the company.

Once you have found and recruited that person have them build a team of less experienced (and less costly) people who will do most of the actual development. Young people tend to be current on the technology that you're likely to be using. They will also be eager and enthusiastic to "work on a real system". Properly led they will be productive and build good software and work very hard in the process of doing it. Now, they might not use the same techniques to build the system that a team of veterans might use. You'll probably get less documentation out of the process than more experienced developers might provide (but maybe not), but I'll bet that you will get a salable system quickly.

Any company with income and some number of employees can get a group medical insurance policy. I've done it when my company had exactly two employees (myself and my wife). Don't assume that you can't provide benefits. Do some research, you will be surprised.

The strong team lead should be your first hire. Enabling such a person to drive the technical direction will be more of an incentive (to offset lower salary) than if they inherit technical decisions from people hired before them that they now must lead.

A strong team lead will attract good people. You want someone who:

• has built and led teams before
• has a good reputation in the relevant technical community
• is passionate about the business

I would also recommend defining your software development methodology in advance of finding that senior technical partner. Like building a sports team you want to run a certain 'offense' in software development - so try to target someone experienced in a methodology that you prefer (Agile, RUP, etc.).