Why do so many startups begin as a consultancy?


So many SaaS companies started out as consulting shops. With venture capital and angel funding readily available why do so many startups go the consulting way first?

Are there any other benefits to this approach that I should look at?

Consulting Startups

asked Feb 21 '14 at 12:33
Warren Anderson
35 points
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2 Answers


Here's a related question to look at: Product vs Consulting business? Pros / Cons?


  • Easy to start and easier to grow than a product initially.
  • Good way to fund a product based business without raising money.
  • You only make money when you're working. If you're out sick or want to take a few days off, you lose revenue.
  • As you grow (add employees as consultants), filling the client pipeline gets harder and harder.
  • Employee turn over is much higher.
answered Feb 21 '14 at 16:25
Nishank Khanna
4,265 points


I'm not sure but I think the big advantage of a consultancy is that it so cheap to run.

A consultancy can often just consist of you, and you don't have to take any money if the business doesn't make any money, and your office can be your basement. Therefore, if you are a talented specialist, you can run your own consultancy with no overhead.

Compare this to a business which has even just one full time employee, an office manager, and an office.

Full time employee - $3000 / month
Office space - $1000 / month

Cost to run a business: $44K /yr + (plus expenses)
Cost to run a consultancy where you are the consultant: $0 / yr (plus expenses, recoupable)

answered Feb 21 '14 at 16:16
Daniel Stern
13 points

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