Outsourcing most development/design for a SaaS startup. Is it feasible or will I go broke before starting?


2

The service I'm planning to launch, requires a lot of work (code and design-wise), and it definitely needs more than 1-2 persons.

In my country, start-up partners are hard to find/non-existent. It would be easier to get funding, than to find a partner.

On one hand, according to 4-hour workweek, it seems that outsourcing most of the work is possible. The idea is to outsource work for x USD, make sales y > x USD, so that you have a y-x USD profit. However in my case, I will have 0 sales until I launch the product and make the first sales. Which means I will have to cover the expenses for outsourcing. The key challenge is to guess the cost of outsourcing (and of course figure out how to cover these costs).

On the other hand, in Getting Real (37Signals), it is suggested that you launch a basic product, sign-up customers, add more features. Iterate. However, I'm concerned that a basic feature set would kill the product, as it would offer nothing more than 99% of the competitors. The main advantage of the product is that it is a turn-key solution. If I cut down the features, I lose this advantage.

How do I execute this? The idea is there, and it looks promising. The implementation plan is missing.

Bootstrapped Features Outsourcing

asked Mar 18 '11 at 19:08
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Dyn Zack
216 points

5 Answers


1

You're trying to outsource the very core of your company. There are no programmers in your area to partner with?

A good development firm should be able to provide a budget for your project. If you're going to copy another site, you should be aware of almost all the requirements. You may feel you need all the features, but your site doesn't have to handle thousands of users on day one. Not sure if they would be willing to negotiate any delay in payments, but give it a shot.

You've assumed that everyone is satisfied with what is in the market, but you've done nothing to see if there are quality customers wanting something different or more of the same.

If a bad version 1.0 would kill a product, Microsoft would be out of business. You can release a beta, users will understand.

Since you're keen on books, you may want to read: Start Small, Stay Small: A Developer's Guide to Launching a Startup. I know you're not a programmer, but it would give you some insight on how to keep the development costs to a minimum until you have a viable product.

answered Mar 18 '11 at 22:10
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Jeff O
6,169 points
  • I'd be worried if your entire core competency was outsourced. – Michael Pryor 8 years ago
  • As a matter of fact, I'm a programmer. Thanks for the reference. – Dyn Zack 8 years ago

1

You may want to check out the latest book from 37signals called "Rework", specifically the chapter "Underdo Your Competition". I don't know your market but your statement above that "a basic feature set would kill the product" misses the point entirely. A sublime, unbloated feature set about which you are unapologetic differentiates you. This is a strength, not a weakness. We are doing just that.

answered Mar 19 '11 at 03:00
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Kenneth Vogt
2,917 points
  • Really thanks for the reference, great stuff. Thats what my "manager-self" tells me to do. Build the most valuable features, and build them better. As opposed to my "newbie-dreamer-self", saying build everything that can be build and crush the competition. Will follow your progress... – Dyn Zack 8 years ago

1

Hey dynZack, thanks for asking the question.

You're wanting to outsource development for a product that will not have any competitive advantage until it has got tons of features? That sounds pretty dangerous.

This means you're going to be paying out the nose to get your product built, and every hour of development that it takes is big bucks down the drain. And if you're trying to outfeature your competition, this is going to take a long time and a lot of money. So unless you or an investor is willing to just throw tons of money at product development, I don't think this is a good idea.

But, you're reading good authors, and asking questions, so I think you're on the right track.

Personally, I think a far better route would be to find developer(s) who are willing to work for equity. Now, you're exactly right - this is much harder to find than someone who just wants a salary. But I would encourage you to wait it out, keep searching, pray :-), and see if you can find a guy who'll work for equity.

In my case, I spent over a year developing my idea, writing the business plan, doing market research, developing really crappy alpha versions, reading every book I could get my hands on, and talking with potential investors in hopes that I would get money so I could pay some developers a salary. Finally, after a year, I found the perfect fit - a older guy was looking for something to do and was willing to work completely for equity until we got our product developed. It was totally worth waiting for.

Who says that someone working for equity has to live in your country? Your developers can live anywhere in the world and still work for equity. Just use some of the awesome, free collaboration tools available. Here are a few that our company is using to work remotely on development:

Google Docs

GitHub

RubyonRails

Skype

Trillian

Basecamp by 37signals

Campfire by 37signals

Amazon S3

As you search for developers and perhaps investors, these two sites might be helpful:

http://foundrs.com/home http://angel.co/ Okay, here are some big reasons why you should get someone who's willing to work for equity:

  1. You will not have to pay more money if the project takes longer than expected.
  2. Your developer(s) is going to work harder and longer hours because he has the potential for a big payoff and the risk of no payoff.
  3. You will not risk other people's money if the product becomes too expensive and the company dies.
  4. You may be able to completely bootstrap it, thereby maintaining more ownership and control, as well as having no investment timelines and pressure to reach break even and grow really fast.

Also, I think you may want to figure out a way to add some value to customers with a smaller, more lightweight product before building your massive, beautiful, industry-revolutionizing product. If you can build something small that satisfies a niche and allows you to hit break even really fast, and then use this stream of income to support a lean operation that is building "the big one", I think this is a much better model. In our case, our beta-test product is more labor intensive than our final version will be, but we are still able to charge customers, because it still adds value. The only difference is that we're doing labor intensive work, with a few customers, while we test it, rather than our final, highly automated software, with a bunch of customers. But its allowing us to make money and pay the bills, even during our beta stage.

Lastly, since you're into books, you ought to check out Steven Blank's "The 4 Steps to the Epiphany." There's a free pdf of the first half of the book available here. It might be helpful for you in the early days. It focuses on Customer Development as an addition to Product Development, and it has some good things to consider before and while you build your product.

Hope this helps, and best wishes!

answered Mar 19 '11 at 18:21
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Aaron Gray
386 points

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To address your "basic product" concern, I haven't read the book in question (though it looks interesting) but I'd have to agree with launching a basic product, building a user-base and adding features over time.

Developing a product, especially a web application, is an organic process. Having a user base will help you develop the features they need, the way they need them implemented. This may be different from how you originally designed the product. There will be tweaks to make on many parts of your product. If you have a massive application with many different features, it can become a lot of stuff to take care of all at once. If you build it up over time and take the time to perfect every element as you introduce it, you will likely have a much stronger product.

Let your users know that it is a beta. Have a progress blog so they can keep up with what is going on and update it regularly and let them know that you are working hard to fit the product to their needs. Open up a venue for constructive feedback and discussion.

Take all of this with a grain of salt. It is opinion based on experience. I just think it is better to make many small moves and build them up rather than spend all that time planning and end up making no moves at all.

answered Mar 19 '11 at 00:43
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Sean Blake
101 points

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The question about outsourcing programming really depends on what you mean by "outsource". If you mean hand your plans for the software to another company and hope they execute for you, there is slim to no chance of success.

If on the other hand you mean hiring people from your country or other countries, working directly for you, working from home, that is ok and it's more possible for you to succeed with this route.

Is it possible to succeed without a technical founder? I think yes, but would require hiring very high quality technical resources and probably more people would be required as a great technical founder will be working 16 hours a day on the project, but you can't expect employees to do this.

answered Mar 24 '11 at 20:41
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Rob
151 points

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