Why Ooutsourcing Should Be Part Of Your Startup/Business Growth Strategy?
You’ve snatched the crucial seed funding and are on your way to Series A. Well, that’s marvelous. It means that investors have recognized your startup and are willing to test its potential. You need to spend each penny of this funding very thoughtfully. Now, you are ready to grab that Series A funding and convert your visions into a reality. Only, it is not that simple.
The “Series A Crunch”
“Series A Crunch” is a term coined by the venture capital community to describe a visible trend in Series A funding. This trend can be broken down into four statements:
- A considerable number of startups are receiving seed funding.
- The competition to acquire Series A funding is consequently huge.
- PE and VC investors are becoming increasingly more selective and supporting fewer startups.
- Only when PEs and VCs are assured that the startup is a low-risk, profit-churning business model, do they provide Series A funding
Investors want startups to generate positive cash flow even before receiving Series A funding. This translates to higher stakes and expectations. Almost 67% of startups stall at some point in the VC process and fail to exit or receive follow-on funding. These are huge numbers! VCs ad PEs are unlikely to hand in Series A funding to startups that aren’t showing solid evidence of market traction.
Why should you be partnering with an outsource development company?
To make sure that you stand out from the crowd and appear as a worthy investment, you need to maximize your seed funding’s ROI. Remember the golden adage that “cash is king”. Investors take into account your metrics and finances to analyze how you save, spend and invest their bucks. Also, to stay competitive, you’ve got to prioritize efficiency and acquire quality talent. However, given the tech talent shortage, roping in top-notch talent demands considerable money, time, and effort.
So how can you quickly source the expertise you need and speed up your development timelines simultaneously? Outsourcing has emerged as a convenient and effective solution to your worries. Startups such as Slack, GitHub, and Alibaba became global powerhouses by utilizing outsourced talent. In fact, one of the most successful startup growth strategies for scaling is outsourcing. By reducing the considerable amount of resources that would’ve gone toward recruiting, training, full-time salaries, and development downtime, you’ve induced considerable budget flexibility.
Building collaborative partnerships with outsourcing firms can deliver significant perks like:
- Improved reputation
Teaming with another established business augments the perception that your business is stable and reliable.
- Increased business value
Partnerships increase a company’s valuation, showing PEs and VCs that you are capable of building strategic relationships that create seamless workflows and help you execute effectively.
- Mutual benefit
Such partnerships emerge out to be win-win relationships. With the outsourcing partnership, you can leverage the expertise and workforce of a wide, quality talent pool. Your outsourcing partner gets his money and is a satisfied and reliable client.
Benefits of Outsourcing
- Check the burn rate
Burn rate is a term used to describe the rate at which a new company spends its capital to finance overhead before generating any positive cash flow. In more straightforward terms, it is how quickly you spend your money. By outsourcing, you can increase the amount of control you have on your burn rate in several key ways:
- Reduce development costs while making development efforts more efficient.
- Massive amounts of resources that would have otherwise been spent on recruiting, training and payment of in-house resources can be saved, allowing you to focus on spending where necessary.
- You can hire talent with specific skills for only the needed period.
- Increase visibility over spending and more effective planning.
- Faster time to market
VCs and PEs need to see that you can execute and deliver timely, meeting consumers’ demands. Demonstrating your ability to perform within deadlines is essential to inspire their confidence. Outsourcing can conveniently make this happen in the following ways:
- Launch the in-demand products faster and gain an edge over your competitors.
- Keep your internal team laser-focused and satisfied.
- Quickly acquire the most talented and specialized expertise across the globe. In a scenario when the lack of skills is proving to be a major hindrance to success, outsourcing can be a formidable advantage.
- The agile development methods favored by outsourcing companies help you iterate more effectively and get to market quicker.
- Increased focus on core business
To develop a sustainable business model and assure the investors that your startup can succeed, you and your team should be laser-focused on your core product and critical business objectives. So, acknowledge that you cannot distribute your attention in multiple spaces. Determine the positions where you can delegate and where you need to outsource. Collaborating with an outsourcing company helps you focus on what is of prime importance. Your outsourcing partner can ably manage and accomplish tasks that don’t deserve your time and attention. This also fetches valuable expertise and helps you expedite your development timelines.
Yes, the Series A Crunch is a critical issue. To rise above the other startups and snatch the Series A impetus, you need to develop a business plan and scaling strategy that shows the investors that your startup can grow and sustain, and be rewarding for them in the long run. Outsourcing can help you inspire confidence in your investors and make the maximum of your bucks.