Business planning · Saas

Acqui-hire vs off-shore development?

Brian Brown Founder, consultant, adviser

October 28th, 2014

I have a friend (exec) in fast growing SaaS company with a new, large round of founding. They have off-shore developers, but are thinking they need to move the development back home through an acqui-hire of a development team. Smart move? And is it even possible to find such a team?
A great idea is 1% of the work. Execution is the other 99%. In this course, we’ll teach you how to conduct market analysis, create an MVP and pivot (if needed), launch your business, survey customers, iterate your product/service based on feedback, and gain traction quickly.

Gil Allouche Founder @ Metadata

October 29th, 2014

IMHO If you can benefit from the cost savings and they know the work -- tell your friend to keep the team, hire a local CTO who can manage them effectively and let him gradually build a local team.

Toli Kuznets Senior Director of Engineering at Marin Software

October 28th, 2014

This is science fiction. As others noted, it'll take a while to transition the new team to the existing product, and there may be cultural issues. Also, "outside" acqui-hired people may not be that motivated to work on some new random product they didn't put their sweat/blood/tears into that just fell on them.
Finding and evaluating such a team is going to be hard as well - who will do the due diligence? You may not get what you expected.

Better to find someone locally to run the eng team, and use that person to help grow an in-house team while using the offshore team in parallel to move the product forward until internal team is big enough.

David Cavander Principal Scientist, Digital Marketing at Adobe

October 29th, 2014

My experience is you would need both sides. The HQ side brings the concepts, problem solving and thought leadership. The offshore side brings the areas such as db, cloud, app, gui, etc etc. Offshore needs a lot of direction and a strong local engineering lead. Both need to be A teams.

Alan Peters VP Product and Technology at BusinessBlocks

October 28th, 2014

Odds of finding a worthwhile acqui-hire at that stage are slim to none. 

Your friend is looking for somebody who can build a team and nip technical debt in the bud without losing momentum. 

Tall order but happy to discuss further if you want to provide details

Vijay MD Founder Chefalytics, Co-owner Bite Catering Couture, Independent consultant (ex-McKinsey)

October 28th, 2014

I agree...if you're large and established, or adding on a new capability, acqui-hire makes sense.  Fast growth startup + acqui-hire = all kinds of cultural issues + whatever you find out after the deal closes.

You don't want to rush this one.  You can maintain the offshore thing while seeding a new team at home...best bet is to find someone who's either at the end of handcuffs or who's current gig is faltering with a strong network in the types of people you want to bring onboard.  Just make sure that (previous) organization's culture is what you want the new org to have.

Marco Calicchia Business Development

October 29th, 2014

Having come from several different startups who have recently moved internationally, your best bet here is to move some of the current development team back to your friend's homebase. You can then hire a few local developers, let the current developers teach them the bits and bobs of the business. You will need to offer them a few benefits to keep them going (as the current developer market is slim so a good package can give them a reason to continue working, otherwise they will go elsewhere). Once a footprint has been established, you can send the developers back home (if they do not want to stay), and let the current team with a CTO build out a strong company.

I am not a professional advisor, but have a lot of international market understanding and have seen what works and what doesn't

Best of luck!

Marco

Obaidullah Khawaja Head of eCommerce at Raptor Supplies

October 29th, 2014

Acqui-hires work best if you have a relationship with a reliable offshore partner that also has some skin in the game (sweat equity). The natural progression is from small partner to retainer + equity etc

This way you have a way to judge the technical capability and cultural fit. Plus it can only work if the offshore partner commits to sending his employees to sit with yours on rotation (ideally PM or technical offshore liaison). In the longer term the offshore employees should also be contractually bound to join you full time in the event of another round of funding or exit etc. 

This makes the offshore team like your own team with restricted stocks units on a vesting cycle (tied to deliverables etc) but at a much lower cost basis

My advice is based on real evidence (a friend of mine was involved in 2 such companies who got sold to Fortune 500 companies) and I've been in your friend's position too as a PM at Amazon and Microsoft. An arms length arrangement and a requirement to scale very fast won't work

Soren Riise Jack of many trades

October 30th, 2014

What does your friend think he will achieve by bringing it local -- what is the goal?

Having lot of "technical debt" sound like that the implementation is broken as it is, and moving the development from one team to a next team would not real this -- but rather as other have indicated, in the short term make it worse, as new people unfamiliar with the code have to struggle with a mess left behind by others.

Aqui-hire or not is not the question.   The question is whether your friend have confidence in the current code base (does he even have any real knowledge on the code?) -- and if not would he be willing to take drastic action ?  How to get the right team should be a question to answer once the situation is understood and a plan is made.

I help companies on a CTO-for-rent basis -- If interested, drop me a mail.

Soren

Lawrence Lerner Digitalization and Transformation Coach

October 29th, 2014

Great topic! I agree with @Steve, we need a bit more information here. Acqui-hires are usually of another product company in a related space. Finding the right company, culture and skills is a deep challenge. It's not impossible but what do you want to spend your time doing and how much time do you have.

I've build several outsourcing businesses. In general companies don't  get acquired for internal project. Some will do a BOT (Build-Operate-Transfer) but that takes time and depending on the country have its own restrictions.

If you can share more, I think you'll be able to get more specific advice for your friend.

Steve Owens

October 29th, 2014

We have have in-house engineers and outsource engineer, and we are a outsource engineering company. You are not giving a reason for this move, nor is there any description of what the company is doing, so hard to give a specific answer. I will say that in general, leadership, management and a clear set of processes are the keys to successful product development. It rarely has anything to do with in-house or outsource. In a lean start-up, you do not want an in-house team - at least not until the point were you know you have a repeatable business model. If you send me your email, I can send you our White Paper on this subject that might be useful for your friend. Steve Owens - Finish Line PDS A Better Way for Small Companies to Develop Products e | Steve.Owens@FinishLinePDS.com p | 603 880 8484 w | www.FinishLinePDS.com 94 River Rd | Hudson, NH | 03051 Click for Product Development White Papers ---- On Tue, 28 Oct 2014 22:18:48 -0700 Brian A. Brown<reply+dsc+1708@founderdating.com> wrote ---- FD:Discuss New Discussion on Acqui-hire vs off-shore development? Started by Brian A. Brown Raised $250m+ in VC. Sold companies. Multiple times: founder/board member. President/CEO, COO, EVP Corp Dev + Sales. Patents. I have a friend (exec) in fast growing SaaS company with a new, large round of founding. They have off-shore developers, but are thinking they need to move the development back home through an acqui-hire of a development team. Smart move? And is it even possible to find such a team? FOLLOW DISCUSSION or Reply Directly to this email to participate in the discussion Manage your email notifications