Digital agency · Offshoring

Using an agency (partner) vs. cofounder?


November 22nd, 2015

I have been following the customer development process as part of my goal to build an enterprise grade software platform for health care. I now have a laundry list of potential features from customers and it needs to be pared down to inform the development of the MVP.

I have spoken to several potential co-founders but it's not clear that they have the time to make this a reality / support the product after release.

I have several potential customers who say they will buy once it's built etc. Regardless, I am thinking about finding an agency to design / develop the product. Not in a traditional sense ie. fee for service, but on a partnership (equity) basis. Maybe a firm that has a local presence, but manages offshore developers which could keep the costs down.

Has anyone been able to do this successfully? Eager to hear about your experiences using this path.

Guy Brockless Head of Growth Marketing

Last updated on November 12th, 2018

What you describe is an increasingly common model referred to usually as a Venture Builder or Startup Studio.

A venture builder enables startups to leverage its internal team of business developers, designers, developers, marketers and sometimes VCs in the ideation, development and launch of a company. It is a business model structured for acceleration: invest in a fully equipped, talented team, identify a few things you do well, replicate the model and put your team to work to grow different businesses in parallel.

The equity component brings alignment of business interests similarly to an in-house team but there is a significant reduction in risk. Hiring a CTO and development team is costly in cash and equity and there's little to guarantee success. Unless you have a big wad of cash in the bank this is not likely an option. The alternative then is an agency or a venture builder both bringing an on-demand team which is experienced and comfortable working together. They will have processes and workflows in place to ensure efficiency and can offer fixed price MVPs.

The differences between tech agencies and venture builders is significant:

Agencies VS Venture Builders

  • Short term profit maximization (high hourly rate) VS full alignment for long term value creation (low hourly rate + equity)
  • Non-scalable systems (to redo after 6 months) VS scalable MVPs with full reusability
  • Prices increasing (milking loyal customers) VS prices fixed by contract for any upcoming work
  • Devs outsourced VS All in-house
  • "commoditized devs" VS Hiring top talent
  • Mass production of websites VS 1 dev working only on a few projects over several years, and thus really "caring" and being aligned with the startup
  • PMs are sales people VS PMs are entrepreneurs / mentors

Anthony Miller

November 22nd, 2015

Hi there! My agency, millermedia7 actually serves startups in this way. We're a small digital creative agency, and have built several MVP's. Not sure what kind of structure you've been thinking about. We'd be happy to have a chat at the very least to help you avoid any hurdles.

Md. Shihab Uddin

November 24th, 2015

Combination of both.