Should I Use a Dev Shop? - Michael Seibel

Michael Seibel on using development shops to build your startup.

[DrTune]

If you're building a tech company and you're not technical yourself, you don't know what you don't know. You need someone technical you like, trust, and whose financial interests are directly aligned with yours. You don't want them to be an employee, you want them steering the ship along with you.

[alleaktien-insider]

Michael Seibel is without doubt the best CEO for YC you could wish for -- Michael, just wanted to say THANKS. You helped me create so much value, and a 100k MRP (monthly recurring profit ;D) startup so far! Keep going~

[zwip]

You’re the best Michael. Thanks for giving us your wisdom you acquired the hard way. You help not only the top entrepreneurs you meet at YC but also second rate ones like me who just want to create something useful.

[HeliasVieira]

I'm part of a dev shop, and we only work with startups that have a highly technical CTO. From our experience, when they don't have a solid technical team/CTO, it's always far more difficult. You didn't consider this, but I think the best combo is hiring a technical co-founder, and check if they could leverage what dev shops have to offer.

That said, I don't think going with a dev shop is the wrong decision for a lot of early-stage startups. They probably won't have the time or budget to hire in-house (plus training, learning), and using a dev shop that has built similar solutions before is far more cost and time effective. And in the meantime, you can start recruiting for your internal team. Having a great team is a must in my opinion and dev shops should never replace that.

[MHasnain]

Definitely agree. Failing at startups myself and now running a dev shop I think the best thing for you to do if you're not technical and dont have alot of money is to hire a technical co founder, come up with an implementation and then hire freelance or remote employees under the technical co founder. The technical co founder should always be aware of everything thats happening with the tech and so if in the future you decide to move development inhouse its not a disruptive change..

NEVER Start a company without at least 1 technical employee or founder.

And if you're starting a billion dollar company, hire inhouse from the start.

[hitabo]

As someone who has done both the building for startups, and built the startups, the only side of house I don't have experience with is actually being the one who does the outsourcing. My experience is that you are utterly nailing it to the wall about investors looking for people who can execute — that is something that has come up even on projects that we have built for startup companies. Also, the knowledge that you gain from building your MVP is absolutely critical, and I always have encouraged people to think of the MVP phase or early stage as more of a research stage, and that approach makes a lot more sense to founders. This advice is sage. Kudos.

[alexandreazevedo]

Great video! We tend to choose the dev shop rather than a technical co-founder, because it seems much easier to manage processes (building the MVP) than the people (a new partner).
We put a lot of efforts on thinking about features and processes. So, developing a healthy relationship seems much more difficult than “simply” developing the solution.

[romainbrabant]

Spot on video and advice. In 2016, I invest $72, 214 (65k EUR) in my MVP with a Ruby on Rail Dev Shop from Poland 🇵🇱. Hoping I could somehow “Skip a line”. But after 5 months they couldn’t even commit to finish it for 100k or Equity. Lost 💸 but also lost a Year from frustration before I reboot the project from the scratch with in-house team!

[NanduKrishnanNKSanandu]

Michael Siebel's short videos are just GOLD. They keep solving all the doubts I have in my head without me having to say it!

[beezuschrystler]

I’m a technical founder and I built the core part of our product offering, but for “nuts and bolts” I outsourced. I spent more and it took more time, but I was pleased with the work. but the thing that killed us was it was impossible for me to iterate on.

[michaelheggie]

I've been battling with this issue for the past few months now. Trying to get together something low cost while highly iterative. This is great advice, thank you. These videos provide enormous value!

[buinkweb]

There is some truth to most things he said, but he vastly overstates almost every point. I'm sure he's very knowledgeable about other things, but I see some big issues with his advice here.

First, he says that it will take longer to get the product with a dev shop. I've seen the opposite be true many times, particularly when your technical cofounder is working on your project on the side, in between projects. They're trying to squeeze your project in their spare time and that will always take longer. My gut says that this point is just wrong in the vast majority of cases. If you're paying someone, they're going to do a better job than someone just hoping for a big payout.

Second, he says that a dev shop isn't as invested in your project because they don't have equity. Truth be told, it takes a lot more than equity to get someone to fully commit. There is nothing special about equity that makes them more committed. Yeah, maybe the potential big payoff is powerful on good days, but in hard times, that equity means nothing and paying the bills means everything. Compensation type does not improve commitment. There are many other more important factors for commitment like project interest, culture, etc. There are many dev shops that are looking for long-term relationships, you just have to find the right one.

Third, it is true that your project will cost more when using a dev shop, but if you have the money, you can get a whole team building vs one guy in his basement on the weekends. Web development has become so complex these days, that there usually isn't one guy that can do it all, and if he can, I guarantee he can't do it all well. You need a team. So, even if you have the one guy, you may want to fill out your team with fractional resources from a shop.

Fourth, I defer to him on whether investors want to see outsourced teams, but I have heard the opposite. That said, I do think this is the most solid point he makes, only because most investors are like lemmings and they just follow what other investors do rather than thinking through this. If an investor isn't sophisticated enough to see that your product was built well within a decent budget, then you may not want them investing in you anyways.

Fifth, his point about throwing the first iteration away isn't only true for outsourcing. This is a well known developer bias that new developers default to rebuilding stuff if it wasn't built the way they like whether it makes sense for the business or not. I've seen this same thing happen when the version one was built by the technical co-founder and then professionals come in later. I've even seen it where the rebuild isn't any better than the first build. This is an industry problem and has nothing to do with the decision to outsource or not. If the new co-founder comes in and instantly recommends a rebuild, it may be a good sign that you have a developer who doesn't understand the business tradeoffs of what they're saying.

Sixth, he says that with a dev shop you'll run out of money and won't have money to iterate. This is a problem with tech startups in general. We need to plan for iterating. I don't see any difference between the two, other than the incorrect assumption that equity founders cost nothing. They still have bills to pay and if they're smart, they still understand the concept of opportunity cost.

Seventh, he stresses how important it is to find a technical co-founder, even if it takes more time to do so. The sad truth is, many ideas die because technical co-founders who will work for nothing but equity are not as common as you'd hope, and then when you find one, they may not have the skills that can get you to where you want to be. In reality, to find a developer who can do the job in a reasonable amount of time and at a good level of quality is already very hard. This industry is extremely competitive right now and salaries are inflated because of how much cash the big tech companies can throw around. Then, if you try to find someone who can do the job, but do it for free, you're looking for the diamond in the rough and most people will never find it.

[AdeelKhan]

Having gone the route of outsourcing to dev shops on more than one occasion, I agree with all the points that have been raised.

[ill]

Anytime Michael seibel is on the thumbnail on the video I instantly click the video I just appreciate his knowledge, and expertise in the start up world.

[martinstine]

Thank you too Michael. Learnt something from this video. 🙌🙌🙌 YC

[vaexperience]

I'd argue that going Dev shop is even harder: it can be much more expensive as you never fully know the underlying complexity. also trust is a big one. Besides finding a tech co-founder another route is to upskill oneself in programming - it will take a lot of time to get it right, but might just be worth a shot if the other options aren't available. Just a thought

[sagarjaid]

Agree Michael, Very nice series keep posting 🙂

We need suggestions for experts like you!
Again thank you for amazing content 💗

[FahmiEshaq]

Listen to Michael...I'm a tech guy and what he said is 100% correct hands down

[jared.s.k]

Would YC consider having a CTO matching/finding program? The idea would be a founder can put together a one page pitch and 5 minute video. CTOs can review a short pitch by founders in a closed system. If the CTO is interested the founder and CTO can be introduced.

[IonutMilitaru]

That being said, after you've had your MVP and you've set the founders team and the foundations of your dev/product team, I am here to help you scale the development operations following your technological vision and roadmap!