How I Used Software Outsourcing To Sell Two Startups.

John Sung Kim 3 min read

Our San Francisco & Eastern Europe teams at dinner celebrating our acquisition by Kareo. (2015) #DoctorBase

As the founder of two startups (one IPO, one cash sale) I’ve leveraged offshore labor to save on the crazy high costs of operating in California. My first startup was venture funded and the second mostly bootstrapped, but we used offshore software and marketing teams to start both. Here are the top 3 things I recommend to non-technical entrepreneurs seeking my advice.

#1: Rent a Part-Time CTO First

I can’t emphasize this enough.

You magnify your chances by one or two orders of magnitude when the lead developer has actually launched successful applications before.

But you will not find this person at an outsourcer or a freelancer website.

The best outsourcers can build you an MVP for a small beta, but they can’t build you an application that will be commercially successful. In 22 years in the software business, I’ve never seen it done – and in private conversations at conferences – outsourcers will admit the same.

In each of my two startup projects, I found a solid part-time CTO first and had them directly manage the outsourcer’s team. The part-time CTO was financially unaffiliated with the outsourcer, and it needs to be that way to audit for common vendor shenanigans (upselling skills, overbilling on hours, taking shortcuts on code quality, etc.).

Good CTOs also have the product experience to 10x your chances of success, drive down development costs because they make the team go faster, and create well-architected code that can be sold to an acquirer one day.

Please trust me when I say an acquiring company’s CTO/VP will audit your code heavily (often for days) before final purchase.

Good CTOs, like good sales managers, pay for themselves fairly quickly.

Get a “CTO as a Service” for as little as a few hours per week

#2 Negotiate Prices One Skill Level Down

It’s very common for outsourcers and recruiters to sell interns as “Junior Developers” and mid-level developers as “Seniors.” The entire system incentivizes vendors in this way.

When hiring additional team members, before settling on a fixed rate, agree on an initial per hour pricing during a 30 day trial period. Your part-time CTO can spend some time in a pair programming session with the new developer and quickly assess the speed with which they will execute tasks successfully.

10% – 15% rate reductions are common if your CTO identifies this common practice early on and can offer to coach the developer (which adds value to both the outsourcer and your project).

You can also use this time & cost savings to fund your part-time CTO.

See what outsourcers pay their developers in Eastern Europe

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My first startup which I started with 6 credit cards had an IPO on NASDAQ. (2013) #Five9

#3 Have an Ongoing Marketing Plan

In between startup #1 and #2, I was a “Growth Marketing” consultant to numerous successful tech companies such as UpWork, RingCentral, Qualys, and LGC Wireless. Even some non-tech organizations like Miller Heiman and the State of California.

So I got to see a lot of firsthand data on what worked and what didn’t.

One of the most common mistakes that first-time founders make is to assume a Product Hunt launch or PR will bring a critical mass of users.

It won’t.

Launches are often best done in phases, likely with miniature pivots at each stage, and while you may not need a Chief Marketing Officer yet, having an experienced demand generator create a basic “Go To Market” plan is critical.

Once you have this basic plan in place, you can hire lower cost labor on Toptal or Upwork to manage your marketing campaigns on a daily or weekly basis.

We partner with a very well-respected San Francisco agency who creates low-cost Go to Market plans

Once your Go to Market plan is started, you should start filling in a spreadsheet like. (Assuming B2B. B2C metrics may differ slightly).

After two decades and two startups in Silicon Valley, my two CTOs and I decided to set up a software development shops in Eastern Europe (Poland and Ukraine). Hope this article saves you time and money on your project’s journey!

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