Vijay Anand | The Startup Guy.

The Future of the Startup Workforce : OnDemand Talent?

Posted on: June 22, 2008

Everybody, just about everybody seems to be having this problem. The teams that I oversee in IIT, all the way to a lone team in Simla, everybody is having a talent crunch. It is said that the most important aspect of a startup is the team. Have we grossly overlooked something? Or do things just have to be looked at differently? I think there is an alternative, and thats probably how the future will evolve.

So according to one entity’s claim, there are 800 startups in Bangalore. I know that as part of tracking startups, we see an average of about 500 – 600 new startups coming up every year, and these are just in the Technology space, and product focused.

Do we really think that we have the manpower to fuel all these dreams? I am really starting to doubt that. Loads of Opportunities, shortage of talent, and high density of clusters – which is going to be mean more and more people are going to leave startups to probably freelance and make use of this opportunity. I wouldn’t blame them. They are just tapping into the opportunity.

nGenera an entity founded by the guy who wrote the book on Wikinomics, which helps larger organizations optimize their task forces has this to say about Workforces: “…Enterprises have shed pyramid-style organization structures and instead view talent as a “marketplace” where workgroups with the right skills and experience can be quickly assembled, put on a given task and rewarded for the value they provide.” Does that sound Familiar? Will the same make sense for a Startup?

One of the primary reasons why a startup is pushed to go hunt for an Investor much before the focus, solution and customer has been identified, has been primarily because of this reason – the need to hire. if you want to hire, and someone none other than the best, he/she also comes with her own charade of questions as to how the startup is funded, and what are the options that the individual will benefit from. None of which makes sense, nor has a concrete founding unless there is a bank statement which shows some balance with lots of zeros following it – or atleast a term sheet.

So really, the eye of the hurricane is the issue with attracting talent. If that is solved in anyway, then a whole lot of issues along with it, including that of funding will slow down a bit. And time, even borrowed time is godsend for a startup.

Here is a gist of the issues:

  • Attracting talent for a startup is really hard.
  • Even if you manage to find a really talented individual whom you are dreaming and envisioning of as your future CTO, chances are that he wont take a fulltime responsibility.
  • If you go the usual route, hire freshers and want to train them, you realize that a year later they put your name on their resume and become part of the “hard to get” group, demanding hefty packages.
  • I’ll repeat, there is common theory that any investor will back a good team. Perhaps we need a slight change of thinking on that regard. It is not the team size, the numbers, nor the profiles that should matter. If there is an individual at the helm who could ideate, plan, execute and deliver then it should suffice right?

    I’ll get to what I am trying to say.

    I am thinking outsourcing. Did you know that Digg was mostly build over elance? The most touted Kevin rose, was not one of those developers who went nuts, locked himself inside his bedroom and coded away. Perhaps there is wisdom in outsourcing.

    Let’s put Mr. Friedman’s words to test if the world is really flat, shall we? I mean, if we could get talent from anywhere, then all of a sudden the perk of being in Bangalore, Chennai, Mumbai, or being in Gorakpur does not make a difference. And I think that itself is an incentive to try.

    The more I think about it, the more it makes sense. Think about it. Employee productivity is at around 4% right now. I could put some ruppee figures on it and say, if you invest 100 Rs on an employee, you get a product which is enhanced with a value of Rs 4. That’s ridiculously inefficient. And this output is for mammoth corporates. Can a startup really afford such inefficiencies and spend most of its time acting like training agents, than companies that are building dazzling products?

    Lets look at the benefits of getting more involved with communities like elance, Limexchange or Odesk for that matter. In order to make it work, you are going to have to;

    1. Break your product into modules and have vivid clarity on what you want. That will force the startups to get some clarity on what they are building, rather than playing by ear.

    2. You need to be able to do some project planning, which you should have been forced to do anyways.

    3. You only pay for what you build, which means much greater productivity

    4. You do not have to move to any specific location. You could be sitting in your own hometown, or wherever you can save costs on, and still get your work done. If Instablogs could be based out of Shimla and build such fabulous UI, traction and a community around their offering, it certainly is an example. Not that I have anything against Shimla, but its not your everyday IT Hub as commonly perceived to be more efficient to startup.

    5. And the best part of all. If you are having a cash crunch month, you can delay your next task allocation. You control time lines as to when the next task should begin, which means you don’t have to worry about having to shell out monthly salaries with or without productive work happening.

    Most teams that I am aware of, still would want to hire people fulltime. Well, you probably can, if you can justify it and if you can afford them. But in most cases, I am wondering if its a case where the founder just isn’t willing to accept the fact that the role that he chose to play is a lonely path. At the end of the day, he/she is the only visionary and the sole knight protecting and nurturing the idea child (perhaps along with his co-founder), but surrounding yourself with people who are at your call and beckon is just a temporary comfort and solace. I know it can get lonely, and having to see three people, the same three people, in your officespace everyday can be pretty tiring, and boring and even might feel as if you are stuck in a rut. (One of the reasons why Incubation centres make for some comfort factor, being around with other teams)

    But instead of focusing on surrounding yourself with frail souls, why not keep yourself surrounded by those key guys who share your vision (might be just you and your co-founder), and build the prototype, product and your initial traction with a product that is built by a team which is miles away, yet close by you – just a skype call away, and take it from there?

    You are most probably going to tell me that since your product is constantly evolving, you wont be able to get a specifications document beforehand. Odesk, and most of the freelancing sites do offer the capability to hire a person on hourly rates. And with the progress of agile project management methodologies, all you need is a good tool [like what Silverstripe software has], and you are good to go. Ofcourse, there is still the issue with your mentors and investors having to agree to it,but if anyone can make it happen, I know an entrepreneur can. Why not show them it works? Heck, When NASA and the defense contracts across the world are outsourced, why not that mashup you are building?

    I was initially a bit skeptical that outsourcing my development work will also mean that someone has access to my code. But I think the NASA model is going to rescue us there too. That’s why I mentioned that you need a core team. Ideate. Figure out the requirements, the initial one. Break it into pieces and send them all to four corners of the world. When it comes back, be ready to put it together. Oh yeah, you need to know how to work with code inorder to be able to do this, but if you or your co-founder cant, you were dead in the water even before you started.

    I am hoping to give this a whirl for my own startups. Has anyone tried this option? If so, what has your experience been?

    Disclaimer: I am not sure if this is a longterm solution. But most of the hard work and crux is essentially built in the beginning of a startups product lifecycle and thats when all the constraints are there. If the prototype is built, you have a few elite customers, and investors are standing on all sides wooing you, perhaps you can think about getting some folks onboard fulltime, and building a team to build from there.

    Some Discussions from Before:

  • The Startup Lunch Initiative
  • A Conversation I had with Vishal Gondal, where he was talking about this issue. Working with an Army, vs. Optimizing
  • Hiring Strategies for Startups, to attract those core members.
  • Do You really want to work for a startup? Think it through.
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    7 Responses to "The Future of the Startup Workforce : OnDemand Talent?"

    Hmm.. I would have loved to test this sort of model but I, myself, love to code. Moreover, when someone else develops a thing for you, it is very hard to get satisfied with the quality. You always seem to find the ways in which he could have done better.

    Vijay,
    Well, I have faced almost all the challenges which you have mentioned all.

    To keep the cost to the minimum, We decided to train freshers and get the codes delivered from them. However, they will leave you for a better package.

    To my advantage, I have found my CTO and he is working on the module to break it into pieces and i have formed a core team now.

    Now, instead of going to elance, odesk, etc, I have tried contacting the companies offering services on these websites directly and have negotiated a price to keep the costs down. I hope this will work out fine. I am trying it out and lets see how it can be effective.

    The main challenge in a startup is to keep the costs to the minimum and yet get quality products. This seems to be a major bottleneck. Getting an investor can definitely ease this pressure on this and get things moving fast. But getting an investor after the prototype is ready with a few customers will always give you the power to negotiate well.

    Vijay – I enjoyed reading this post. And you are right – there are many ways to create a startup that don’t require lots and lots of money. One of the reasons we founded http://www.crowdspring.com is to help small and midsize businesses buy creative services (logos, site design, marketing materials, etc.) without having to spend a ton of money. And the reason our model works differently from Elance, oDesk, etc. is because we felt it was easier for buyers to set their price, explain what they want, and pick from actual designs, not just proposals. This makes it MUCH easier to break down what you need – something that is often complicated for people, as you point out. I invite you and your readers to take a look – http://www.crowdspring.com

    Ross
    co-Founder

    I’m a big fan of the online job portals like elance, but I think there are a narrow set of startups for whom they would be appropriate. ie. Startups where the founders are technical and still working well paying jobs, but want to scratch a particular idea itch which requires more time than they can give on the side. These people can afford to pay the rates and can give enough guidance and track progress closely enough to notice if things are going seriously wrong.

    For many startups keeping costs low, and having time to iterate on the idea are top necessities in staying alive long enough to be successful. Contractors don’t fit this profile. Founders either need to be humble enough to bring on cofounders sharing significant equity and risk, or patient enough to work with freshers.

    For many startups the idea is somewhat amorphous which is a bad situation to pay people by the hour, and the prime value of startups is often its development capacity which doesn’t get developed in the contracting scenario.

    My feeling is founders are often too stingy with

    I agree with the model of outsourcing during the initial phases of the product’s life-cycle. This helps keep the costs and risks (both from over-staffing and attrition stand-point) low. It may also help reduce the time to market as now you don’t have to spend the time hiring, training etc… and instead have trusted a services company to deliver the assigned tasks in time because we know they know the technology better than the fresher. Once the product has built significant traction then it makes sense to built an in in-house team. my 2 cents!

    Outsourcing may be a good idea – but I think we need to make sure that services orgs understand the startup DNA 🙂

    This is experience that I have had doing outsourced work for startups in the US. My 2cs
    1. Evaluate if the company is open to change. Most outsourced services orgs prefer to work on a fixed price model with requirements frozen out. This might not provide value for startups.

    2. Sense of product ownership – How well they can understand the market and just not work on isolated modules. This might be something to think about.

    The founder needs to know what skills the company is being built around.

    If your core IP is in the software, then it makes sense to do it in house for 2 reasons. 1) You dont want the outsourced team building a similar project for someone else, and 2) you dont want to depends on a third party when you need to make quick, critical changes to the product.

    On the other hand, not every company has software as the core IP. The main focus may be in some other domain and the software is only the enabler. In such cases, outsourcing is the way to go.

    Look at it this way. Companies outsource a lot of administrative work to a chartered accountant. This is perfect for a software firm, but if you are an accounting firm you obviously want an in house team.

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