How To Work With Tech Agencies As A Startup Founder - Part One
10 Min Read
At Solid State Group we work with founders every day to build their first tech products. We ourselves spin out our own startups including Bullet Train, so we know what it’s like on both sides of the aisle.
We know that founders feel like tech agencies can be opaque, expensive, inflexible and non-entrepreneurial.
This blog series is for them.
This series will illuminate the opaque processes, show startups how to reduce agency costs, and work collaboratively to achieve the same goal: that of a hugely successful high-growth startup.
In Part 1, we look at who should choose an on-shore agency, how much it might cost, how to use the agency to raise more money, how to prepare to contact an agency, and what to expect from the scoping process before a contract is signed and the project kicks off in earnest. That bit is coming in Part 2.
Startups and corporates have several options when outsourcing to a bespoke software team. In brief those options are: on-shore, off-shore, near-shore, freelancers. (And hiring permanent staff.)
Different options suit different businesses. We at Solid State Group are an on-shore agency, this means we usually work with clients based in our country, the UK, and our office is in Shoreditch in London. We also work with international clients who value the level of skill and knowledge that London firms bring.
On-shore versus off-shore is not just about “expensive but good” versus “cheap but bad”. There is so much more to hiring a dev team than price.
But, while we’re on that subject:
Well, how long is a piece of string?
For a launchable product, realistically, it starts at £100,000. Mobile apps can be done for a little less. Websites can be done for very little. But if you’re a tech startup whose main product is a tech product, and you have big ambitions for a multi-million pound business, you don’t get that tech product launched for less than £100,000.
And then there’s maintenance, debugging and continued development after launch.
Which usually means that only people with £100,000 can use on-shore agencies?
Not at all.
You need your £100,000 to build a cross-platform product yes, or half that for an app, but you can start working with an agency before then. Here’s why.
Building a product is not like buying a house where you hand money over for an object. You’re buying a service, not a product. The service you’re buying is not just pure coding, but the research, feasibility study, ideation, customer development and prototyping services needed to start coding. Think of an on-shore agency not as tech guns for hire, but as partners in building your business.
If you were hiring someone to redecorate your bedroom, you wouldn’t just pay for a person to paint a wall, you’re expecting them to conduct a design and due diligence process first.
Likewise, any entrepreneur knows that a startup is not a fixed product but a long journey to product/market fit and the thing you ideated is not the thing you will build.
It is therefore possible and a good idea to hire an agency for as little as £20,000 to start this journey. At the end, you will have an idea of the feasibility of your idea, and an MVP with which to prove the customer need and raise the seed money to have the £100,000 to spend on the next step of the process.
Only on-shore companies can realistically provide this close service for you, which is why we at Solid State Group frequently work with founders with early stage ideas and scant capital. We believe they have the ability and chance to raise serious sums off the back of our work, and then continue the build with us when the funds are in the bank.
And for those of you with less than £20,000? We recommend you start with freelancers, Squarespace and MVP-faking tools such as Marvel in order to raise the money to start building a product properly.
So that’s the budget, but as I said, there’s more to think about when choosing to outsource your tech supplier than a mere day rate.
Do you have a deadline? On-shore companies are usually specialists when it comes to projects with a tight deadline. They’ve garnered these experiences from working with large corporates in long term partnerships as well as with startups with fixed runways who need their product in front of users as soon as possible. If that’s your situation, best to go with an agency who can prove they work to deadlines.
Do you need to meet face-to-face? I know many great businesses who are successfully working with off-shore agencies to build their product, but for early stage businesses I still believe that nothing beats a good face to face meeting to keep driving progress forward. As I say above, you’re hiring a partner when you hire a tech agency, and if you wouldn’t countenance your co-founder working remotely, then it makes sense to apply that rule to your tech builders too.
Is your startup in a highly regulated or brand-dependent industry? On-shore teams are likely to have a deeper knowledge of local legislation, regulation and accepted security standards for their country. Consequently regulated companies such as fintechs or businesses with a high reputation value are a better fit for on-shore - think how TalkTalk was damaged by its data breaches, and Facebook…
Do you need the agency to work in your office? On-shore teams usually prefer to work from their office in the environment they know, with the equipment they know. Some will compromise and send devs to your office if there’s a demonstrable benefit, Solid State Group does this occasionally.
There is work you need to do before you reach out to an agency. It’s work which will make you feel confident and comfortable talking to agencies about what you need, give you the right information to have an intelligent conversation with them, and help the agencies understand how to help you in return.
Budget backwards or feature forward? Usually, you’ve either got a set budget and want to know what you can get for it, or you’ve got a set wishlist of features and capabilities and the budget’s flexible. You need to know which one you are, and the high level details, before you send the intro email.
(A startup rarely has the luxury to finance the latter wishlist, but with good planning and communication, it shouldn’t need it - see the section below on working with agencies to see how to manage on a budget.)
What do your customers absolutely need? In order to get the most out of your relationship with an agency, you need to come prepared with a deep knowledge of your customer’s pain points and needs. While customer development is a never-ending process, the more you can teach your agency about your customer’s behaviour at the start the better. You’ll need to have this information written down and easily shareable amongst the team.
Customer development is a real skill and while it’s advisable you learn it, it’s also something you can outsource as well - software houses can’t always offer that skill though Solid State Group can as we’re have an end-to-end offering for startups.
This email should be like a pepperoni pizza. Just enough meat on the base to satisfy hunger, but not so overloaded it’s a slog to get through.
You should introduce yourself, your idea, your budget or features, what stage you’re at, and what your goals are. Those goals should include a potential launch date, and what you need the product to do - is it to generate revenue, win over investors, or prove customer need? From this info, the agency can quickly discover if they’re a potential match for you or not, wasting as little time as possible.
Dear Developer Agency
I am Joe Bloggs, this is my LinkedIn. I am working on an AR app which teaches millennials how to dab. I have a budget of £20,000, and I’d like to explore the technical feasibility of my idea, and build an MVP in order to raise a seed round.
Is this something your business can help with, and if so, how about a meeting next Wednesday at 3pm?
That’s one pepperoni cheesy crust ready to go.
You’ve done your homework, you’ve set up the meeting. Here’s how to get as much out of the agency as possible.
If there’s one thing you remember, it’s that this meeting is for you to learn from experts. Get as much free info as possible, NOT just talk about your startup. You could talk all day about your idea to a lamppost for free, this meeting is about listening.
So well in advance of the meeting, send as much written information to the agency as possible. Info around your target audience, competition, sector, customer pain points, progress and any designs or builds, all the things you’d need a new employee at your company to know about in great detail.
The agency will then use this info to prepare in depth for the meeting. They want to win your business, so they should come with their technical experts, not just the biz dev guys, to share ideas about how to actually build what you need - if you’ve sent the right information ahead of time of course. If they do not seem to have prepared, then chances are they’re not going to be the dedicated partner you need - though don’t expect a detailed proposal at this point, just ideas.
But those ideas are gold dust, and the more meetings with different agencies you have, the more you’ll learn about the options for building the product. I recommend talking to at least three agencies and challenging each one with the suggestions from the other to get a true understanding of the pros and cons.
- Be honest! Be honest about any problems you think loom on the horizon, any anxiety you feel about the agency’s approach. The sooner the agency knows about a problem, the sooner they can solve it.
- Take time to develop relationships with your potential partners. Treat them like onboarding your own staff, invite them to your office, or get them out for a drink in a social setting. Share your business values as much as your stats and goals. Celebrate the startup’s successes.Make them feel like a team and they will do the same for you.
- Don’t select a partner purely on price but always ask them to justify their price even if it’s pleasantly low. This deal needs to work for both parties.A product’s success never depends on whether you cut the day rate by 5% or not, it depends on a motivated and valued team with free creativity and tight deadlines.
- Request detailed examples of past work similar to your product. This will help you understand what’s possible and is a reference point to give feedback on, “I loved the UI on your first AR app but the backend isn’t secure enough for our confidential data.”
- If the agency quotes a wide price range “anywhere between £50-150k” for example, it’s a sign there’s not enough clarity around the project. Consider spending more time on scoping.N.B. most agencies do not work to a fixed price because it does not reflect their working methods, so a small range is expected, see our How To Work With An Agency section below.
- The sales people are great for you in the deal negotiation because they’re highly motivated to get the sale for their commission. They’re the one who can wrangle a compromise for you and find creative win-win solutions.
Finally happy with what’s on the table? Then it’s time to finalise the paperwork.
The documents and contracts are about protecting you and the agency. Broadly speaking, there are three main pieces of paperwork to expect:
- Confidentiality Agreement (NDA)
- Standard Contract or Master Services Agreement (MSA)
- Work Authorisation or Statement of Work (SOW)
NDA: Does what it says on the tin. It’s a mutual agreement to keep non-public information private.
Standard Contract: This contract refers to your relationship as a whole, not to the details of the project specifically. It will cover things such as liability, ownership, and Force Majeure.
Work Authorisation: This is the document which contains the details specific to the project. You’ll find details on the payment terms, the rates, where the staging environment is hosted, the support and maintenance, invoice schedule, even what tools the agency will use to communicate. (Clue, it’s probably Slack.)
Payment Terms: For agencies, time is money. They want as short a payment term as possible - which means you’ve got something to barter. If you can give short terms, they might compromise in your favour in another area.
The standard is 14 days for startups FYI.
Non-Compete: This is a no-brainer - less to stop an agency selling your product to a competitor, this is unlikely, and it’s even more unlikely that the agency will try to copy your business themselves, but you still need the non-compete clause to protect yourself and keep everyone crystal clear about what belongs to whom.
Non-Solicitation: Agencies don’t like clients hiring their staff for obvious reasons! So, usually they demand this clause to prevent you doing this.
Intellectual Property: Just like with the non-compete, this is where everyone gets on the same page about who owns what. You want to make sure you own all the product IP, but a spanner in the works is when an agency uses third party modules and plug-ins, which is completely standard and professional practice, but make sure you know what’s what in case you need proprietary software instead.
Portfolio Use: This is simply to allow the agency to use you as a case study. In some instances, businesses don’t want it public knowledge that they used the firm, but for startups in particular it’s a nice idea to have the agency include you in their portfolio.
The agency will feel more motivated if they will be sharing the project with the industry (devs are competitive, they want to show off how good their work is) and also you get some free advertising on their website and networks, which is always nice.
Now you should feel prepared to contact an agency as an equal partner, and know what you need to do with your business to be ready to succeed together. It’s still daunting approaching an agency with your precious idea, we understand that, but know that agencies just want to build cool stuff and do their best work.
Part 2 - how to work with your agency in the design, prototyping, and launching process - will be coming soon. But for more reading, check out our How I Did It Series, where we interviewed corporate professionals who have successfully made the switch to starting successful businesses. Highlights include an ex-lawyer who started a legal product for startups, a banker who started an ML business, and a founder who left the BBC to start her business while 9 months pregnant.
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