Recruitment is a challenge often overlooked by startups, not realizing the impact of poor recruitment until it’s too late. In many cases, startup owners can spend up to 40 percent of their working hours on tasks that do not generate income but are critical, such as hiring, payroll, and other HR tasks. And that is once a team has already been assembled which is a challenge in itself. In fact, it takes an average of six months for a startup to hire someone. Unfortunately, for nearly a quarter of startups (23%), team issues will eventually lead to failure.
One specific trap can be especially costly — hiring a local, full-time development team for the MVP. The Minimal Viable Product, or MVP, is the earliest iteration of your product with the only core functionalities required to prove the business model, concept, and demand.
Unfortunately, many startups will burn through a large chunk of their budget right at the start on a team they cannot fully utilize. Or at the other extreme, startups will “make do” with teams that do not have the necessary skills to build MVPs that do their idea justice. But now startups have an affordable yet comprehensive solution to recruitment — staff augmentation.
- Building an MVP with an in-house team offers the most transparency and control but is rarely financially feasible.
- Outsourcing, especially offshore outsourcing often comes with poor communication, slow turnaround times, and an overall lack of structure in operations.
- The gig economy is flourishing and is often the cheapest way to an MVP but evaluating technical candidates is a challenge for non-tech founders. Additionally, the managerial overhead will be too much for most.
- Staff augmentation matches the control and transparency of an in-house team and the cost of a freelance team, enabling companies to build a moderately-sized MVP quickly and for a fraction of the cost.
Breaking Down the Cost of an MVP
The Minimal Viable Product is just that — minimal. It should only contain enough features to convey the main concept to customers and use their feedback to build the product further. But even then, MVPs can vary a lot in size and scope. For instance, Airbnb’s MVP would be a fraction of Facebook’s MVP. To keep things consistent, we’ll stick to discussing the cost of a social media/online forum-like app, something like Twitter.
In this case, hiring a US-based in-house team would be a minimum of $50,000 which includes a full-stack developer, a designer, a tester, and a project manager, but there’s more. By definition, MVPs iterate quickly and in most cases, startups will go from the MVP stage to active development fairly quickly. But since it’s not a sure thing, hiring an in-house team for the MVP is rarely a good idea.
But hiring an in-house team isn’t the only option, is there? We can outsource, hire freelancers, or use a staff augmentation service.
What is Staff Augmentation?
Staff augmentation has many names but at its core, it’s a model where startups (and even enterprises) hire talent on a temporary basis to meet a short-term project’s staffing needs. More often than not, short-term projects like creating an inexpensive MVP cannot justify the cost of hiring a full-time team of developers, designers, and product strategists. In fact, just those three positions can cost a startup anywhere between $150,000 to well over $400,000.
On the other hand, staff augmentation gives startups a dedicated team that can see the project to completion in a fraction of that. There is no hidden fine print or “gotchas” and it’s not a deal too good to be true.
Staff augmentation clearly lays out the scope of the project and the deliverables in advance which often results in an accurate estimate rather than an indefinite retainer. More importantly, projects that rely on staff augmentation rarely last more than two months. In fact, most MVPs can be delivered within weeks thanks to the extra manpower and professional experience that a dedicated team brings.
Staff Augmentation vs Outsourcing
Outsourcing has earned itself a negative reputation, and for justifiable reasons. Most of the time, it’s difficult to maintain quality control or get quick iterative changes. But this is mostly offshore outsourcing. Staff augmentation is much closer to onshore or nearshore outsourcing, meaning companies work with people in their time zones, making it easier to give feedback and receive revised iterations of their software much more quickly.
But that’s not all. Part of the bad reputation that accompanies offshore outsourcing is the seeming lack of structure, communication, and well-defined protocols to deal with unforeseen circumstances. But since staff augmentation is something offered by agencies or managed service providers (MSPs) with an in-house team of product strategists, developers, marketers, engineers, etc, miscommunication or unstructured working hierarchy is extremely rare.
In fact, everyone in the technical team has a reporting manager that works directly with the startup’s management team to ensure smooth collaboration between the two teams. When required, the dedicated teams can even work as an extension of the company’s IT department. That’s the beauty of staff augmentation — unparalleled flexibility.
Staff Augmentation vs Freelancers
The gig economy is on fire — in a good way. Easier internet access means there are hundreds of thousands of expert freelancers ready to fill your technical talent needs. And hiring freelancers is usually not very expensive either. But that’s usually where the good aspects come to an end.
Hiring technical talent for a non-tech founder can be a nightmare. The downside of a flourishing gig economy is that you need to look a lot before you find the right person for the job. This can take weeks and you still may end up with someone who does not have the right skills for your project. And unless you’re hiring a project manager, you’ll likely be spending a lot of time coordinating your designers, developers, and testers. Even if you do hire a project manager, it might be some time before they work like a well-oiled machine (or they might never).
Freelancers are great in a pinch and finding the right individuals can be a great solution but MVPs demand frequent revisions and quick turnaround times that freelancers generally can’t deliver. More importantly, during these early phases of the startup, founders usually don’t have a lot of time (or energy) to manage everything themselves. This is why staff augmentation becomes such a well-rounded alternative.
It takes the burden of management away from the startup founders while providing them with an expansive network of qualified technical talent in every technology. More importantly, agencies that offer staff augmentation are usually more than willing to work with non-tech founders and help them find the right individuals for their project, even when helping the founder lay out the project’s technical requirements.
Startup Incubators and Staff Augmentation
Startup incubators or business accelerators usually have their own recruiting teams but most lack the practical expertise to find qualified technical candidates. This is a bigger problem when they are handling multiple startups that require different technology roles. Not to mention, they need to be cost-conscious when hiring at volume.
Hiring at volume adds another challenge — vetting individuals. Over time, hiring at volume will almost always lead to an overall degradation in the quality of talent. This is shortly followed by increasing costs and a lack of productivity.
These issues can be solved with the holistic talent recruitment and management that staff augmentation brings. For incubator leaders, the ability to find highly specialized areas of expertise such as engineering, design, DevOps & SRE, product development, and so on, all under one roof is monumental in streamlining operations and reducing administrative overhead.
How Moonlight Labs Helps with Staffing
Moonlight Labs partners with startups, enterprises, and incubators to meet diverse talent requirements (mechanical or otherwise). We have a simple but effective process that begins with identifying staffing goals and laying out the qualities desired in a product team. We go the extra mile in creating roadmaps, establishing reporting relationships, levels of urgency, managing feedback, and more to ensure a smooth integration.
Through our flexible product teams, Moonlight Labs can quickly build a moderately sized web application for the fraction of the cost of alternative solutions, suitable for meeting core customer needs and demonstrating market fit for investors. Additionally, we can expand the MVP team to begin the active development cycle and build a fully-featured market-ready version of your app.
Get access to top technical talent. Reach out to our team for a free consultation today.
About Moonlight Labs
Maui-based technology company, specializing in prototypes, MVPs, and fully-functional, scalable products. Through a team of product strategists, developers, marketers, and engineers, Moonlight Labs helps companies through every step of their software journey, from concept to launch and beyond. We share our expertise through flexible product teams that are 100% dedicated to your project and company needs.