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Acqui-hire vs off-shore development?

I have a friend (exec) in fast growing SaaS company with a new, large round of founding. They have off-shore developers, but are thinking they need to move the development back home through an acqui-hire of a development team. Smart move? And is it even possible to find such a team?

15 Replies

Alan Peters
1
0
Alan Peters Entrepreneur
VP Product and Technology at BusinessBlocks
Odds of finding a worthwhile acqui-hire at that stage are slim to none.

Your friend is looking for somebody who can build a team and nip technical debt in the bud without losing momentum.

Tall order but happy to discuss further if you want to provide details
Vijay Goel, MD
1
0
Vijay Goel, MD Entrepreneur • Advisor
Founder Chefalytics, Co-owner Bite Catering Couture, Independent consultant (ex-McKinsey)
I agree...if you're large and established, or adding on a new capability, acqui-hire makes sense. Fast growth startup + acqui-hire = all kinds of cultural issues + whatever you find out after the deal closes.

You don't want to rush this one. You can maintain the offshore thing while seeding a new team at home...best bet is to find someone who's either at the end of handcuffs or who's current gig is faltering with a strong network in the types of people you want to bring onboard. Just make sure that (previous) organization's culture is what you want the new org to have.
Toli Kuznets
2
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Toli Kuznets Entrepreneur
Senior Director of Engineering at Marin Software
This is science fiction. As others noted, it'll take a while to transition the new team to the existing product, and there may be cultural issues. Also, "outside" acqui-hired people may not be that motivated to work on some new random product they didn't put their sweat/blood/tears into that just fell on them.
Finding and evaluating such a team is going to be hard as well - who will do the due diligence? You may not get what you expected.

Better to find someone locally to run the eng team, and use that person to help grow an in-house team while using the offshore team in parallel to move the product forward until internal team is big enough.
Gil Allouche
3
0
Gil Allouche Entrepreneur
Founder @ Metadata
IMHO If you can benefit from the cost savings and they know the work -- tell your friend to keep the team, hire a local CTO who can manage them effectively and let him gradually build a local team.
Obaidullah Khawaja
0
0
Obaidullah Khawaja Entrepreneur • Advisor
Head of eCommerce at Raptor Supplies
Acqui-hires work best if you have a relationship with a reliable offshore partner that also has some skin in the game (sweat equity). The natural progression is from small partner to retainer + equity etc

This way you have a way to judge the technical capability and cultural fit. Plus it can only work if the offshore partner commits to sending his employees to sit with yours on rotation (ideally PM or technical offshore liaison). In the longer term the offshore employees should also be contractually bound to join you full time in the event of another round of funding or exit etc.

This makes the offshore team like your own team with restricted stocks units on a vesting cycle (tied to deliverables etc) but at a much lower cost basis

My advice is based on real evidence (a friend of mine was involved in 2 such companies who got sold to Fortune 500 companies) and I've been in your friend's position too as a PM at Amazon and Microsoft. An arms length arrangement and a requirement to scale very fast won't work
Inbae Ahn
0
0
Inbae Ahn Advisor
Managing Partner, CIO at Polyform Labs
Acqui-hire ONLY IF the company being acquired is a competitor to what your friend is building AND has customers and revenue that prove their business model is viable. This way you remove a competitor,acquire paying customers and most importantly get a team that has domain expertise and believes in your buddy's idea.
Steve Owens
0
0
Steve Owens Entrepreneur • Advisor
Finish Line - A Better Way for Small Companies to Develop Products
We have have in-house engineers and outsource engineer, and we are a outsource engineering company. You are not giving a reason for this move, nor is there any description of what the company is doing, so hard to give a specific answer. I will say that in general, leadership, management and a clear set of processes are the keys to successful product development. It rarely has anything to do with in-house or outsource. In a lean start-up, you do not want an in-house team - at least not until the point were you know you have a repeatable business model. If you send me your email, I can send you our White Paper on this subject that might be useful for your friend. Steve Owens - Finish Line PDS A Better Way for Small Companies to Develop Products e | Steve.Owens@FinishLinePDS.com p | 603 880 8484 w | www.FinishLinePDS.com 94 River Rd | Hudson, NH | 03051 Click for Product Development White Papers ---- On Tue, 28 Oct 2014 22:18:48 -0700 Brian A. Brown<[removed to protect privacy]> wrote ---- FD:Discuss New Discussion on Acqui-hire vs off-shore development? Started by Brian A. Brown Raised $250m+ in VC. Sold companies. Multiple times: founder/board member. President/CEO, COO, EVP Corp Dev + Sales. Patents. I have a friend (exec) in fast growing SaaS company with a new, large round of founding. They have off-shore developers, but are thinking they need to move the development back home through an acqui-hire of a development team. Smart move? And is it even possible to find such a team? FOLLOW DISCUSSION or Reply Directly to this email to participate in the discussion Manage your email notifications
Lawrence I Lerner
0
0
Lawrence I Lerner Entrepreneur • Advisor
Digitalization and Transformation Coach
Great topic! I agree with @Steve, we need a bit more information here. Acqui-hires are usually of another productcompany in a related space. Finding the right company, culture and skills is a deep challenge. It's not impossible but what do you want to spend your time doing and how much time do you have.

I've build several outsourcing businesses. In general companies don't get acquired for internal project. Some will do a BOT (Build-Operate-Transfer) but that takes time and depending on the country have its own restrictions.

If you can share more, I think you'll be able to get more specific advice for your friend.
Brian A. Brown
0
0
Brian A. Brown Entrepreneur • Advisor
Founder, consultant, adviser
Great points. Thanks. Lawrence and Steve asked for more details. Here is about the limit I can share. Why are they contemplating this: They want more in-house control over product on a day-to-day basis. They want faster changes and reduction of communication issues. What is the product? It is a back-office SaaS product.

I agree with much of what has been said. Acquisitions and integrations of any type are difficult and many if not most fail. There may be no short cuts to finding a team lead and building organically in order to better own their destiny. They are way beyond proof of concept. The company is growing very quickly.

If anyone knows any potential team leads etc, I can pass along. I have no financial interest in the company -- unfortunately. :)

Thanks.
Lawrence I Lerner
0
0
Lawrence I Lerner Entrepreneur • Advisor
Digitalization and Transformation Coach
Control and productivity can be achieved in a number of different ways. That's a potential deep dive with the company. It may be the development methodology or other factors.

Where are they located?
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