Life of FBi | Non-Tech Start-up Founder

Looks like a Chinaman, Sounds like an Aussie, Utterly Confusing

Posts Tagged ‘Outsourcing

Halve Your Team, Double Your Rev

leave a comment »

Wrapping up a busy summer at Babson’s Summer Venture Program, there were your expected results from a three month incubation; some startups were able to get from idea to alpha prototype, some were able to go from private beta to generating revenue. What was unexpected, at least to me, were how much the teams grew with interns and part-time student hires.

Of course a serious constraint of any student startup is the lack of time to execute and bring to market your product. I’m all for Ferriss like efficiency, but the reality that I’ve experienced is that it simply takes a lot of man hours to get a startup from idea to product to market to growth. So what’s the logic?

– Need 1,000 hours to build this web app, and we’re aiming to get to market within 10 weeks

– Founders only have 25 hours each to dedicate per week outside of school = 500 hours total by week 10

Besides the fact that it’s probably going to take 1,500 hours because everyone ALWAYS underbudgets time for web apps, you think you’re going to need three interns to punch out 10 hours a week (total 300 hours), but that still only brings you to 800 hours by week 10. So let’s bring on another intern (100 hours), and then outsource components (120 hours), bringing you to 1,100 hours. You think you’re being smart by overbudgeting by having that extra 100 hours ;)

The thing that I saw as consistently as growing teams was the decay curve of efficiency as each team member was added. So you’re not actually getting quality 1,100 man hours. You’re getting far less. From disengaged interns and disconnected outsourced developers you’re probably getting closer to 600 quality hours. It’s basic economic dimishing marginal returns. That’s in addition to having founders who are often over-achievers, still wanting to excel in other parts of their domain, i.e. still be top of their class, be President’s of the most respected clubs, etc, and are restricted to so many man hours on their startup.

Even if that isn’t the case, sometimes the notion of growing a team is just so appealing. I know Blank Label definitely suffered from that. When Max, co-Founder, exited the business, I was determined to build a team. There was a revolving door of interns, and then a zoo of sales reps on commission, developers all across India and Eastern Europe.  And I’d make two fundamentally devasting mistakes every time. I would get out the worst part of any relationship, at The Dip, the most challenging part, but just before you’d start to experience some real value. And I’d always underappreciate the overhead management time which would cripple me from driving the business forward.

My lesson: Have as few people on the team as possible, doing the most amount as possible. You cannot afford to have a 20-80 rule in a startup. It will kill you, and your startup. And Stay Lean —> Build Less, Fix Time and Budget, Flex Scope

When in writing, Getting Real by 37 Signals sitting by my side for inspiration.

Written by Fan Bi

September 7, 2009 at 12:44 am


Get every new post delivered to your Inbox.