investors, saas, minimum-viable-productI run a Saas based product which I have outsourced to a software development company. We have traction and a high number of paying customers and have recently turned profitable.
Before I approach investors, I plan to do the following:
Form my own technical team and get the knowledge transfer done. I have heard investors usually hate outsourced product development.
The project manager at the development company has worked tremendously hard and is very eager to join a startup, especially ours. But, will it be a problem if I poach him? What are the pros and cons of doing this?
Is it ok for investors that the initial product development had been outsourced?
The key question is what they’re investing in. If you’re running the show and outsourcing everything, the assets in addition to lines of code and clients are your vision, yourself, and your project management skills. Huge risk. If you’ve assembled a team that is running the show, tangible assets include your team and its know-how. Your project can live on if you ever get hit by a car. As such, forming your technical team before moving forward is the right way to go imo. (At the very least get that project manager.)
Poaching the staff of your outsourced development team happens. Check your contract, in fact, as there might even be clauses that define if you can do so or how. If it’s covered, it’ll typically state that you’ll compensate the company much like you’d compensate a head-hunting firm. If it’s explictly denied (or if the project manager’s contract forbids it) then try to reach a deal along those lines. If it’s not raised in your contracts, work out a deal (if possible) where a transition is in place to keep everyone happy – you want to stay in good terms with the development company in the event they’re needed in the future.
Why don’t you ask some investors?
Transferring development from an apparently successful development team to a new untested and untried team is a costly and risky maneuver. One for which you currently have no validation is a good idea.
For example, what happens if you go to all this effort, only to find out investors aren’t interested, or are interested but would prefer an outsourced team? Maybe they are simply indifferent… and would have prefered to see more sales or higher revenues?
The investor is just another customer - why don’t you go and find out what they want?
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