There is some truth to most things he said, but he vastly overstates almost every point. I'm sure he's very knowledgeable about other things, but I see some big issues with his advice here. First, he says that it will take longer to get the product with a dev shop. I've seen the opposite be true many times, particularly when your technical cofounder is working on your project on the side, in between projects. They're trying to squeeze your project in their spare time and that will always take longer. My gut says that this point is just wrong in the vast majority of cases. If you're paying someone, they're going to do a better job than someone just hoping for a big payout. Second, he says that a dev shop isn't as invested in your project because they don't have equity. Truth be told, it takes a lot more than equity to get someone to fully commit. There is nothing special about equity that makes them more committed. Yeah, maybe the potential big payoff is powerful on good days, but in hard times, that equity means nothing and paying the bills means everything. Compensation type does not improve commitment. There are many other more important factors for commitment like project interest, culture, etc. There are many dev shops that are looking for long-term relationships, you just have to find the right one. Third, it is true that your project will cost more when using a dev shop, but if you have the money, you can get a whole team building vs one guy in his basement on the weekends. Web development has become so complex these days, that there usually isn't one guy that can do it all, and if he can, I guarantee he can't do it all well. You need a team. So, even if you have the one guy, you may want to fill out your team with fractional resources from a shop. Fourth, I defer to him on whether investors want to see outsourced teams, but I have heard the opposite. That said, I do think this is the most solid point he makes, only because most investors are like lemmings and they just follow what other investors do rather than thinking through this. If an investor isn't sophisticated enough to see that your product was built well within a decent budget, then you may not want them investing in you anyways. Fifth, his point about throwing the first iteration away isn't only true for outsourcing. This is a well known developer bias that new developers default to rebuilding stuff if it wasn't built the way they like whether it makes sense for the business or not. I've seen this same thing happen when the version one was built by the technical co-founder and then professionals come in later. I've even seen it where the rebuild isn't any better than the first build. This is an industry problem and has nothing to do with the decision to outsource or not. If the new co-founder comes in and instantly recommends a rebuild, it may be a good sign that you have a developer who doesn't understand the business tradeoffs of what they're saying. Sixth, he says that with a dev shop you'll run out of money and won't have money to iterate. This is a problem with tech startups in general. We need to plan for iterating. I don't see any difference between the two, other than the incorrect assumption that equity founders cost nothing. They still have bills to pay and if they're smart, they still understand the concept of opportunity cost. Seventh, he stresses how important it is to find a technical co-founder, even if it takes more time to do so. The sad truth is, many ideas die because technical co-founders who will work for nothing but equity are not as common as you'd hope, and then when you find one, they may not have the skills that can get you to where you want to be. In reality, to find a developer who can do the job in a reasonable amount of time and at a good level of quality is already very hard. This industry is extremely competitive right now and salaries are inflated because of how much cash the big tech companies can throw around. Then, if you try to find someone who can do the job, but do it for free, you're looking for the diamond in the rough and most people will never find it.

@Fixer934

2 жыл бұрын

So 100% agree what you said. I think YC put out such info, in some cases, for their best interests.

If you're building a tech company and you're not technical yourself, you don't know what you don't know. You need someone technical you like, trust, and whose financial interests are directly aligned with yours. You don't want them to be an employee, you want them steering the ship along with you.

Michael Seibel is without doubt the best CEO for YC you could wish for -- Michael, just wanted to say THANKS. You helped me create so much value, and a 100k MRP (monthly recurring profit ;D) startup so far! Keep going~

You’re the best Michael. Thanks for giving us your wisdom you acquired the hard way. You help not only the top entrepreneurs you meet at YC but also second rate ones like me who just want to create something useful.

@rasinansar4890

3 жыл бұрын

You're not second rate if you're building something useful

Great video! We tend to choose the dev shop rather than a technical co-founder, because it seems much easier to manage processes (building the MVP) than the people (a new partner). We put a lot of efforts on thinking about features and processes. So, developing a healthy relationship seems much more difficult than “simply” developing the solution.

@Drewlicious

4 жыл бұрын

I agree

@clintonharold8375

2 жыл бұрын

I agree 100. I fell out with my partner just months into the project and we finally couldn’t launch. Now I’m rebuilding

I've been battling with this issue for the past few months now. Trying to get together something low cost while highly iterative. This is great advice, thank you. These videos provide enormous value!

Michael Siebel's short videos are just GOLD. They keep solving all the doubts I have in my head without me having to say it!

As someone who has done both the building for startups, and built the startups, the only side of house I don't have experience with is actually being the one who does the outsourcing. My experience is that you are utterly nailing it to the wall about investors looking for people who can execute - that is something that has come up even on projects that we have built for startup companies. Also, the knowledge that you gain from building your MVP is absolutely critical, and I always have encouraged people to think of the MVP phase or early stage as more of a research stage, and that approach makes a lot more sense to founders. This advice is sage. Kudos.

Spot on video and advice. In 2016, I invest $72,214 (65k EUR) in my MVP with a Ruby on Rail Dev Shop from Poland 🇵🇱. Hoping I could somehow “Skip a line”. But after 5 months they couldn’t even commit to finish it for 100k or Equity. Lost 💸 but also lost a Year from frustration before I reboot the project from the scratch with in-house team!

Definitely agree. Failing at startups myself and now running a dev shop I think the best thing for you to do if you're not technical and dont have alot of money is to hire a technical co founder, come up with an implementation and then hire freelance or remote employees under the technical co founder. The technical co founder should always be aware of everything thats happening with the tech and so if in the future you decide to move development inhouse its not a disruptive change.. NEVER Start a company without at least 1 technical employee or founder. And if you're starting a billion dollar company, hire inhouse from the start.

I’m a technical founder and I built the core part of our product offering, but for “nuts and bolts” I outsourced. I spent more and it took more time, but I was pleased with the work. but the thing that killed us was it was impossible for me to iterate on.

I'm part of a dev shop, and we only work with startups that have a highly technical CTO. From our experience, when they don't have a solid technical team/CTO, it's always far more difficult. You didn't consider this, but I think the best combo is hiring a technical co-founder, and check if they could leverage what dev shops have to offer. That said, I don't think going with a dev shop is the wrong decision for a lot of early-stage startups. They probably won't have the time or budget to hire in-house (plus training, learning), and using a dev shop that has built similar solutions before is far more cost and time effective. And in the meantime, you can start recruiting for your internal team. Having a great team is a must in my opinion and dev shops should never replace that.

Agree Michael, Very nice series keep posting 🙂 We need suggestions for experts like you! Again thank you for amazing content 💗

Anytime Michael seibel is on the thumbnail on the video I instantly click the video I just appreciate his knowledge, and expertise in the start up world.

Thank you too Michael. Learnt something from this video. 🙌🙌🙌 YC

These videos are amazing, thank you!

Thank you for giving us this jewel.

Having gone the route of outsourcing to dev shops on more than one occasion, I agree with all the points that have been raised.

Excellent points! Thanks for sharing!

Right to the point. Great advice. How about have a tactical founder but to scale up have partner with her dev shop

Smart insights. No one side fits all solution here. Choose wisely... Good luck, entrepreneurs!

Thank you Michael!

That being said, after you've had your MVP and you've set the founders team and the foundations of your dev/product team, I am here to help you scale the development operations following your technological vision and roadmap!

Michael, could you do a video about the typical costs at the beginning ? Advocate, when to incorporate, accountability ? Because as bootstrapper I never know when I need to pay.

Would YC consider having a CTO matching/finding program? The idea would be a founder can put together a one page pitch and 5 minute video. CTOs can review a short pitch by founders in a closed system. If the CTO is interested the founder and CTO can be introduced.

@Kazibekoff

5 жыл бұрын

Jared Karabegovic good idea

@ImGayWhenISayThisBut

4 жыл бұрын

Instead of wanting Y Combinator to do that, you should turn that into a business yourself . I know I would’ve wanted that in finding my tech co founder.

@Drewlicious

4 жыл бұрын

Yes Jared, listen to guitaeprodigy100, I would use this platform in a heartbeat if it were available. In fact, I am surprised there is not one out there now being that it is hard to find good available CTOs out in the market~

@zj5308

4 жыл бұрын

I think it’s already created

@sambitmukherjee1713

3 жыл бұрын

No it should be someone you know for a long time. "Co-founder hunting" is a bad idea.

Wish I heard this in 2015. Great advice guys

I love the advice. Problem is if you want a technical founder (like me), because you have a world changing idea (like me), but live in a country with no access to developers (like me)!

Amazing and actual for me! Thanks

I'd argue that going Dev shop is even harder: it can be much more expensive as you never fully know the underlying complexity. also trust is a big one. Besides finding a tech co-founder another route is to upskill oneself in programming - it will take a lot of time to get it right, but might just be worth a shot if the other options aren't available. Just a thought

@clintonharold8375

2 жыл бұрын

This is my route now. Learning programming and building the whole thing my self

But Sir, when we recruit a technical co-founder , we also lose a hefty percentage of equity too . Is this a good idea as first outsource the technical work to build a MVP by spending money, either then raise capital or generate revenue and then recruit Developers on salary to expand the technical work ? What are your thoughts Sir ?

Absolutely right!

Any suggestions on the best way to recruit a technical co-founder? Where should you focus your search?

Lol. so I'm a technical co-founder that chose to outsource even though of course i can code a huge portion myself. Why? Well after building this platform for 1year we have spent 10k and it scales to 100k concurrent users with ease not to mention has a world class design. Yes iv built very talented teams and know the hiring process well but really, I built another business (dev agency) in this last year that can make me more than I made as an engineer if I wasn't so lazy on scaling things. Just like the 40k of debt i saved from wasting my time on a degree I can promise the opportunity cost of me working full time was well over 10k haha. Idk iv now watched this guy say multiple times doing development in house is smarter in most situations and honestly thats like the most "unoptimized general advice" iv heard, have fun paying 20x what we did to build a scalable social network and marketplace, really. But hey maybe this is the best advice for the masses, who noes. Also i evade massive risk as a founder by focusing on a high risk (SaaS) and low risk (services agency) at the same time. Regardless of market fit I will win and this is the type of stuff people need todo instead of just throwing all their eggs into one basket. Again, maybe they should spend a decade gaining valuable skill first but its the same then. Leverage others to teach you and fund things and you always win, regardless of startup success

@pawelallable

4 жыл бұрын

Who is working for 1 year for $10k? If you are a developer, couldn't you just do this yourself much quicker?

Listen to Michael...I'm a tech guy and what he said is 100% correct hands down

I think this advice depends on the precision by which you know the problem and the solution (ie you’re in a mature business landscape that needs innovation without the appropriate culture to take on innovation). A technical cofounder who does not know the industry that you’re solving for well can waste time and money fooling themselves, and you, that they can build an appropriate MVP. “Oh yeah, I can build this in 3 months” and you come to find out it’s really closer to a year. I would say this really depends on the complexity of the problem you’re solving (see Clay Christiansen) and the experience of the technical cofounder under consideration.

YC, I’ve got a fairly unique case as I’m a solo technical founder with less business or finance knowledge. Could you do a video on something along those lines? Cheers!

@ycombinator

5 жыл бұрын

Sure! -Craig

@wstdonwiteout

2 жыл бұрын

Seconded. I am also in the reverse situation. Highly technical solo founder looking for a non-technical partner to own sales, marketing, and cx. How long should I go solo before I bring on this partner?

Hi Michael, have always been watching your videos. For hardware products, should we use Dev Shop?

I would prefer a technical cofounder. But I jusy don't have the connections. So iwas hoping to outsource toa dev shop to use something to helps potential echnicla founder on my vision

With software there are always two dimensions: 1. Scope = what features need to be implemented? 2. Quality = what degree of polish is needed? With dev shops, it's usually fairly easy to specify the scope. But at least in my experience, it's very difficult to agree on what quality means. If a dev shop wants to cut corners, they will always find ways to do so legally. With an MVP sometimes this is not that important, but it can be a problem for reaching real product-market fit.

Technical skills transfer - Ycombinator should collab with USAID/ World bank to impact youths entrepreneur around the globe.

As an experienced CTO/product type of guy myself I have a huge pain of finding decent CEO/marketing/sales kind of person. To be honest most entrepreneurs on early stage have no real world background relevant to their ideas (hence poor ideas). Could you elaborate on this issue please? Anyone with the same problem (and decent entrepreneurs as well :) - reply to this comment plz.

@jimihendrixx11

4 жыл бұрын

Hi Michael, found any good people to work with yet? Shoot me an email on satoshisystemspng@protonmail.com if you have some projects you would like to discuss.

@Drewlicious

4 жыл бұрын

Your statement is quite surprising to me Michael, I have developed this notion that I being the sales and marketing guy that it's the (available) and (visionary) CTOs that are a rare breed~

@stevenlee4864

3 жыл бұрын

I will say a great CEO is just as rare as a CTO. It’s very likely that they are working on something already or working in other company waiting to be discovered.

How can we get to work with Y combinator? We have a new patented technology in the Virtual Desktop space that's allowing us to be priced close to half of our competition in the market while providing more features!

Does those dev shops also do the design how the product works? That's a big problem that can make situations different

Key is to the ability to iterate quickly

Interesting point. I'd argue that there are people who are not "fully" technical...aka, can do either UI, front-end or back-end, but maybe not all 3, but most importantly they know what they don't know. These people might be able to outsource dev in a smart way, because they know specifically what needs to be built, the stack to use, and the estimated time to build it a specific task or feature. What do you think?

@linkertv

5 жыл бұрын

I was thinking the same thing. The technical ability of founders is more of a multi-dimensional spectrum than a binary variable, and so is the decision to outsource. Also, the term "full stack developer" is thrown around excessively when most people are more accurately described as "half-stack developers" or "quarter-stack developers." So why not outsource a very specific task to an expert in a particular technology while the founders continue to professionally develop on the spectrum from non-technical to technical?

How about a martketing shop? as a technical founder especially after MVP or PMF

Where do you find a technical co founder

Michael genuinely helps manage my anxiety.

@vasudevddn98

3 жыл бұрын

True

I sent one of those emails and got great advice and stopped. Saved me a ton of time and money. I'm having patience, learning the basics moving forward so I can at least build an MVP and talk to devs. Thanks Micheal.

brilliant .......

It's interesting how I was caught up last week with two offers: to build my solution with a dev shop and they collect equity to cover 50% payment and I'll balance up the remaining or I should go with a cash investor, I went for the later. Feeling positive now about my decision, thanks Michael I'm really loving you guys at YC

At the 5:00 mark you said that by recruiting a technical co-founder, you end up spending far less than if you were to recruit a dev shop. Is this because you are assuming the technical co-founder is doing all the coding work in leu of the dev shop? If so, I am not sure how realistic this is.

I honest think that a middle ground would be the most optimal for all stakeholders (Investors, Non-technical founders and others) with respect to development of software solution... Investors should have a panel of pre-qualified software development firms to competitively procure jobs/projects approved by investors. The international procurement pre-qualification standards should be upheld... This would ensure competitive and optimal costing and most importantly, efficient procurement practices will ensure that most talented software development team produces the best product upon award of the contract... This is the power of efficient procurement in soft-dev projects...😉😉😉

I’m a Product Manager who’s a Solo Founder. Been trying to get my startup off the ground for 4 years and I can testify all you’ve said is true. It wasn’t until I became a stronger PM that I was able to handle dev shops better (culminating in one of their best devs joining me but not as a CTO). Launching for the 5th time this week. Let’s see how it goes this time around

Good content btw. If you spend as Michael Seibel says between 20K-50K to build a MVP with a Dev-shop, you are taking the wrong path. If you are not a technical founder you can test and idea working with a dev-shop or any other tools available (instapage, unbounce, wix...) for a very low cost. Get feedback and metrics and start building relationships to get a technical co-founder.

He's absolutely right when he uses the word "Trap". I can say because I outsourced one of my products. The first one was an absolute nightmare. They said they'd built it in 3 months but took about 9 months to build. IMAGINE that. The only motivation for Dev Shops is money and they want to trap you. And chances are you will fall in the trap if you're not experienced. Unless you really don't find a technical co-founder and have run out of options, don't outsource the MVP.

is there ever a case where there is no technical co-founder, and lets say its two marketing co-founders? who employ an early technical lead? or should that technical lead feel they should be co founder since they're the ones making the product

@DrTune

5 жыл бұрын

I think you answered your own question. Consider the importance of having highly skilled, experienced and highly motivated technical person(s) around when you're building a tech company. Are you going to attract and retain a quality person if the offer is "come work for us marketing guys as an employee"? Good people are very hard to find; they're almost always busy. Not-so-good people are much, much easier to find.. and how will you even know the difference? I would say you want a well-rewarded tech cofounder because you'll be trusting them with a lot of decisions you don't really understand properly (including hiring other techs).

@DrTune

5 жыл бұрын

@Omar Chowdhury Very, very true.

Yes, Amit Shah, there will be a disconnect between the Engineers, Founders and the customers!

Nice insight however I think this really depends as you can also hire a wrong CTO who may sink your own company. Everyone has to make this decision for himself and do very good due diligence in both cases. Many founders just jump on the wagon without getting in to details thinking that some kind of magic will do the job. Also what is weird for me is that Y combinator invested in Gigster, Youteam, Pilot which are in essence dev shops or platform for dev shops after you clean all storytelling fluf, so its not like they are totally against it. Full disclosure I am part of dev shop industry:)

@ahmedt2758

4 жыл бұрын

Anton Koval I personally think the dev shop route is the best.

I My Personal Opinion A Non Technical Founder Should Have Some Technical Knowledge.So That Even If The MVP Is OutSourced He/She Will Know How The Software Operates,What Are The Features The Users Want To Be Changed & Lot Other Things

Why didn't I see this video 4 months ago. Not too late though

Some technical co-founder can be terrible. They demand more for less skills and work input. Hence, the reason some default to dev shop, a better option isn't there. It's difficult to get a technical co-founder with excellent value.

We have actually turned a dev. shop into a SaaS-like partner utilizing iterative development. We 100% agree with what Michael said here and have seen it first hand while developing this system of development. We develop weekly by default and follow agile principles the whole way to keep the cost as low as possible, the technical minds you need imparted, and the ability to see to its development for one flat per-sprint fee. Just wanted to add our thoughts from the dev. point of view. blastoffapps.com

We fell into the trap. I could go on forever about why he’s correct

@DennisIdeler

4 жыл бұрын

Do share some of your experience, it could help others.

That's like SEO and marketing agencies Lol.

Tldr: No! (find a technical co-founder)

Lots of valid points here and some can be applied across custom software building in general including the big players. So we work a slightly different model where we build for an equity stake plus a fee and put together a world class team of guys from top tech companies and startups across the Bay Area and London who understand the problem area for which they are building. We also bake in flexibility for iterations and user testing into the build and help with building out a team and handover. We’re predominantly fintech for now but email letsroll@boseman.co.uk to know more.

Generally agree, but if you're thinking of going the dev shop route, here's another view: kzread.info/dash/bejne/n5-kzquIYNXAhqg.html

#mystory