Do NOT hire engineers to build your MVP

Rik Visser Lean Startup

You’re a non-technical founder? Need to someone to build your MVP? Join the club. First: you will not find a technical co-founder. If the project is small enough, you can learn the basic skills to build it yourself. Otherwise you can find a freelancer or outsource your MVP. (Want to know when to freelance vs outsource? ).

Side note: we’re looking at this from a very-European (Dutch) perspective.

You should NEVER employ engineers to build a MVP.

Do not put engineers on your payroll before you find product-market fit.

We’re not kidding. Do not do it. Why? Essentially it all boils down to a lack of flexibility. If you are still trying to find product-market fit, you won’t know what skills are necessary a month down the line, let alone a year.

Why does that mean you should not hire?

  • Employees — in Europe — are extremely hard to replace. You have to be extremely sure this person is fit to stay around for a long time. No such thing as pink-slipping or trial periods (unless you give a >6 month contract).
  • Taxes — here in the Netherlands— make it much more cost efficient to hire a freelancer or outsource. Especially abroad due to deferred VAT rules if you hire someone from outside the country. That saves you 21% in cashflow.
  • You need a combination of skills in the beginning. And unless you raised a few hundred thousand €€€, you can not afford to hire four or five engineers. That means you are stuck hiring generalists. We believe it is better to have a team of part-time experts than one or two full-time generalists. You’ll have a tough time hiring an employee for one or two days a week.
  • Employees are not co-founders! A developer cannot be expected to take care of all the non-technical duties a (technical) co-founder has, like the company strategy, marketing, sales, investor meetings or generally “being the face of” your startup.
  • You lose your own flexibility. If you have employees showing up at 8:30, you better be there at 8:30. Every. Single. Day.
  • Everything else gets more expensive. Bookkeeping. Sick days. Office space. Insurance. Coffee. Hardware. E-mail accounts. Software licenses.

So… No technical co-founder. No in-house developer. What to do?

We wrote a blog about exactly this (Start ups: who should you ask to turn your idea into reality?). Basically, we believe your options are:

  • Hack something together. (Small projects.)
  • Hire a freelancer. (Small projects.)
  • Find a software development agency to be your partner. (Bigger projects.)

“Don’t be daft. A technology company has to have its core competencies in-house. All the big guys say so.”

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Yes, a lot of big names say this is true. But there are also examples of successful companies that took another path.

Our thinking is that the underlying assumption is completely wrong.

Not all companies relying on technology are tech companies. Or: technology is not a core competency of most modern start-ups.

Arguing that every company that does business on the web is a tech company is flawed logic. It is like saying airlines are airplane companies, department stores are real-estate companies or shipping companies are ship companies.

A lot of airlines do not own the planes they fly. (See this interesting discussion for details.) They do not this to for various reasons. The business of airlines is moving people efficiently and — theoretically — pleasantly from A to B. Travelers do not care if they’re on a 747, 777, 380, 330, 320, 737 or DC-10. That is not to say planes are not incredibly important. They must be safe. Pilots have to be trained for them. Switching is expensive (repainting, breaking leases, retraining employees, etc), but even then many airlines do not own the planes they fly.

Department stores (or any other store, really) do not own their real estate. Sometimes they are in the same building for decades, paying rent that entire time. Department stores do not want to deal with maintenance, building codes, financing and all the other hassle. They want to focus on providing a great experience to their customers. Obviously, this includes a safe, attractive building in a good location, but it is not a core competency.

Same deal for shipping companies, construction firms renting equipment, some sports teams renting their athletes from special purpose investment vehicles and many other examples. I think you get the point.

Some technology-utilizing companies are tech companies. Some are not.

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Saying AirBnB is a technology company is like saying travel agencies were brochure, desk & office-building companies. AirBnB is an experience company. eBay is an auction company. Amazon is a retail company. BusinessInsider is a media company. Facebook & Snapchat are social communications platforms. Uber is a taxi company. You get the drift.

That is not to say tech companies don’t exist. Buffer (awesome!!) is a tech company. Google search is a tech company. Amazon AWS is a tech company. In all these companies the technology is the actual product. But the list is shorter than you think.

So, I can outsource tech development of my MVP?

Yes. And, in fact, you should! Go ahead and start a company that heavily relies on (advanced) technology. Just buy the expertise you need. Just like you don’t onboard your accountant and buy your office building. Plenty of time to do all that when you have hit the big leagues!

For now: use your funding wisely and outsource. Your money will end up buying a lot more useful output than if you had hired.