Why Silicon Valley startups should look to LatAm to reach their innovation goals. Last week I spoke at a panel discussion at Nexus 2016 on how startups can best use nearshore partners. In its sixth year Nexus 2016, organized by Nearshore Americas, brought together over 150 attendees from throughout Latin America, including the former President of Costa Rica, Laura Chinchilla.
For the first time the event was held in the tech-centric city of San Francisco. In this blog I want to highlight some of the key points of the discussion, and explain how startups can benefit from nearshore services.
The benefits of nearshore services for startups
Working with partners in general can have numerous benefits for startups, and nearshore amplifies these. Particularly when a startup is attempting to innovate faster, stretch its budget, and reach its goal or achieve a certain delivery in a limited timeframe, partners can provide much needed help. The key benefits of outsourcing, and nearshore services in particular, include:
- Expand your potential talent pool. Throughout the US, and particularly in Silicon Valley, finding the talent you need, when you need it, is challenging. Even ramping up a small team of 15-20 developers, quality assurance (QA) engineers, user experience (UX) experts, and architects, can be time-consuming and difficult. Particularly for small companies with limited time and resources to attract talented individuals, it can be a constraint to their growth. Working with nearshore partners means startups can access a much larger talent pool, while remaining in the same timezone.
- Focus on your core. Working with partners in the areas you need help, means you can free up time and resources to focus on what makes you different. It means you can get your innovative product to market faster.
- Flexibility, and the ability to ramp up and down rapidly. Outsourcing in general, and nearshore in particular, provide startups with much needed flexibility.
- Use benefits of nearshore to implement Agile development services. In order to innovate faster, and speed up the delivery of your product, Agile software development is a must. If you are competing with established companies, for example in fintech or healthtech, you will not differentiate if you work in a traditional model. But by rapidly iterating, and improving your product based on customer feedback within the framework of Agile development, you’ll be at an advantage. Nearshore services, with the time zone overlap and cultural similarities, enable you to work in real-time Agile development.
Addressing the concerns of working with partners
During the discussion, some of the panellists raised some concerns that either they or startups in general sometimes have when working with partners. I want to address these here:
- Can service providers protect a startup’s IP? As I mentioned during the discussion, service providers would not be in business for long, if they cannot guarantee the protection of their client’s intellectual property. For example, Belatrix has been working for nearly 20 years with firms ranging from startups to Fortune 500 companies. Meanwhile startups can look to providers that have robust security certifications in place – again, for example Belatrix is certified ISO 27001, which provides external recognition of the world class security and confidentiality processes we have in place.
- Startups should not outsource everything to a provider. Here I agree with the assessment. We would rarely recommend that a startup outsources everything to a partner – which contrasts with established companies with multiple product lines, where complete products can be handed over to partners with greater ease. In our experience those startups able to identify the key components or modules of their product where they need help, have the greatest success. Meanwhile, at the very least a startup should ensure they have a product owner/ CTO/ or VP of product engineering on their side of the relationship, who has a strong understanding of the subject matter and technical issues.
- Very early stage startups may need to mature before working with partners. There are times when we are approached by a founder with an idea, but there is still no technical roadmap in place. At such an early stage there can admittedly be challenges in engaging with such companies, because they don’t yet have a technical vision. Based on our experience, we would recommend reaching out to a service provider once you have at least 2-3 people on your team and have developed at least a basic technical vision. Once you’re there, providers can help with services such as user experience consulting, to help you understand the needs of your customers, and develop a more robust product roadmap and vision.
- Will the value of a startup go down if they work with partners? This is a concern which startups sometimes raise. The argument has several foundations. Firstly, venture capitalists may mention that the value of your startup is in your people. However, in reality no one is buying people – just look at the attrition rate in Silicon Valley. Also in reality, you will have a strong contract with your vendor. It is often the case that the contract you have with your vendor is tighter than that which you have with your employees.
Belatrix has a long history of working with startups in Silicon Valley and other innovation hubs throughout the US and Europe. For example, in Silicon Valley we started working with mFoundry in 2012, supporting them and helping them accelerate innovation with teams in Argentina and Peru. We remained a partner of mFoundry through its launch as a startup, developing and launching a global product, to its acquisition by a Fortune 500 company.
Working with startups is always exciting, but we particularly enjoy this work because it helps keep us at the forefront of the latest technological and business innovations. Based on this experience, Belatrix has developed innovative ways to specifically engage and help startups. For example, using creative contract models (such as taking equity or convertible notes in exchange for services). Meanwhile we’ve built technology roadmaps for startups, so CTO’s can easily see the consequences of the decisions they make early on in the product’s life.
It’s an exciting time to be a startup in the tech industry. The rapid emergence of new technologies, means there is tremendous opportunity, but even with the best vision, startups can benefit from help as they build long-term, scalable, and successful products.