Startups usually have a limited budget to work with during the early stages of their lives. However, many successful entrepreneurs have managed to take advantage of outsourcing in one form or another to accelerate the growth of their companies. Maybe their stories will inspire you to do the same. So without further ado, let us look at a few examples of companies that managed to make the most of outsourcing during their infancy.
The first of our list of companies that have used outsourcing to fuel their growth is Klout. Joe Fernandez came up with the idea for an app that would allow users to link up their social media accounts to see how influential they were while he was recovering from jaw surgery in 2007. However, he couldn’t convince any of his friends that this was a good idea, so he went to Singapore, where he outsourced the development of the app and the Klout website.
“I quit my job and went to Singapore … and stayed there for four months while we built the beta version of Klout,” Fernandez said during his talk with Personal Capital CEO Bill Harris (via Inc. Magazine). “I put about $200,000 of my own money in, and was fortunate to have hosting partners and developers and people that were willing to work on belief in the vision and not on belief in cash on the table.”
Klout would become a success in the years that followed, and Fernandez would go on to sell the company to Lithium Technologies in 2014 for $200 million.
After selling his previous company, Alex Turnbull wanted to get another startup off the ground, but he couldn’t find a co-founder with a technology background for the customer support app he had in mind. Lacking the technical knowledge to make the app, Turnbull decided to outsource that part of the business to MojoTech, a custom software development company headquartered in Rhode Island.
It cost quite a lot of money. However, Turnbull realized that by doing this, he would retain 100 percent ownership of Groove. He didn’t even have to recruit or train anyone to do the work for him.
“Four months after we got started, I had a working app that we released into the market. We were able to collect feedback, test the product, learn about our users and improve. Had I not hired MojoTech, I have no idea how long it would have been before the app was built,” Turnbull said in his blog.
Today, Groove has more than 5,000 customers worldwide, and they generate around $5 million in annual recurring revenue.
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Looking for examples of a company that used outsourcing to jumpstart its growth? Check out Fab. Founded by Jason Goldberg and Bradford Shellhammer in 2010, Fab relied on outsourcing from the start as they teamed up with a software development firm called True Sparrow in Pune, India. So while Fab focused on its products, the entire True Sparrow team would take care of the tech side of things. Goldberg had worked with True Sparrow before, so he already trusted them, and he would travel to India every month to work with them until they ironed out the kinks.
Fab would eventually acquire True Sparrow in 2012, and the company’s founders, Nishith and Deepa Shah, were even named co-founders of Fab. “A large part of our success has been due to the technology team at True Sparrow. We wanted to make sure that as we make Fab into a long-term sustainable business, the technology team is a part of the company,” Goldberg said of the acquisition.
Fab was once worth more than $1 billion. The design-focused e-commerce site grew so rapidly that it went on to reach 1 million subscribers within six months – faster than Facebook and Twitter. Unfortunately, the company made the mistake of expanding in Europe before establishing a solid foundation in the US. It was the wrong move, and Fab came crashing down because of it. In 2014, Fab was sold to PCH Innovations for only around $15 million.
Today, we know AppSumo as the go-to website for people who want to get discounted prices on tech and software. But did you know that former Facebook and Mint.com employee Noah Kagan spent only $60 to start the company? You read that right. But how did he do that? Well, he outsourced. “We were able to build the core product in one weekend, using an outsourced team in Pakistan, for a grand total of $60,” Kagan said.
Kagan hired a remote developer to create PayPal integration so he can easily collect payment through his website, and he only had to spend $60 on that. Imagine that. AppSumo is one of the best examples of a company making the most of outsourcing, and to this day, they continue to rely on outsourcing for many of their projects.
SeatGeek founders Russel D’Souza and Jack Groetzinger believed in outsourcing from the start as they relied on outsourced workers to handle a wide range of tasks – from software development to data collection. This allowed them to build their infrastructure swiftly and inexpensively.
SeatGeek may be one of the largest event ticket search engines out there, but to this day, they continue to work with contractors through Upwork (previously oDesk) while maintaining a small internal team. The Manhattan-based company also employs contractors from the Philippines and several other places like Pine Bluff, Arkansas, and Aurora, Colorado.
AlertBoot is a good example of a company that used outsourcing to boost their productivity and save money. Instead of maintaining their own infrastructure, the cloud-based data and mobile device security service provider decided to outsource their infrastructure as a service (IaaS) to save millions of dollars in costs and labor. “Transitioning from a data center to an infrastructure-as-a-service provider proved to be one of the best moves we made for our business,” AlertBoot founder Tim Maliyil said.
AlertBoot used to host their servers via colocation services, but they eventually made the transition to cloud infrastructure services to eliminate the need to purchase their own servers. “This move also saves us over $85,000 in monthly hosting expenses,” Maliyil noted. “I wouldn’t host our servers any other way.”
From humble beginnings, each of these companies became examples of success because they dabbled with outsourcing. If you’re also thinking of outsourcing certain areas of your business, do check out OnlineJobs.ph. They have over a million resumes in their database, so you should be able to find the right people for your team. Feel free to contact us if you have any questions.
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