Scaling Tech Teams — The New Solution

In order to scale, growth-stage startups are faced with a choice: to hire in-house or outsource.

It is a decision that can determine the success of a startup’s ability to meet the growing demand for its services. Hiring in-house is expensive and time-consuming. US employee talent, especially engineers, command relatively high salaries and have a wealth of employment options to choose from. Outsourcing can cause an erosion of culture and a loss of control.

So what option should growth-stage startups select? Is there an opportunity to get the best of both worlds?

To paint the picture, let’s imagine you’ve been assigned the task of increasing the size of the product development team within your company. Your current team is quality, but you’re lacking in size and failing to develop features at a rate necessary to match the goals of your business. This is a common phenomenon within growth-stage tech companies. You need to scale your team quickly, but you’re running into a number of difficulties:

1. Salaries are higher than ever

The median annual salary of a software engineer in the US is $110,000 (1). Only taking into consideration salaries, that’s over $1 million per annum spent just on a 10-person team. With fears of a looming recession, companies are understanding that they need to be more efficient with their capital and extend their runway, while simultaneously continuing to evolve their product and increase their revenue. This is not a simple task.

2. Outsourcing is an option, but it doesn’t allow you to retain institutional knowledge

An option could be to find an offshore development partner who can swiftly add members to your team. However, institutional knowledge is key when developing large products, and therefore, outsourcing the majority of your development can be risky. So even though outsourcing can be a good option to add a few members to your team, it’s generally the less preferred option over hiring your own in-house employees.

3. A fully distributed team has its flaws

You could try to build an internationally distributed team to avoid paying US salaries, but that also has some setbacks. Without implementing and sustaining the correct infrastructure, distributed teams can generally be less connected, less productive, lack a strong team culture, and miss creativity and innovation.

4. Employee retention is difficult

We’re experiencing “The Great Resignation” where new research has shown that only 28% of IT workers have a “high intent” to remain in their current roles (2). A study by the Society for Human Resource Management shows that employers spend the equivalent of 6 to 9 months of an employee’s salary in order to find and train their replacement (3). Your company might be focusing primarily on hiring new employees but forgetting that a key to growth is also strong retention.

5. Competition is tough

On LinkedIn, there are close to 300,000 open software engineer roles in the US (4). Competition is tough, and finding and attracting top-quality talent is a time-consuming and demanding job. You need a team of recruiters to sift through and contact hundreds of engineer profiles for every single person you end up hiring. You need to also invest time and resources in recruitment marketing to make your company stand out from the crowd. With companies such as Apple, Google, and Microsoft operating offices all around the US and hiring the best talent, it makes it increasingly difficult to hire the team you need.

The challenges of the new age require new thinking. In order for growth-stage startups to create an edge over their competitors, they need to find a way to access an affordable yet quality talent pool, retain institutional knowledge, create a collaborative in-person working environment, and retain their talent long-term.

At OAK’S LAB, we understand these challenges and have created a solution to solve them. Our business division, OAK’S BOOST, has cracked the code on how to efficiently support growth-stage startups while scaling their tech teams.

We do it by combining the sections below, which individually may seem trivial, but together create an ideal model.

1. Select Europe

The European startup ecosystem has experienced tremendous growth over the last decade, and top-quality engineering talent has been one of the main drivers of this growth. According to SkillValue’s latest report, which ranks countries by the quality of their software engineers, 9 out of the top 10 countries were European (5). Engineers in Europe are also very well educated and have a high level of English. Due to cost of living differences between the US and most European countries, engineer salaries are more affordable, allowing companies to save around $40,000 per member per annum. Due to the high quality and relatively low cost, US growth-stage startups are looking for ways to hire talent in Europe. Many companies have historically partnered with outsourced development firms to get access to European engineers, but that no longer needs to be the case.

2. Build an in-house team

Instead of outsourcing, we’ve found it vital for companies to retain institutional knowledge by hiring their own in-house employees. To find the best talent you’ll need to learn the ins and outs of the European labor market or engage a European-based recruitment agency. Before your employees are hired, you’ll need to select a local law firm to help you navigate European legislation, establish an entity on your behalf, and prepare all the necessary employment agreements. Services such as remote.com exist to help you legally hire a few remote members without establishing a local entity, but they aren’t an ideal solution when you’re aiming to build a large team. Therefore, we recommend creating your own European-based subsidiary.

3. Create an inspiring office

A flexible working environment is an absolute must-have perk in today’s age, but hiring a fully distributed team won’t reap the same benefits as having a collaborative in-person atmosphere where people enjoy coming to the office and solving challenges side-by-side. The key lies in setting up an inspiring office space designed for collaboration and branded with your company’s logo and colors. Once your office is set up and running, it’s important to establish regular trips for key employees to travel between the US and European offices to create a feeling of unity within your organization.

4. Nurture your culture

Your job isn’t completed after onboarding your new team. In today’s environment, it’s important to continuously nurture the office culture and environment by focusing on a comprehensive employee experience. Setting up a framework for regular employee educational events and team-building activities will keep your new team engaged and performing. This, in turn, will increase your employee retention, especially in Europe, where data shows that employee turnover is much lower than in the US (6/7).

5. Make Europe your competitive advantage

Though competition in Europe is ever-increasing, working for a growing US company with a strong vision can be a powerful proposition when hiring European talent. By focusing on employer branding activities and raising the name of your company within the local community, you can attract and hire the best talent in the area. Building a team in Europe rather than the US can become your competitive advantage.

The secret to successfully implementing the above lies in finding the right balance of the business functions that growth-stage companies should outsource versus retain in-house. We’ve found it most successful when companies outsource the functions of legal, finance, recruitment, human resources, and office operations when building their European entity. This allows companies to focus solely on managing the day-to-day work and performance of their newly hired team.

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By outsourcing these functions and not having to learn how to operate within the European legal framework, we’ve seen US growth-stage startups scale quickly, efficiently, and cost-effectively. All this while maintaining their own engineering culture by hiring in-house employees who are engaged, performing, and enjoying their work.

OAK’S BOOST has spent the last few years optimizing this model and then implementing it with a number of our US growth-stage tech companies. It’s been a big success. By leveraging our European market know-how and strong operational, finance, and recruitment processes, we’ve been able to absorb business functions from our startup partners that they would find difficult while navigating a foreign continent.

The new model of outsourcing has finally arrived. A model that allows you to hire your own in-house employees. A model that allows you to scale swiftly, affordably, and at a high quality. A model that solves the challenges of the new age.

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If you’re interested in hearing about OAK’S BOOST and our model, reach out to me at theo@oakslab.com or send me a message on LinkedIn.

Sources

1 — talent.com
2 — emarketer.com
3 — lrshrm.shrm.org
4 — linkedin.com
5 — daxx.com
6 — cedefop.europa.eu
7 — humancapital.aon.com