How does Offshoring & Nearshoring help extend a Startup’s Runway

How does Offshoring & Nearshoring help extend a Startup’s Runway

If your startup doesn’t have enough runway, you risk going out of business before even understanding your market. Imagine having just developed a great product, but being left without the cash required to sell it. This is possibly what keeps 95% of entrepreneurs awake at night!

Seasoned venture capitalists will tell you to plan a startup runway of about 18 months between rounds. This window of time is for you to implement your plans, even in situations where growth is difficult. Alarmingly, another study states the 18-months average runway period could be too short. Considering the growth of startups at different stages, it suggests that you should plan for at least 21-35 months. The reason is simple: things rarely go as you expected them to.

Speaking of uncertain times for tech startups, it’s only wise to stay frugal and keep your expenses low. One major overhead for any tech startup would be employee salaries, they typically amount up to 70% of your startup’s expenses. But remember…every dollar saved adds to the length of your runway. That’s where Offshoring and Nearshoring come into the picture.

Here are some calculations to illustrate this.
We have compared the costs for a Senior Full Stack Developer here, as they are the most sought after resources at the product development stage.

  • According to GlassDoor, the average salary of a Senior Full Stack Developer in the USA is about $125K a year, plus benefits like Health.
  • Whereas the average rate for a Canada-based nearshore resource is about $45 an hour, which translates to $95K‬ and no additional benefits. That’s a saving of $30K per employee a year. So for a team of 10 people, you could be saving as much as $300K a year.
  • And the average rate for an India-based offshore resource is even lesser. At an average hourly rate of $30 an hour, you could hire a seasoned Senior Full Stack Developer for just $63,000 per year. Now that’s about half the salary you would pay for your employee in the US and translates to nearly $60,000 for an employee a year. The savings get only bigger when you consider the total number of resources. You probably save enough money to start work on your next big idea!

Advantages of Nearshoring & Offshoring

It’s a no-brainer that Nearshoring and Offshoring could help you stay frugal, cut costs and extend your startup’s runway. But these outsourcing models deliver big on other benefits too.

Skilled Resources: For lesser money, you get highly experienced resources to work on your projects. We are talking about the kind of hands that have worked on tons of projects before they took up yours.

Bandwidth to focus on Core Activities: With the development assigned to a partner, you are now free to concentrate on your core business activities. This also empowers you to develop your internal task force and use them more efficiently.

Better Risk Management: Outsourcing will allow you to share any associated risks with your outsourcing partners thereby reducing your burden.

Staffing Flexibility: Outsourcing certain independent tasks allows your business to maintain financial flexibility when there is an uncertainty in demand. You can scale up or down comfortably.

The ultimate benefit of Nearshoring and Offshoring is that it helps your organization gain a competitive edge in the market. Through strategic outsourcing, you are increasing your productivity while managing your in-house resources intelligently. Outsourcing can help you surpass competitors who have not yet realized its benefits.

Related Blog: We understand your outsourcing concerns. Here’s why we are different from other IT Services companies.

About Ideas2IT

Founded by an ex-Googler, Ideas2IT started its journey as a high-end product engineering partner for Silicon Valley startups. We honed our skills in vertical-specific solutions, cutting-edge technology and go-to-market strategies with them. As we grew, we added competencies in process, engagement model and delivery to work with enterprises. We are proud to be part of delivering innovative solutions for enterprises like Microsoft and startups like DeVero to big exits. With a leadership team made of former entrepreneurs and big company executives, we have the right mix of passion and maturity to deliver futuristic solutions.

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