The Talent Pool for Startups May Be Getting Bigger

October 2, 2013

Last month, we discussed why collaboration and sharing physical office space is particularly important to startups. See "The Essentials for Startups: High Speed Internet and a Collaborative Environment," September 10, 2013. In that article, we noted that while many businesses have been started and run successfully from anywhere in the world, startups are more likely to succeed in an environment where employees and/or founders are able to meet and interact in person. Prime examples of this success include companies such as Google, Twitter, and Groupon. But, is it really necessary and feasible for startups to maintain all of their functions in-house? California-based oDesk, the world's largest online workplace, is betting that startups will quickly see the financial advantages and growth possibilities of outsourcing many key business functions. On Monday, the company announced the launch of a startup accelerator partnership program called oDesk Upstarts. Startup or seed accelerators are for-profit startup incubators, that essentially take classes of startups made up of small teams and support them with funding, mentoring, and training for a specified period of time in exchange for equity in the startups. Accelerators are privately funded and tend to focus on mobile/internet startups. oDesk Upstarts is a "slate of partnerships with more than 20 global startup accelerators aimed at introducing even more high-growth, early stage companies to the prospect of on-demand labor." The partners will offer free outsourced labor with the goal being training, coaching, and mentoring.

The idea is an interesting one, but will startups outsource their labor? While investors tend to shy away from startups that outsource core business functions, outsourcing labor may be the solution to two of the biggest problems facing startups: (1) shortage of talent, and (2) limited financial resources. oDesk contends that investors should not fear outsourcing, but rather embrace it. According to the company, outsourcing labor is an excellent bridge over the early growth phase of startups, and is not "a replacement for a company building its core team[, but] a solution for reaching scalability more quickly and doing so in a flexible manner." oDesk hopes that startups will outsource more than just accounting and HR functions. The company hopes that startups will outsource development and content creation as well. We will have to wait and see if the idea takes hold.

As noted above, the shortage of talent is a big concern for startups. Last month, we discussed Blueseed, "a startup community for entrepreneurs, on a cruiseship twelve nautical miles from the coast of San Francisco in international waters." The purpose of Blueseed is to give foreign entrepreneurs who cannot legally work in the United States the opportunity to be close to California and all it has to offer startups. Well, recent rumblings on immigration reform from both side of the House of Representatives may mean the opening of opportunities to many of those foreign entrepreneurs. Last week, House Democrats released a comprehensive reform bill, and there are reports that House Republicans also are working behind the scenes on the issue. Research shows that immigrants have had an enormous impact on the startup community: In 2010, immigrants were twice as likely as U.S.-born individuals to start a business, and between 1995 and 2005, immigrants helped found more than 25% of all high-tech firms. Immigration reform is likely to be a boon to startups and we will monitor the situation.

If you are an entrepreneur looking to start a business or if you are a startup, there are many issues that may affect you and your company. Where is the best place to start your business? Where can you find the best talent? Is outsourcing a good option for your business? What can you do to maintain employee satisfaction? How can you maintain your financial well-being and achieve financial success? For help understanding possible legal matters that may face startups and any other issue affecting startups in Sacramento and throughout the area, please contact us today.