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The number of startup incubators (or business accelerators) in the USA has grown dramatically in the last decade. And as that number continues to grow, the early bird advantage that many incubators used to enjoy is disappearing and resulting in thinner profit margins with the same amount of work. This means that these incubators must turn to alternative solutions, such as staff augmentation.
Staff augmentation is the most recent and most complete recruiting solution that tech incubators are turning to because of its high return on investment (ROI). Staff augmentation allows start-ups to have access to top talent within the tech industry without the high cost of in-house recruitment or the quality assurance risk of outsourcing and freelancing.
Key Takeaways
Related: Staff Augmentation: The Only Right Way to Build Inexpensive MVPs in 2022
Finding top talent to help meet business objectives and fit the organizational culture has become increasingly difficult for tech incubators as new technologies and requirements reach the market every other day. The continued growth and expansion of the tech industry, particularly in the last few years due to world events, also means that full-time talent does not come cheap. The explosion of the gig economy has provided a cost-effective alternative to the budget-conscious firm. However, when time is of the essence, reviewing the work and experience of freelancers (often in the hundreds) is a task that will overwhelm most HR departments.
That is why, for many tech incubators, the solution to budget and time constraints is staff augmentation. The value that staff augmentation brings, however, is more than just high value at low cost. It also includes:
Most modern product teams are composed of highly specialized individuals with in-demand skills such as programmers, analyzers, security specialists, client relationship professionals, product development managers, and many more.
Usually, for projects like this, the time to launch is quite short and, according to LinkedIn, the average time to hire is 41 days across a range of functions. For roles in information technology, project management, and engineering, the time range is even longer at 44, 47, and 49 days respectively.
With staff augmentation, you have access to a vast pool of talent that is experienced in their line of work. You don’t have to spend time and money recruiting for each role. The best part is that they’ve already been vetted.
The cost and time saving that staff augmentation adds to the bottom line cannot be overlooked. When compared to other staffing alternatives, the monetary value staff augmentation brings is clear:
Cost of Hiring In-House vs Staff Augmentation
According to Glassdoor, the average US company spends $4,000 on hiring a single employee. Some estimate the cost to go as high as $7,000 or more, depending on the industry you’re recruiting from. Staff Augmentation agencies help to reduce staff costs by about 20–30%.
According to another recently published comparative analysis of the cost of staff augmentation, it can be up to 3 times less expensive than employing a team in-house in the USA.
Cost of Outsourcing vs Staff Augmentation
The cost of outsourcing the entire project can cost up to 30% more than staff augmentation because outsourcing takes the entire project off of your hands. With staff augmentation, you only pay for the skills/talents that you need when you need them. At the same time, you remain involved throughout the entire development process and have the necessary communication channels for providing feedback and maintaining quality control — all of which you lose out on when outsourcing.
Cost of Freelancers vs Staff Augmentation
While freelancers generally charge less, the cost of hiring them ends up being higher in the long run than the cost of a staff augmentation agency because of a number of factors including level of expertise, lengthy process of vetting, and the administrative cost of managing multiple freelancers separately.
Aside from the high cost of hiring in-house, recruitment is also getting more difficult each year, with the labor shortage reaching a 15-year high in 2021. If you were even willing to bear the cost of hiring full-time staff, you would not be able to do so quickly.
An often-overlooked factor during recruitment, especially within business accelerators is the administrative burden of managing different product teams.
To overcome this issue and minimize the administrative responsibility incubators inherit, staff augmentation companies will include a manager who is the reporting authority for the technical team and is responsible for conveying clear feedback from the company’s IT or management team to ensure everyone is kept in the loop concerning the project’s development. These managers are also responsible for ensuring that project milestones are met and spending is on target.
An added benefit is that there is no additional administrative or management costs because staff augmentation agencies oversee issues pertaining to payroll, benefits, unemployment, coaching, and so on for the additional talent.
That said, the beauty of staff augmentation is flexibility and the startup (or the incubator’s management) can maintain an active role in the development if they prefer so.
Many skills required for a startup are only needed in the early stages of the product development cycle. That’s why in-house recruitment for full-time specialists is not a feasible solution, as it burdens start-ups with huge payroll costs for employees that will only be utilized when there is a project.
Staff augmentation enables incubators to easily scale up or down their technical workforce. The teams are never on the company’s payroll and return to the agency when the project is over.
Startup environments can get hectic, often resulting in high employee turnover. The incubator will often face the brunt of the financial impact. Similarly, every time an employee leaves, there is an implicit cost of onboarding and training a new employee, resulting in productivity loss.
The staff augmentation approach solves both of these issues through a much larger talent pool that is much more well equipped to handle the agile and iterative demands of a startup. Additionally, the incubator is unaffected by turnover.
If there is one thing that start-ups all over the world have in common, it’s tight budgets, even with the support of a tech incubator. Staff augmentation helps overcome recruitment limitations with an open supply of talented product teams that can develop their ideas into products. However, finding a reliable partner for staff augmentation can be tricky. This is where we come in.
Moonlight Labs partners with startups, enterprises, and incubators to meet diverse talent requirements (mechanical or otherwise). We have a simple but effective process that begins with identifying staffing goals and laying out the qualities desired in a product team. We go the extra mile in creating roadmaps, establishing reporting relationships, levels of urgency, managing feedback, and more to ensure a smooth integration.
Through our flexible product teams, Moonlight Labs can quickly build a moderately sized web application for the fraction of the cost of alternative solutions, suitable for meeting core customer needs and demonstrating market fit for investors. Additionally, we can expand the MVP team to begin the active development cycle and build a fully-featured market-ready version of your app.
Get access to top technical talent. Reach out to our team for a free consultation today.
Maui-based technology company, specializing in prototypes, MVPs, and fully-functional, scalable products. Through a team of product strategists, developers, marketers, and engineers, Moonlight Labs helps companies through every step of their software journey, from concept to launch and beyond. We share our expertise through flexible product teams that are 100% dedicated to your project and company needs.
