Fast-growing startups, especially after the first round of external financing, often encounter the challenge of moving from an MVP to a fully developed product. The aim of this guide is to help startup founders to better organize software development in their companies.

In this practical guide I’ll highlight the major challenges that startup founders encounter on their route to sustainable and stable growth. You’ll find descriptions of solutions available on the market for software development – depending on financial capacity of your startup and experience with software development – hopefully one of them may suit your needs.

Table of contents:

Challenges to the rapid growth of startups

1. Moving from a minimum viable product (or service) to the one that brings paying users

The MVP is minimal because its purpose was to prove that it works, and now you need to provide your customers with the real thing. Probably even Steve Jobs could have shown a mock-up iPhone during his first presentation, but he needed something more to deliver to the stores and customers later on.

2. Investors’ attitudes and expectations

Investors want milestones, deadlines, key performance indicators, and the return on their investment. The pressure is strong, so you need to show stable and predictable progress to maintain their trust.

3. Limited time frame

You usually are not able or allowed to develop your product or service for as long as you would want. Limited time is a major constraint for most startups.

4. Finding the right people to develop your software

Recruiting software developers is a challenge itself but turning a bunch of experts into a seamlessly working team is a completely different story. Do you have time and resources to do it on your own?

5. Choosing the right tech stack

Various technologies have different perks and constraints, and even small decisions can have a huge impact on the future. Having a trusted development team will help you make better, well-informed decisions about the technology and future growth of your startup.

Solutions for software development in startups

There is no question of sustainable growth without experienced specialists. But how and where to find them and make them work efficiently for your business? As usual, you need to consider costs, effort, and the team’s experience. Moreover, you should think about getting a comprehensive team that includes not only developers but also quality assurance specialists, Scrum masters, UX and graphic designers, project management and testing experts etc. Furthermore, if you decide to outsource the team but don’t have experience in managing software development, it would be great if your team was eager to share their knowledge and give applicable advice. Not all companies – regardless of their actual expertise – want to share their know-how to enhance their clients’ business success.

There are four most popular ways to organize software product development in a startup, especially for organisations with already existing MVP. Let’s look at their pros and cons.

1. Freelancers

Freelancers are relatively easy to find and hire, and cost of their work may be relatively low if you look for those based in Asia or Eastern Europe. Especially today, when remote working allows to lower your costs even more. Freelancers are a great solution if you need a quick fix or a smaller functionality that isn’t critical for your startup. However, we’re talking about building your new product – not an MVP – so you need to consider a few challenges with hiring independent contractors. Working with freelancers you hire individual players who don’t constitute a team. It will be your role to manage them and boost team spirit – otherwise, they’ll remain just a bunch of developers.

You need to remember that many freelancers don’t get engaged with clients and projects, and you never know how long they will stay with you. According to our experience, freelancers often work on more than one project at the same time, and if they decide to focus on only one of them, it’s not sure that they choose your startup.

2. Outsourcing

Theoretically, if you want to have a clear mind and not engage too much in the software development stage for your product or service, you can outsource the whole process. All you need to do is tell your outsourcing partner what you want and wait for the results. There’s no need to care about the recruitment of specialists. Possibly, you can hope for a seasoned and comprehensive team that works efficiently- but you don’t have a choice – you must trust your provider. Such projects usually have fixed prices, so at least that won’t surprise you. I know it sounds tempting, but keep in mind that you’ll have hardly any influence on the work done.

The company of your choice will work according to the specification you provide, but that’s where your control ends. As soon as you get the product you may find out that it misses your expectations, even though the deliverables meet the specification. Adjusting the software to the real needs of your startup may then be painful and expensive. Moreover, as the second round of financing comes around, you may find out that further development of the software will be costly and inefficient, hence you’ll need to rebuild the entire product or service. And it is fairly improbable you’ll get the same team to work on these future changes.

3. In-house team

It’s the total opposite to an outsourced team – all the developers and other software specialists work full-time in your company. As a direct employer, you have much more control over their work, but you also must take care of all the HR issues, like payrolls, sick leave or holidays.

Moreover, you cannot be sure that no one will leave your startup – things like that happen. That takes us to another issue: you must take care of your employees, make sure they have everything they need to do their jobs, and that they are satisfied with what they do.

But first, you need to build the team: search for specialists, attract them, check their expertise, hire, make sure you have all the skillsets needed, and then transform this group of experts into a team. However, before you even do that, you need to decide on your tech stack – it may pose a problem, because possible solutions will be limited to your team’s expertise. You will also need a trusted software architect who will support you in design and tech stack selection.

Scaling an in-house team is another challenge.

On the bright side, however, there are also a few benefits – you can immediately start working on any task, and your team will have a chance to gain deeper understanding of your needs, as well as develop their skills as the project progresses.

4. Dedicated team

In this model you – as a founder – take part in the process, working together with your software development provider on the team creation project. You’re still involved and can choose with whom you want to work. However, you don’t need to bother with the recruitment, the hiring process, or other HR stuff. What does it mean in real life? You don’t need to devote at least a couple of weeks to sourcing talent from the market.

Check this real-life example: recently we at Inspeerity were building a team from scratch for our client. It took us about a month of daily work – we had to find approximately 60 candidates, interview, check their skills, and finally choose six of them (yes – six out of sixty!) for the final development team. Bear in mind that we knew exactly what we were doing.

Your dedicated team will work on your project only and will be available for future phases of your startup development. Scaling up and down is much easier than in an in-house team. The dedicated team provider can always add developers from their pool, and you don’t need to worry about that. Also, it’s much easier for such a provider to grow the tech stack with the expert workforce they already hire. So, a dedicated team gives you influence and control over all processes but takes away all the challenges associated with creating a team, hiring developers, or making sure everyone has something to do.

Is there a better solution for custom software development in a startup?

It seems that a dedicated team is a very good model for cooperation and software product development in a startup. There is a fifth way, though. It’s usually the best solution for small to medium companies that need to upgrade their product but still want to stay agile and flexible. We call it a hybrid solution that mixes a small in-house team with a comprehensive dedicated outsourced team. A hybrid team consists of experts with complementary skills.

In such a case, you maintain control over the whole process, keep critical know-how inside your company, and still have the benefits of a dedicated team. When you mix your in-house software experts with external developers, you get a very flexible and cost-efficient synergy. For companies that can’t afford the in-house part of the team, I would advise starting with a dedicated team and then smoothly move to a hybrid model.


As usual, there is no one-fits-all solution, as it all depends on a particular idea, tech stack, culture, and maturity of the startup, and lots of other issues. Let’s review the main pros and cons of each model once again.

A team of freelancers is cost-efficient, but it may prove very unstable and hard to manage. In the outsourcing model you get someone else to do the job, but you have little control over the results. The in-house team lets you easily manage the whole process and obtain the software quality you want, but it is the most costly solution, and it also requires a lot of effort to set it up properly. A dedicated team is cost-efficient, easily scalable, open to changes and it allows you to stay in control. The only pitfall is the relationship with your provider and possible dependence.

Finally, the hybrid model makes it possible to balance all the advantages and disadvantages of an in-house and dedicated team – it’s comprehensive, scalable and stable, while it also lets you stay independent in the long-term.

Choosing the right path for your startup requires taking into account many factors, but we hope we have managed to make that choice easier for you, providing you with this guide.

Are you a startup founder?

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