Outsourcing For Funded Startups: Here’s How Much It Actually Costs

Updated: Nov 1

Raising seed-funding is a great achievement. But now what?


Keep in mind that seed investors expect you to deliver the rosy picture you painted when raising your round. This means hitting all the product development milestones and sales numbers that you’ve promised.


So how do you spend your funds wisely to send good news to your investors? And how can you make sure that your startup is evaluated as worthy for additional funding?


For huge companies like Slack, the answer seems to be outsourcing. Over 12 million daily active users make Slack one of the most widely used communication channels among startups and small businesses.


The company is also popular for achieving a valuation of $1B in just eight months even without investing in traditional advertising or a Chief Marketing Officer.


Many professionals love the company for the simplicity of their design and effectiveness of the app, but did you know Slack made it possible by outsourcing?


Stewart Butterfield, the CEO and co-founder of Slack, brought Slack’s prototype to user interface specialists MetaLab. Then, they built the app from the ground up.


Source: MetaLab


Ultimately, Slack's strategic move to work with a company offshore proved how outsourcing can be advantageous even at the initial stages.


Curious how you can make outsourcing work for you?


In this guide, we’ll review the following:


  • Challenges of Funded Companies and How Outsourcing Can Overcome Them

  • The Downsides of Outsourcing and the Strategies to Address Them

  • Different Outsourcing Options That You Can Leverage to Become a “Revenue Engine”


At the end of this article, you can decide if outsourcing is the best option for you to show results to your investors and receive additional funding.


Ready? Let’s begin.


What are the Challenges of Funded Companies?

It Can Be Difficult To Spend Funding Wisely


When the money hits the bank, it's tempting to go on a buying spree - from office chairs, in house chefs, to ergonomic tables, and what-have-you.


Stop.


It’s no secret that running out of funding and personal money is the second topmost reason why startups fail. So it’s important to realize that at this stage, you have to be mindful of your financial runway.


Imagine your company as an airplane. The same as a plane needs sufficient runway to take off, your company needs enough cash to build its minimum viable product and hit its milestones. Invest money recklessly, and you'll end up cutting the runway short.


Source: Photo by Pascal Meier


Pressure To Show Results to Investors Fast


As Trace Cohen, NY Venture Partners' managing director, points out, the company's immediate objective after its seed round is to get to its next round. The only way to do this is to hit expected numbers in a year or so.


If a company runs out of runway before raising another round of funding, it's bad for all stakeholders involved.


And this is why investors are so determined to reach product-market fit and start earning ASAP. After all, 9 out of 10 startups, or 90% of startups fail. Naturally, investors don’t want the startup they invested in to fall under this 90%.


There’s No Guarantee You’ll Always Get “More Funds”


In July 2022, Pakistan-based delivery service Airlift announced that they would be closing down operations. This was despite raising an $85 M Series B round in 2021.


The reason? The funding round they planned for the year fell through.


Due to turbulent economic conditions, some of Airlift’s investors notified the startup of a 2 month funding delay. Other investors followed suit, and one thing led to another until Airlift was forced to close due to funding issues.


This isn’t an isolated case, either. In fact global funding has significantly slowed in the second quarter of 2022.


So as you prepare to raise your next funding round, you’ll be faced with the following challenges:


  • There’s a fierce competition between startups for funding, and PE and VC investors have become more selective.


  • Companies must demonstrate solid evidence of traction in a growing market, and position their business models as low risk and high reward.


  • Seeded startups are faced with higher stakes, as VCs and PEs increasingly expect them to generate revenue even before funding.

How Does Outsourcing Help Funded Companies Reach Their Goals?


To show investors results that your startup is viable, you must achieve traction in the following areas:


  1. Revenue growth

  2. Customer growth

  3. Market share growth


Here’s how outsourcing can help.


Revenue Growth


To receive another round of funding, funded startups must demonstrate to their investors that their businesses can generate sustainable revenue growth. Outsourcing can help.


Outsourcing is a high-leverage option for funded startups to scale faster, hit their revenue goals, and meet other projections, enabling them to impress their current investors and look good for another round.


For example, clients that outsource to The Scalelab generate 2 to 10+ sales qualified leads month after month. To enable them to focus on selling and improve their revenue, we handled and streamlined their list building and lead generation.


Customer Growth


To achieve revenue growth, you must master customer growth and long-term retention. At The Scalelab, we help clients grow their customer base by conducting detailed prospect research and sending personalized messages.


Here’s how:


  • Through detailed prospect research, you can customize your approach per prospect, thereby improving engagement.


Below is an example of the database we generated for clients.


  • Hyper-personalized messages position our clients as approachable and human to their prospects. Not only does this approach result in 92% open rates and 68% connection acceptance rates, they also encourage replies like this from potential clients (picture below is the response of a C-level executive of a large bank):



Market Share Growth


A company's market share is the percentage of total sales it generates in an industry. This metric gives a general idea of the size and influence of your company relative to its market and competitors.


For investors, market share percentage shows your company’s ability to compete and win in its market. High market share growth means better revenues compared to competitors.


Outsourcing can offer funded companies huge competitive advantages. It gives them immediate access to partners with the expertise and capacity to bring their products or services to the market, but at lesser risk and time required compared to finding, hiring, and training in house.


For example, at The Scalelab, we’ve helped clients fill their pipelines with sales qualified leads all without:


  • Hiring In-House - By outsourcing to The Scalelab, companies free up the cost and risk of spending on hiring and training in-house employees long before they have refined their processes.


  • DIY - With The Scalelab, seed-funded companies don’t need to spend hours learning and training employees how to engage prospects and generate highly-qualified leads. These skills are already covered by experienced contractors if they outsource.


This way, they can spend time on other higher-level activities to maximize their growth potential instead of taking on the additional operational burden of training and managing in house.


The Pros and Cons of Outsourcing for Startups


To help you decide whether outsourcing is for you, we reviewed the pros, cons, and projected costs of outsourcing.


​Advantages

Disadvantages

Boundless Talent Pool

​Expectation and Goal Mismatch

Access to Experts with Proven Results and High-Productivity

Difficult to Find Trustworthy Vendors That Will Give Results

Cost-Effective

Can Be A Low Touch, Impersonal Relationship

No Extra Expenses Required for Benefits

No Access To SOPs

Access To Experts With Proven Results


Outsourcing has helped a lot of companies grow exponentially. One of the reasons why it’s so effective is because it provides access to experts with proven results and no longer needs training.


This means, you don’t need to risk spending months and thousands of dollars hiring and training in-house with no guarantee. You can simply leverage a partner with established results and leverage their expertise.


For example, Patrick Murphy, Togal.AI CEO and the Executive Vice President of Coastal Construction, experienced the challenges plaguing the construction industry.


It took general contractors and estimators laborious weeks (even months) to complete the takeoff and cost estimation process, and they don’t get paid for this part of the construction process. He knew AI and machine learning could help. That’s when they decided to build AI estimating software, Togal.AI.


However, having non-technical leadership, they had to partner up with Tribe to execute their strategic vision. Tribe is a collective of data scientists and top engineers from industry leaders in AI, including Google, Airbnb, Uber and SpaceX. They have proven results.


The result? Recently, Togal.AI won first place at an International Startup Competition and received $420,000 investment from Florida Funders, Algorand, and Panoramic Ventures. This was after they pitched their vision in front of celebrity judges, including Shark Tank’s Kevin O’ Leary.


Source: Togal.AI


Had Togal.AI decided to hire in-house and train engineers and scientists to develop their app, it would’ve taken much longer to execute their vision.


Cost-Effective

Not only does outsourcing save thousands from training and hiring in-house, doing so also allows you to leverage your outsourcing partner’s premium tools and proven systems. This means, you don’t need to spend thousands on individual tools or invest in courses to acquire the necessary skills.


Here are some of the projected time-investments and costs between hiring in-house, DIY, and outsourcing.


​In-House

​DIY

Outsourcing

Projected Costs

In the U.S., the average cost per hire is around $4,000. In addition to hiring, you need to consider recruiting, onboarding, and training costs.

The good thing with DIYs is that you don’t have to spend on hiring and recruiting. Instead, you can train yourself or existing employees. Here are the costs:


  • Training costs per employee = $1,071

  • Courses and Mentorship programs:

  • $30,000 - $50,000 if you’re hiring a consultant

  • $3000+ if you’re investing in a training software


It depends on the industry. But for outbound sales outsourcing for startups, it’s $1,500 - $2500+ per month. The advantages with outsourcing is that the investment is more flexible depending on your needs. For example:

  • Some outsourcing partners can get paid fully per project or partially per project with a mix of performance commissions.

  • Investment structures can be adjusted based on desired results. For example, at The Scalelab we have multiple packages with varying prices. We have packages for getting 2-4 leads per month, and we have packages for getting 10 leads and above.


Time-Investment Before Achieving ROI

Because of the time needed to hire, onboard and train new-hires it may take months or years before achieving ROI.

Unless you’re experienced on the subject, it may take months or years for you to master necessary skills. Not to mention, you’ll have to undergo laborious months of trial and error of executing the skill for your business before getting ROI. So despite being relatively low-cost, DIY might be draining your resources long-term.

If you partner with experts that have established systems and proven results, the ROI can be instant. For example, at The Scalelab, within 6 weeks of hiring us, clients are already getting 2-10+ leads per month and getting ROI within X-timespan. It's like investing us your money to give you 5X in return.

The Cons


Here are some of the reasons why you should not outsource.


Mismatch of Goals and Expectations

Outsourcing means handling over control on certain projects. But when there’s a lack of transparency and clarity in the expected results, it can lead to mismatch of expectations, which then leads to disappointment.


To avoid this, when we onboard clients at The Scalelab, we communicate our whole process for getting leads and the exact results they can expect. Our transparency and consistency are results of our processes being proven and validated every month in over a multitude of businesses.


We’ve proven what we can bring to the table, and this is what we communicate to our clients to ensure we’re aligned in both goals and expectations.


Difficult To Find A Trustworthy Partner

One of the main challenges of outsourcing is finding a reliable partner that can give you results. Often, founders spend time and money only to see that their expectations aren’t being met. Furthermore, as a funded company, where you put your money is critical to the survival of your business.


To find a trustworthy outsourcing partner, here are some of the questions you can ask.


  1. What is the provider’s experience with regards to the goal you’re trying to achieve or the need you’re trying to meet?

  2. Do they have a proven and sustainable process for fulfilling this goal or need repeatedly?

  3. Do they have any proof of client success, case studies or testimonials?

  4. What tools and technologies are they investing in?


At The Scalelab, we’ve invested in various tools like HubSpot for CRM and VidIQ for YouTube. The former helps us streamline our customer support and sales while the latter provides us insights in growing our YouTube channel.


Investing in technology not only makes us more efficient and productive, but also improves the experience of clients when engaging with us.


Different Outsourcing Options: What Should You Outsource In Your Company?


Because your goal is to become a “revenue engine,” we’ll be focusing on an area that directly impacts your revenue - OUTBOUND SALES.


Outbound sales is a powerful marketing approach because instead of passively waiting for prospect inquiries, you’re proactively engaging leads, and closing deals.


And outsourcing makes it even more potent. Outsourcing enables you to leverage a provider’s years of experience, industry expertise, and their premium tools to give you the results you want. You’re also getting instant feedback and faster results due to direct interaction with clients.


Here are some of the outbound sales approaches you can implement.


Cold Emailing


Cold emailing means sending emails to potential customers without prior engagements. They may appear similar to cold calling, but in reality they are much less intrusive.


They are:

  • Cost Effective - You can send thousands of emails for free or at a really low cost as opposed to running ads.


  • Highly-Scalable - You can leverage cold email to scale more cost-effectively by gathering data and validating your offer using the least resources.


  • Increase Conversion Rates - If you’re already implementing other lead generation strategies, cold emails can help improve their conversion rates by making sure leads are already “warmed up” before you contact them via call or face to face meeting.


Although many people claim that cold emails are easy to ignore, it really depends on the quality of your messages. If you’re spamming everyone with generic messaging, then yes it’s easy to ignore.


But if you’re researching your target prospects and sending them human and approachable personalized messages like the one in the picture below, then you’ll be getting results like:


  • 92% Open rate

  • 63% Reply rate

  • 68% Connection acceptance rate


Here’s a little context about the pictures. These are samples of messages we send our clients’ prospects at The Scalelab.


After visiting a prospect’s LinkedIn profile, we immediately send them a personalized email requesting a meeting.


We offer them an actual coffee using a picture of the client, holding a cup with the client’s name and a cup with “first name.” This means that a prospect's first name is going to be inserted automatically into that picture.


And it works. Personalized and approachable messaging gets replies like the one below. (Side Note: This response is from a global head of a large insurance company.)




If you’re curious about the investments needed to outsource cold emailing, I’ve outlined them below.


Projected Costs

2 - 4 leads = $1,500 5 - 10 leads = $2,500 10+ leads = customized pricing

Potential Results

You can get the leads within 4 - 6 weeks

Bottomline, cold emailing is a smart, low-cost, and high-leverage option for maximizing your seed funds and growing your revenue.


Want to learn how to generate leads week after week through effective cold email copywriting? Learn more about it here.


Outbound Sales (Cold Calling)


When businesses solicit sales from customers they’ve never spoken with before making the call, the process is known as cold-calling. While typically referring to phone-based engagements, it can also include in-person door-to-door interactions.


  • The advantage with outbound sales is there’s minimal touchpoints. This means, while the typical selling process could take months before reaching fruition, cold-calling directs and tracks all actions using one touchpoint. Upon one successful call, the salesperson can gauge the interest of the prospect and handle objections right away.


  • The disadvantage is, it can be a high-stress approach for many team members and require more training to outsource. As the call is unsolicited, it’s often hard to predict how the prospect will react. Callers need ample training to handle the calls professionally and answer the prospects' concerns on the spot.


Below are the average investment amounts needed to outsource cold calling.


Projected Costs

  • Telemarketing company based in the U.S. = $20 - $75 / hr

  • Offshore telemarketing service = $12 - $20 / hr

  • Telemarketing company charging per lead = $35 - $60 / lead

  • List of Prospects = $3000 / 1000 names

Potential Results

A typical cold-call has a 2% success rate. But if your provider built a quality lead list, the success rate is higher at 20%. This means, if the provider is calling 100 highly-qualified leads in 1 month, 20 of those can convert to appointments.

Social Selling


Social selling uses social networks to acquire new leads. The platform you use depends on your target market and where they usually hang out online.


For funded B2B companies, the best medium might be LinkedIn as it has about 65 million decision-makers and 10 million C-level executives.


  • The advantage with social selling is that there’s no shortage of skilled social experts, so it’s relatively easy to outsource. There’s also many tools that make social selling effective including real-time analytics, reporting, and automated responses, which you can leverage at no additional costs (because you’ll be piggybacking on your outsourcing partner’s resources.)


  • The disadvantage is that some social media platforms can be restrictive as they prefer you to do ads. If you’re not skilled at navigating the platforms, there's a risk of getting your page blocked or banned from using the site.


I’ve outlined the typical investment amounts needed to outsource social selling below.


Potential Results

At The Scalelabs, we’ve generated 2 - 4 more clients per month by outsourcing social selling to a third-party service provider.

Weighing the Pros and Cons of Outsourcing


PE and VC investors care about making money. This means, they didn’t invest funding on your business just to see it wilt away. That’s why, as you spend the money in your bank and prepare for further funding, you need to demonstrate that your product is a literal money-maker.


Demonstrate the size of the business opportunity and prove that you can turn out a positive profit margin. Becoming a revenue engine? This is what investors care about.


But how?


If you look at the pros and cons, outsourcing can definitely help by giving you access to a limitless talent pool of experts with proven results at minimal costs. But just like any endeavor, outsourcing comes with challenges, too. This includes mismatch of expectations and difficulty to find a reliable partner. It’s up to you to implement strategies to mitigate them and maximize the benefits, so you can reap the rewards, satisfy your investors, and receive further funding.


But before doing so, you also need to understand when it’s the right time for you.


When should you outsource?

  • When you want to lower costs - Are you tired of spending thousands of dollars hiring, onboarding and training in-house? Wish you could remove the costly trial and error of learning necessary skills just so certain areas of your business could grow?


  • When you want your company to focus on the business core - Do you feel like your team is focusing too much on areas outside your core competencies? Are these necessary but mundane tasks draining up your resources?

When should you not outsource and why?

  • When the provider lacks communication - Does the potential provider lack transparency and can’t communicate their process? Don’t outsource as this can lead to expectation mismatch and lead to disappointments.


  • When the provider lacks proven systems and results - Is the provider unable to provide proofs of client success and case studies? Don’t outsource as they may not have validated their services yet.

Streamline Your Outbound Sales with The Scalelab


Want to generate more leads to help grow your revenue, satisfy your investors, and receive further funding? We at The Scale Lab have decades of combined experience in cold outreach and sales.


Our team has helped companies land appointments with top-tier businesses such as Google, Nike, Citibank, and Samsung. Our lead generation campaigns consistently deliver warmed-up and highly qualified sales leads that directly increase your pipeline value.


Come and say hello or drop us a line at hello@thescalelab.com




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