Minimum Viable Product · Project management

Considering a web development firm - embrace or proceed with caution?

Trevor Collins Crowdfunding Entrepreneur & Co-Founder of 100 Danish

October 9th, 2013

I found a potential web development firm to build out an MVP for the startup I’m building, CloudConservatory.com. However, there are a couple aspects of the deal that have raised questions and perhaps a yellow flag of concern.

I’d love to get thoughts and guidance.

This firm has just set up shop here in Boston, with a newly assembled team. I like the lead project manager and trust his input. As his 2 developers have extensive experience.

So I sat down with the team and described the idea for my platform that is going to integrate live streaming video (using the OpenTok api), archiving of those video streams, user accounts & profiles, and scheduling & payment capabilities. In the end, the team loved the concept and the prospect of building it out.

The concern, though, is that they put together a quote for only $15k. My expectation was something closer to 3-6x that range. Also, they expressed that it should only take 6-8 weeks. Again, expectation tells me that 3-4 months is more realistic.

When I asked the lead project manager the motivation behind the pricing, he mentioned:

the firm is new & untested and needs to build up a portfolio
they know I’m in a lean startup that has a limited budget
his team needs something to get there feet wet and not sit around twiddling their thumbs
obviously for the next client they would charge more than $15k

Is this an opportunity I should embrace? Or what do I need to look out for or keep in mind? I’m not a developer myself, but do have a couple local friends who are willing to look over code and general architecture.

Cheers in advance, Trevor

Joel Magalnick Storyteller. Innovator. Leader.

October 9th, 2013

I'd also have them keep the code posted on GitHub, weekly at the very least, so you and/or your tech buddies can check progress and make sure nothing's running off the rails before they get too deep into the development. Plus you will always have access to the code.

Jake Carlson Software Development Manager at Oracle

October 9th, 2013

As with any major purchase, pricing out the market is very important. I would get at least 2-3 bids before proceeding.

Another reason for the low bid may simply be that you have not thoroughly explained the requirements, so I agree with others when they say to make sure they understand the full scope of the work. However, it is not all on you. Experienced developers and project managers should be asking probing questions about the project to determine whether their initial impression of scope is accurate.

The age of the company means little compared to the level of experience of the project manager and developers. A new company with very experienced developers is not so much of a gamble, and I understand the low bid if they are just looking to get some portfolio pieces. It may be worth your while to find out a little more about the experience of the developers themselves (i.e., get their resumes or view samples of their work). If it turns out that they don't have much experience, then this may be the origin of the low bid.

Even if the company itself does not have portfolio pieces to show, the individuals in the company should be able to point to work they have done that is similar in scope to what you are asking for. If they cannot show you at least a couple projects that demonstrate their competence, I would go elsewhere if you can afford it.

That being said, IMO $15k in general may not be as low as you think it is. I was developing large web applications only a few years ago for around that much, though now I'm charging double that now that I have enough portfolio pieces to show. This is especially true if the developers already have experience with the particular technologies involved and/or code already written that can jump start the project. Just to give you an idea, my company charges $20-$30k for a custom web app, from start to finish, including the design and development. There is plenty of overcharging that goes on in the industry, which is why you want to get multiple bids to find the outliers.

Robert Clegg

October 10th, 2013

Broader Picture: will you get sales to fund your business from this or are you looking for investors? You need to see this path because investors are looking for in-house teams not outsourced development. Your ability to bring a team together in house to build your product is KEY as a leader. Investors are looking for businesses to invest in not business models or products. This is a key perspective.

What will happen if this actually does start to work? You will have to face these EXACT same questions as you build your team internally. Can you vet team members? Can you attract high quality talent? Can you execute on milestones. With none of this as a track record you will be at ground 0 with investors. All that risk is still there whether you have a fancy demo or not.

You need to attract a technical co-founder and team to direct this internally.

Anonymous

October 9th, 2013

Trevor, you always get what you pay for. They could be amazing developers, but they will also learn on your project, which means making mistakes (time or quality). As Ray said, having a technical product manager on your team will help you a lot.

Robert Clegg

October 10th, 2013

Ok, reality check: Small start up firms with no capital won't perform even under penalties. You can hammer all you want on them, but in the end you will have to beg and negotiate to get things done. With $15k as what you are paying it won't be worth your time to follow up with legal to pursue them, take them to court, then collect.

Even with larger companies you will end up compromising and negotiating a solution.

Also, even in work for hire, you may be "protected" if they make a mistake and include some copyrighted code, but that doesn't mean you have a solution that then doesn't need to be fixed or reworked. And no, you can't force them to fix it. if they are a small shop struggling to make it they'll evade you.

Contracts aren't what first time entrepreneurs really think they are. You may have all the "rights" and actually be "right" but the reality of fixing your solution, getting someone to work on it and complete it are two different realities.

Simon Storm Director, Enterprise Applications

October 9th, 2013

Trevor - As someone who deals with this all the time, there is no easy answer as to whether a firm is trustworthy. There is also a HUGE variance in prices. I just sent out a project for bidding and the prices for the same work ranged from $25k to $125k. The key to dealing with this is in the statement of work. First, you need to be very, very, very specific about the deliverables (code, documentation, training, transition, ongoing support, etc) and who owns them at the end of the project. This is more than just the site does x or does y. You need to think about application performance criteria (like a page will render in 2 seconds, a page doing xyz will render in under 8 seconds with a load of 50 users, etc). You need to cover error handling, logging, notifications, etc. You need to be sure you clearly state the number of revisions that you are allowed to go through. For example, if you see something you don't like and then they fix it, can you make another round of changes? All of this needs to flow into a statement of work where you need to be sure you have a clause for "the project will not exceed: $$$". This will make sure they don't come back and say that you owe an extra amount of money. Finally, you need to be sure to have a change control process so that if there is a change in scope, they are on the hook for highlighting it and getting you to sign off on any additional work before the work is performed and how much it will cost you. At then end of this include a payment schedule and be sure that you receive deliverables for each incremental payment. You need to look at this from the perspective that if they stop performing you can go to another vendor with the work already completed. Let me know if this helps. Simon

Karl Laughton VP of Finance at Insightly

October 9th, 2013

Hi Trevor,

I'm leveraging a firm here in San Francisco who was recommended to me by the folks at Carbon5 for mvp builds. I was quoted 50k on a delivery schedule of 5 weeks (they have a proven track record and strong team for agile based projects). Furthermore, I'll be hands on throughout the project. Hope this helps level set.

I'd say give them a shot and have your friends review deliverables as they hit milestones on the back end. You should be recruiting a technical team in parallel. At a minimum they can give you something to raise with, and you can scrap it after you've raised to build scale and foundation on establishing product market fit for the next round.

Hope this helps,

Karl

Anonymous

October 10th, 2013

I would even respectfully disagree with that, too. They are new and trying to get traction. Why not show some good faith and make a small up-front payment? You are already taking tons of risk with them, and it's unlikely that there would be such a catastrophe that you wouldn't wind up paying anything, ever! It might go a long way establishing a good relationship - a small up-front payment is a great way to show that you trust them and it might really motivate them. You would be their most important client ever and that's not a bad thing :)

Josh Moser Founder at VinoServant, Inc.

October 9th, 2013

Trevor - pay them $500 (or some lesser amount) to develop a detailed spec document that lays everything out. They should be able to present you with a draft in 5 days, and then it will take another 5 to 10 days to finalize the spec document. If you are satisfied, then it should give you confidence to proceed. If they do an awful job, then you are only out $500 and 10 to 15 days. This document will probably end up being 50 to 80 pages. It will include an Overall Description of the product you are developing along with all the system features and wire frames etc etc. That being said, I would also get two additional quotes. If you would like, I am more than happy to send you a copy of the Spec document that I had put together for my site and app. Just send me an email -- josh@vinoservant.com

Robert Clegg

October 9th, 2013

1. They should submit a dev plan outlining milestones for the project including deliverables. Your friends should be able to tell you if that's realistic. That dev plan should include the rationale for the architecture which you friends should be able to evaluate as well.

2. Consider long term stability and support. Will these guys be there to support what they build? Will they be there to build other features as you go? Will they use your extra budget to keep building or jump on to other paying clients with bigger rates? Should you be structuring a longer term deal for the whole budget to incentivise them?

3. Hey, it's only 6-8 weeks. Offer them double the money if they hit it (no money down). Or some bonus variation thereof. Explain your concerns but give them the bonus option. That puts the onus on them to deliver. But make sure the milestones, deliverables, performance, and any other criteria are agreed to in the contract.

Happy to discuss more directly if you'd like,

Robert

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