So your company has an excellent idea for a new mobile app or interactive website? Beyond a great idea, a detailed business plan and a robust supply of capital also play a critical role. However, instead of looking for outside funding, what about using your own entrepreneurial expertise to form an outsourcing agency to quickly generate the capital for your digital venture?
We call this type of agency a digital venture studio. The goal is to provide agency services with the intention of investing the firm’s profits and resources into your own digital ventures. Because agency service providers typically become profitable long before most startups, this presents an attractive bootstrapping opportunity. Let’s take a closer look.
The Benefits of Offering Agency Services
A recent study highlights the massive profit potential of operating an outsourcing service provider. According to this study, the global market for outsourcing services effectively doubled from 2000 to 2019; expanding from $45.6 billion to $92.5 billion. Needless to say, building an organization to provide outsourcing services offers the potential for significant profits to invest in ideas for new startups.
Of course, any outsourcing agency needs to employ a team of top-notch technology professionals, most notably software engineers and a project manager with an entrepreneurial spirit. At the same time, you need to define the policies, practices, and procedures for your agency. These include a chosen software development methodology and project management approach. In fact, having these processes already in place makes it easier to source and hire tech talent wanting to work for a forward-thinking organization.
You also need to identify a market niche for your agency to target. One matching the experience of your managers and executives makes the most sense. Either way, expect to spend significant time learning about the relevant business domains within that chosen market. Additionally, plan on some evolution during this initial period, as you determine what practices work and which don’t. Successful client projects help drive this process.
Bootstrapping Your Digital Venture
After your agency completes a few successful projects and profits begin accruing, it becomes time to start work on an initial digital venture. Leverage the company’s extra profits as well as any currently unused resources to bootstrap this initial effort.
Coming up with ideas is now easy. As an agency, you’ve spent time researching industries and pain points as part of helping your clients find product-market fit. Document any underserved industries or opportunities and you will begin to see patterns.
Building a digital venture also keeps everyone in your company engaged, especially when in between client projects. It’s the perfect solution for project managers and software engineers currently on the bench. Put them to work on the digital venture initiative. It also ensures the continued maturation of your company’s best practices for software development.
As your outsourcing agency adds new clients and subsequently more technical talent to work on new projects, profits continue to grow. Again, leverage this revenue to bootstrap and spin off new startups. You can also partner with startups to offer your agency services in exchange for equity.
Over time, the agency creates a digital venture studio able to transform great ideas into new digital ventures. In the end, it’s a compelling argument for forming an organization that provides outsourcing services and so much more.
Andrew Amann, CEO of NineTwoThree Venture Studio. Andrew and his team have created 45 products and 9 startups and were featured in the Inc 500 in 2021.
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