I Asked 4 Venture Capitalists:
Is the Reputation of Tech Freelancers Changing?

August 22nd, 2017

venture capitalists

By Michael Solomon, 10x Management Co-Founder 

One of the great things I love about being an entrepreneur is the challenge to consistently innovate to stay ahead of the competition.

Technology and the Internet have radically changed how business is conducted, and these changes are unfolding at an exponential rate. For instance, if you have a business idea that is incompatible with a mobile phone today (a dating site, an inventory management system, a restaurant, a web design firm, a sales software, etc.), you’re unlikely to succeed. This was not the case even 5 years ago.

One industry that has to be particularly mindful of constant innovation is venture capital. Venture capital firms (VCs) provide financing to businesses and startups that are believed to have high-growth potential.

Why provide money to a company if you’re a VC? The potential for huge returns to their Limited Partners. In short, lots of money. Why would an entrepreneur accept money from a VC? Because you need it. Duh! Otherwise you can’t build the product or service you want.

In an effort to understand how VCs manage change and help companies scale, I interviewed four venture capitalists about the importance of the technology workforce to their portfolio companies.

What does the workforce of their portfolio companies look like? Do they exclusively use full-time employees, or do they hire contractors to build products? Is there a tradeoff between waiting for the perfect full-time employee to build a product and getting started immediately with freelance talent? Do VCs let their portfolio companies wait to fill roles, or do they value moving as quickly as possible?

Using contractors (sometimes referred to as freelancers, agile talent, consultants, 1099s, etc.) seems to be a logical way to scale, yet there has historically been a stigma attached to the idea. Does this stigma still exist or is it evaporating as technology evolves?

I had the honor to speak with: Joe Medved, partner at Lerer Hippeau Venture; Marit Molin, Founder & Principal at Frontier Equities VC; Ethan Meyer, CEO of Bristol Palmer; Bob Greene, Managing Partner at Contour Venture Partners. Here’s what they had to say:

Joe Medved, SB Capital Partner at Lerer Hippeau Venture

Joe: For our portfolio companies, we do not want the core tech team to be outsourced. While tech contractors are common in many companies, the core product and pace of development required for startups to succeed are too important to outsource. Our companies have used contractors to fill financial positions and design needs (firms or individuals). Our companies are also open to using freelancers around sprints when tech demand is high or for custom projects, and especially for quality assurance. Having our core team’s work verified by an outsider can be valuable for our portfolio companies.

Having said that, each type of business we invest in is different. For instance, some of our ecommerce businesses use contractors in the early-going to fulfill their tech needs. Some mobile projects are also more likely to get outsourced. These sorts of gigs generally run better when the talent is onshore.

Michael: Do you see the stigma around freelance technologists evaporating any time soon?

Joe: I think the stigma will remain, given that development is at the core of value creation in technology startups. However, just as the freelance economy has yielded value across many services industries, there are areas where increased utilization of freelancers makes sense and is likely to become more common. Many great developers have the luxury of focusing on freelance work given the high level of demand for their services. So long as a company can appropriately vet their capabilities, partnering with freelancers for select tasks can be beneficial in accelerating their product roadmap.

Marit Molin, Founder & Principal at Frontier Equities VC

Marit: Frontier Equities recently invested in a shopping tech startup, Poshly, that matches consumers with products based on questions we ask consumers via the site/mobile app. The quality of technology is our number one priority.

For Poshly, tech talent is not a bottleneck. Poshly is lucky to have an outstanding team that is savvy with recruiting. When demand is high, Frontier Equities and Poshly believe in using tech freelancers to improve efficiency. We believe that it’s important to leverage the best possible talent regardless of where they are located and the structure in which they like to work. Using tech freelancers provides flexibility and agility for the team.

Michael: Do you see the stigma around freelance technologists evaporating any time soon?

Marit: While trends are slow to develop, I do believe that companies’ willingness to use tech contractors is increasing. It seems for most companies having a healthy balance of full-time tech employees and freelancers is ideal. The trend of freelance technology talent is likely to increase in the future, as technologists continue to pursue projects and teams that interest them. Freelancing provides flexibility on a project-by-project basis for everyone involved. Freelance tech talent has been supportive of Poshly’s growth.

Ethan Meyer, CEO & Founder of Bristol Palmer

Ethan: Some of our portfolio companies like to use in-house tech teams, but I think a balance between contractors and full-time employees is emerging as a popular staffing philosophy. Companies are really beginning to understand the value of the freelancer, especially as they compare that value to the hidden costs of full-time employees.

You can definitely increase scalability by utilising an augmented and balanced workforce. I am of course a big believer in due diligence. Using services like the Upworks of the world makes it hard to find the right people, and I’m often skeptical of that talent without any vetting.

Michael: Do you see the stigma around freelance technologists evaporating any time soon?

Ethan: Public perception of the national narrative on contract work/outsourcing is very negative, and that is causing founders to shift away from using freelance technologists. I’ve found that onshore vs. offshore talent makes a big difference, but this distinction is a relatively new element.

Bob Greene, Managing Partner at Contour Venture Partners

Bob: At the end of the day, we prefer full-time employees to fulfill our tech needs. For Contour Venture Partners, we need to have a technical lead we trust in which to invest. We want that leader in-house.

Our portfolio companies often use freelancers at lower levels, and often do so by outsourcing to offshore talent because it can be hard to find the depth of talent you need in your local market. The great thing about developers is that they can work from anywhere. When our portfolio companies outsource, it is an effort that is usually led by the founders. They often know how to access the talent they need abroad.

Michael: Do you see the stigma around freelance technologists evaporating any time soon?

Bob: I haven’t seen and I don’t expect to see a big change in the stigma surrounding freelancers as far as VCs go. It’s true that there is always a shortage of tech talent, but that is simply the nature of the beast. The tech skills we need are hard to come by, and we expect that to continue. Contour Venture Partners helps with recruiting when we can, but the shortage still exists, and likely always will.

How Venture Capitalists Improve Efficiency and Enable Technology

The stigma around freelance technology help is slowly evaporating, and as the reputation and availability of pre-vetted quality freelance tech talent improves, don’t be surprised to see many more VCs encourage their portfolio companies to outsource projects to quality, vetted and secure tech freelancers.

If you like this article, you might enjoy reading How to Conduct A Reference Check When Hiring A Freelancer