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Why is Talent Affordability the Biggest Challenge for Startups?

People are assets that you can bet on when it comes to delivering projects and driving organizational growth. In the case of growing startups, hiring people who have the right skill set and are a perfect cultural fit is even more crucial. With a growing number of tech giants and startups competing for the same talent in the market, it usually becomes difficult for startups to hire them affordably.

According to ManpowerGroup’s Talent Shortage Survey released in February 2020, 69% of employers in the U.S. struggle to fill jobs.


Why is it so challenging?

There’s already a talent crunch in the US. ManpowerGroup's Talent Shortage Survey further estimates that millennials usually demand more pay, flexibility, and challenging work, making it evident that they prefer working with established brands over startups. Employees are now in the drivers’ seat as jobs in the U.S. technology space shift from employer-centric to employee-centric. Thus, even if startups succeed in hiring the best talent, retaining this talent is a big challenge.

Salary of a software developer in the U.S

Software developers with over 5 years of experience (generally millennials) typically demand a salary of $95,000 to $140,000 in the U.S. This is a challenge for startups in their early stages of fundings as it may exhaust all the available funds sooner.

The PMF conundrum

If startups hire fewer candidates to converse the available funds, they may struggle with finding the right Product/Market Fit (PMF) in the stipulated time frame. Also, it may result in burnout of the workforce, further hampering their work-life balance. The result - decreased productivity and higher attrition rates!

In the hustle to achieve a faster time-to-market, startups sometimes hire candidates who are not an excellent fit for their organization. This may force them to extend their runway, which may not be viable in most cases. For startups that have received the series B funding, it may lead to unexpected delays and even project failures.

The current trend - Building offshore teams

To overcome the challenges of hiring talent affordably, most startups (and even established organizations) build offshore teams in countries such as India, Ukraine, China, Poland, and the Philippines. However, when you hear the word offshoring, “India” is probably the first name that will come to your mind, which has its own reasons.

Why India?

The country produces the highest number of Science, Technology, Engineering, & Mathematics (STEM) graduates annually. Thus, the technical expertise available in the country is abundant. Also, all STEM courses in the country are taught in English. Hence, these graduates are well-versed with the language. Moreover, English has emerged as the business language of the country. This makes India an ideal offshoring destination for U.S. based startups.

Startups can also leverage the time zone difference to enable 24X7 operations and speed up their time-to-market. Companies providing 24X7 customer support also benefit significantly from this time zone difference. Collaborating with the offshore team and getting quick fixes for the code also becomes hugely convenient.

Salary of a software developer in India

A software engineer with 6 to 8 years of experience typically earns $17,111 to $22,138. So, startups can save on salaries and that too, without compromising the talent quality!

The mindset of Indian IT professionals

Indian IT professionals usually prefer working for product-based companies over service-based companies. Owing to better work culture, favorable policies of U.S.-based companies, and a high pay-scale offered by them, they prefer working for these organizations. In fact, it fetches them a feeling of self-actualization. Hence, the chances of finding and, more importantly, retaining the right workforce in India are much higher for U.S.-based tech startups.

Thinking about building an offshore team in India but don’t know where you can start? You can start by finding the right offshore partner.


How can Braves help you to scale up your engineering team successfully?

Braves helps global technology companies incubate their dedicated offshore development teams in India. The team in India is an extension of the onshore team and works collaboratively to achieve their goals.

With 17+ years of experience in technology recruitment in the U.S. and India, we know how to build a team of high performers. Our fully managed operations model along with people driven policies has helped clients scale their teams with high employee retention rates of 85%.

Get in touch with us to find out more.


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