For more than a year, startups and small companies have struggled to attain venture capital support. Macroeconomic factors as well as several markets demonstrating high levels of volatility have made investors more cautious. As a result, it’s critical that startups adopt strategies that convince investors that their company is worth their support… and one of the best strategies today involves outsourcing. There’s been a profound shift in outsourcing trends, and venture capitalists support these changes. In fact, attracting venture capitalist funding through outsourcing is among the top things a startup can do. The advantages this approach offers startups are numerous, and investors recognize this. Therefore, it’s worth exploring why a solid outsourcing plan should be a part of every company’s funding strategy.
(Bold forecasted the troubles startups were going to face in raising capital–read about it here.)
It’s not necessarily a secret that startups can be successful in attracting venture capital funding through outsourcing. According to a Deloitte survey, the number of companies embracing broad outsourcing approaches has more than doubled. Compared to this figure being around 20% a few years ago, it is now almost 50%. But what may not be apparent is the areas where outsourcing is being utilized. Outsourcing services have become much more complex and extensive in recent years thanks to technological advances. These have fueled a rise in new outsourcing trends and venture capitalists’ preferences toward its use. The following explains in greater detail why outsourcing is a preferred strategy among investors. And it will also highlight the types of outsourcing services from which startups can best benefit.
The Appeal of Outsourcing to VCs
When investors examine startups and venture capital funding opportunities, their analysis has become increasingly stringent recently. There are several reasons for this. Recessionary pressures, inflation, and higher interest rates play a big part in this shift. At the same time, market uncertainties amidst geopolitical events similarly have increased their level of caution. Understanding this, the benefits that outsourcing services potentially provide are often appealing to these investors. For example, not only can outsourcing improve cost effectiveness and financial stewardship. But it also helps streamline operations internally for companies allowing them to focus more on their core competencies. Naturally, this can help in attracting venture capital funding through outsourcing if it boosts the startup’s value.
(Can AI be the boost small businesses need? Read how they could in this Bold story.)
There are many other advantages that explain current outsourcing trends and venture capitalists’ preferences related to them. For example, outsourcing permits the ability to rapidly scale when market demand suddenly changes. Access to a larger global talent pool supports scalability as does use of other complex services like accounting. Outsourcing also enables companies to better access expertise in non-core competency areas. And it demonstrates a company’s willingness to be innovative as well as collaborative in nature in finding best solutions. These are all attributes helpful in attracting venture capital funding through outsourcing approaches. While growth investing is important, so is a level of frugality and stewardship when it comes to investor dollars. This can be demonstrated by embracing outsourcing trends and venture capitalists’ current preferences.
Outsourcing Trends in Recent Years
Some of the pioneers in outsourcing date back to the late 1980s. Companies like General Motors, American Express, and Cisco demonstrated the cost-savings potential of outsourcing at the time. But since then, much has changed. Outsourcing trends and venture capitalists’ view of these practices are much more evolved. Advances in technologies account for a big part of these advances and changes in outsourcing practices. Not only has cloud technologies played a big role but so does data analytics and generative AI today. This combined with developing global service centers now offer an extensive menu of technology outsourcing services. This includes not only business processing but similarly back-office support, technology solutions, and digital marketing. Startups recognizing these trends and utilizing them will also be the ones attracting venture capital funding through outsourcing.
One of the other major outsourcing trends and venture capitalists’ shifts relates to personalizing services to consumers. There has been a change in consumer behaviors with greater demand for enhanced end-user experiences and interactivity. In many areas, this level of hyper-personalization can be better achieved through outsourcing. At the same time, outsourcing services is no longer being used for customer support or cost-effective operations. Outsourcing services now serve partnership roles, collaborating with companies to realize better outcomes. These outcome targets continue to be in customer satisfaction. But they also involve revenue generation, sales volumes, and effectiveness of marketing efforts. These practices are becoming commonplace. And startups using them will be more successful in attracting venture capital funding through outsourcing schemes.
Outsourcing 4.0 and the Future
Outsourcing trends and venture capitals’ behaviors change over time. Decades ago, the main focus of outsourcing strategies involved cost-reducing efforts. This outsourcing 1.0 version morphed into 2.0 as companies began to increase their relationships with outsource centers. This was further advanced to outsourcing 3.0 with globalization and the introduction of cloud technologies. Today, however, we are entering outsourcing 4.0, which portrays a more holistic strategy to outsourcing. Such efforts include developing strategic partnerships with outsourcing services while leveraging new technologies like AI. Ultimately, this will make companies more agile and responsive while best utilizing their resources and competencies. It’s clear why such strategies are being used in attracting venture capital funding through outsourcing currently.
Understanding this, startups should be aggressive in finding outsourcing service partners capable of providing a full array of options. Naturally, business process outsourcing offerings should include talent acquisition, business development, and innovative work solutions. But comprehensive outsourcing services should also offer specialized services like accounting, data management, and digital marketing. Cybersecurity protections, data center management, systems monitoring, and advanced customer relations services should also be available. For startups, attracting venture capital funding through outsourcing is rapidly becoming a necessary strategy. Based on outsourcing trends and venture capitalists’ behaviors, companies need to leverage all outsourcing opportunities that make sense. The venture capital market is challenging today, and outsourcing is a means to make navigating this market a little less difficult.
Outsourcing is essential for business growth–read why in this Bold story.
