Linda Krestanova7 min

How To Protect Your Startup Amid Economic Chaos

ProductProcessJun 15, 2022

The era of easy money is over. As the Venture Capital (VC) market buckles under pressure from the economic downturn, founders will be lucky to get one shot — meaning that cheap decisions and poor project management are now irreversible mistakes. A tiny faux pas and you’re done.

Startup accelerator Y Combinator is advising founders to plan for the worst by cutting expenses and extending their runways within the next 30 days. The total capital raised in May dropped by 44% compared to April as macroeconomic factors continue adding fuel to the fire.

The last six months in the tech market have been increasingly erratic. 61% of all software, internet and fintech companies are trading below pre-pandemic 2020 prices.

Of course, companies like STRV are impacted, too. Our prospective partners are worriedly negotiating the prices of our services. Some are turning to low-cost agencies or individuals to save money wherever possible.

What we’re seeing are dangerous decisions driven by uncertainty, which is why we feel like the situation requires a response from our point of view.

At the risk of upsetting some of our competitors, we’re going to set diplomacy aside and be completely honest about widespread tricks used in our industry to deceive clients — something we’ve touched on in the past. We firmly believe that this is the time to share warning signs not to raise panic but to help you reassess decisions and plan for the future.

Choosing the Wrong Partner Is a Risk You Cannot Afford

We can’t stress this enough. For almost two decades, we’ve had founder after founder coming to us with a half-baked app and asking STRV to “finish it.” But that’s not how it works.

When you have 80% of a low-quality product done, we can’t slap 20% of high quality onto it real quick and move on. We have to go back and fix that 80%. Oftentimes, it’s so bad that we have to practically start from scratch. It’s always more time-consuming, difficult and expensive than the founder assumes. We’re talking 2–3x the price of what it would’ve been had we been the only team on the project. But there are no shortcuts, no alternatives.

If you choose a cheaper, less-skilled partner, you will end up paying for it in more ways than one. And with VCs under immense pressure, mistakes will not be tolerated. Quality matters now more than ever — and product quality starts with the quality of the partner’s commitment.

The right partner is able to advise you and make recommendations that make sense for your business. Ask yourself: Is this a team that understands my overall goals and can design the best path to reach them within my budget? Do our values and mindsets align? That’s the only way to be sure they’ll support you in critical situations, when the going gets tough.

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Most Common Agency Tricks & How To Do a “Trust Check”

To start with, we highly recommend you learn how to spot BS in sales proposals. Specifically:

  • Is the estimate process too easy and taking a very short time, or is it tailored and detailed?
  • Are you being asked tons of questions about the product and vision, or mainly about your budget?
  • Is there a focus on possible future scaling and iterations, or just on the present?
  • Are technical people involved in the process, or just sales?

In one of our most shared articles, STRV CEO Lubo Smid outlines how to properly compare proposals and which questions you should ask in the process.

But what about specific, widely-used agency tricks that you should watch out for?

Our CMO Fedor has touched on this in his article about removing lies from marketing, and our CRO Rob has explained why STRV’s sales team couldn’t get away with “selling the dream.”

What we’d like to do now is explicitly list the ways agencies fool unsuspecting clients, and how you can make sure you aren’t being trapped.

  • Faking its track record and skills through bold statements. Everyone says they have the best people and have worked on tons of projects because it’s tricky to prove (or disprove). Reasons include NDAs, what qualifies as a project (it could have been just a few hours of lending a hand), attributing an individual’s work to the entire company, etc.

    Trust check: Look for verifiable facts. How long have they been on the market? Are they open to connecting you with previous clients for reference? Have they had many long-term partnerships? Ask for details about the company culture, hiring process and ongoing education, and check employee reviews on the agency’s Glassdoor profile.

  • Allocating available team members instead of the right fit. Having a team with relevant expertise that’s genuinely excited about and interested in your project is a game-changer, but making this happen means a lot of extra work for agencies in terms of planning. Few do it, although it’s a very popular claim.

    Trust check: If the agency says they’ve picked the perfect people for your project, ask for further proof. Has the engineer worked on a similar project before? Does the designer’s portfolio include work in a similar space?

  • Showing design concepts to seem as though it’s official project work. A design concept is something a designer creates and then pitches to the given company. Agencies sometimes use these concepts on their websites to showcase logos, making it appear as though the brand is an official partner — when, in actuality, they’ve never worked together.

    Trust check: You can ask the agency to show you an official case study or specific design outputs, or ask to speak with team members who worked on the project.

  • Including irrelevant or purchased awards as accomplishments. Saying an agency is “award-winning” is the easiest claim nowadays. There are many online publications that contact agencies, offering them an award for a small fee or a feature of that publication on the agency’s website. It’s less a deserved accolade and more a trade.

    Trust check: Do a bit of research about the awards they mention (if they name them at all – if they don’t, big red flag). Usually, a quick Google search will tell you everything you need to know.

  • Saying they can help with everything. Very few agencies, if any, can actually do it all — from brand definition to design, engineering, marketing, SEO, etc. So when they say anything’s possible, what they’re often doing is outsourcing some work to other agencies, the quality of which you’re rarely able to check. Or they’re improvising.

    Trust check: Ask to see outputs of every single service they’re offering. If an agency truly does offer a professional service, they will have case studies and references that include mentions and results of those services.

  • Keeping you cut off from engineers and designers. You absolutely need a product manager, but a PM shouldn’t be the only person you have access to during the project. Some agencies keep the rest of the team behind closed doors to disguise chaos, and because it’s easier for them. This causes miscommunication, delays and poor results.

    Trust check: Ask about the communication process early on. How will it work once the project is kicked off? Make sure there are processes in place that give you access to the entire team to easily discuss technical topics and changes when needed.

  • Taking over an existing project without doing due diligence. If an agency doesn’t take the proper measures — reviewing the existing codebase (after signing an NDA), providing an analysis along with recommendations and reasoning behind the next steps (refactoring? rewrite? no action needed?) — the result can be a mess. Doing it right requires time, experience and set processes, all of which many agencies don’t have.

    Trust check: To avoid issues like stalled production due to legacy code that should’ve been rewritten, or rewriting the entire codebase just because it’s more convenient for the agency, make sure you’re dealing with a team that’s experienced with taking over a project. Check that their advice keeps in mind long-term success and product scalability.

  • Applauding your idea even though it’ll probably fail. Seasoned professionals are pretty good at recognizing ideas with real potential. But business is business. If your idea isn’t great but you’ve got the money to finance it, most agencies won’t challenge you to avoid making you angry or scaring you off. (This mindset is one of the biggest differences between an agency vs. a partner.)

    Trust check: Ask about the initial stages of the project. Is there a phase of exploring your idea, analyzing the market fit and doing necessary research? This is an indicator that the agency prioritizes an honest dialogue and isn’t afraid of disagreeing with you.

    Even before the deal is closed, you should feel challenged (in a healthy way) by the potential partner; if they’re just nodding along and agreeing, be careful.

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Our Process Comes With Extra Layers of Protection

We understand that founders will grow increasingly cautious with their spending. Nonetheless, the market’s current state doesn’t mean no one will be building products. It means that everyone must be smarter about it. That includes both sides: founders and ourselves.

While our prices will not be changing — they’re fair, allows us to have a strong team and uphold our selective approach — we’re more strict than ever with the rigorous analysis of our partner’s projects and our own processes to negate any possible delays, miscalculations or minor hiccups.

In action, this means that every STRV proposal goes through intense scrutiny. We guarantee an estimate that we can commit to +/- 10% (unless there are major changes down the line) and, before any proposal reaches a client, we’re triple-checking details with multiple Platform Leads to confirm the timing, capacity and cost to a T.

We’ve also expanded the questions we ask before starting a project to ensure an even more comprehensive understanding of the client’s goals, leaving no room for assumptions.

And while STRV’s added value has always been our expertise and collaborative abilities, right now, it also lies in our grasp of the market. We’re constantly tracking the VC situation and fully empathize with what founders are going through.

Our Team Is Happy To Offer Free Advice

If we’re not the right partner for you, that’s fine. Just protect yourself from agencies and decisions that will ultimately do you more harm than good. Educate yourself, check sources. And please feel free to reach out to us for help. The tech world is a community of entrepreneurs, engineers, artists… all about to hit some rough times. Might as well help each other get through it in one piece.

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