Do Investors Hate Your Freelancers?

There’s an ugly myth about businesses built on freelance talent.

It comes up time & time again with founders I've worked with:

Is the fact that I use freelancers a problem?

Great question, glad you asked.

Using freelancers in your startup could make you the smartest person in the room, or uninvestable - but it depends.

Founders that get this wrong, don't raise money.

Founders that get it right - they're crushing it.

Here's how to think about it:

Why you use freelancers in the first place

First, we're not talking about "we needed someone to make us a logo so we paid $300."

We're talking about "Tom does 30 hours / week for us" freelancers.

Let's come back to why Tom's freelancing for you, instead of an employee:

• Employees are expensive
• Benefits are complicated
• You might not need someone full-time yet
• But an outsourced service (Fractional CFOs For Hire!) is still too $$$ and not personalized
• Freelancers are flexible overhead
• Best talent, sometimes on the cheap
• People are cheaper in other countries
• You can always go full-time later if it makes sense

Don't forget the downsides

But it's not all fun & cheap games with your 1099s, there's issues & risks with freelancers too:

• Information leaks - especially if you forgot to NDA up
• Not dedicated to growing the company; married to the dollar
• Typically not incentivized toward long-term growth
• Can be actually an employee for legal purposes if you're not careful
• Outsourcing key functions (Sales, Operations?) can mean you have a hollow business

What Investors Think

Myth: “Investors won’t like the fact that my team is almost all freelancers.”

Fact: Actually, that’s awesome. Think about why. An investor can see that you’re focusing on your core business, doing what you do best, and outsourcing the rest. Sure, you’ll have some open spaces on the team later on, but all you need to do is identify them as gaps and future hires.

Fact!: Engaging and managing a freelance workforce shows how you’re working smart and making best use of your two most important early-stage resources: time and money.

Fact!!: A bigger danger is trying to impress an investor by showing them how you’re doing it all on your own. Are you writing your web copy, managing your ads, designing your documents and crunching your own numbers?

Unless you’ve integrated an incredible bunch of productivity tools so that you only have to make the final flourishes and press GO - you’re wasting time and money. If your business is going to grow you’ll have to work with other people at some stage. You’re unlikely to attract investment before you’ve started on that learning curve.

Fact!!!: Investors like to meet founders who play nicely with others. The management of remote teams is becoming a significant and highly prized skill.

Whether you think it's a problem, or you think your business is more nimble, efficient and faster-growth because you use freelance talent...

Either way, you're right.

It doesn’t matter if everyone works under the same roof or in different hemispheres as long as you’re working productively and in sync.

To do that, focus on your automation. What are you automating so you don’t need extra people? And what are you automating so that your sales funnel, customer relations, internal communications and workflow are working at optimal efficiency.

If you can show an investor what kind of team you’re growing and why you're building your business that way, that spells intelligent growth to them.