To be honest, I'm a little nervous about the fluff, too, but I do sincerely believe we're doing something different with 10x.
First and foremost, our clients are the developers. (Admittedly, this nomenclature gets a little confusing sometimes, but it's important for us to constantly remind ourselves that we work for you.)
Rather than thinking of it as a consulting agency, we see our job as making freelancing suck less. In the process, we're building a network of freelancers who share best practices. They even share customers... our customer development has revealed that the #1 complaint from freelancers is that it's feast-or-famine. Since each person in the 10x network brings in his/her own dealflow, one person's feast can ease another's famine. Imagine a P2P network for gigs.
Additionally, the article only briefly touched on the lifestyle design aspect, but that's really important to us. Just like managers in the music or movie industry, we're entering a long-term relationship with our clients, and strive to understand their goals and help them achieve them. For some people, that means we save them cycles that they can put towards their startups. For others, we enable them to travel more. (I started out as a client before we founded 10x, and I spent my time on music, e.g. recording albums, touring, learning the cello.)
Also, my cofounders come straight from the entertainment world. They managed John Mayer from being an unknown singer/songwriter to playing sold-out stadium shows. They bring a really unique outside perspective to our industry.
And finally, as the article mentioned, our cut is only 15%. My understanding is that consulting agencies often take 50%+.
First and foremost, our clients are the developers.
Do you get paid by people for whom you find good developers?
Rather than thinking of it as a consulting agency, we see our job as making freelancing suck less. In the process, we're building a network of freelancers who share best practices. They even share customers... our customer development has revealed that the #1 complaint from freelancers is that it's feast-or-famine. Since each person in the 10x network brings in his/her own dealflow, one person's feast can ease another's famine. Imagine a P2P network for gigs.
I have worked very hard at developing my client base. Why should I share it with strangers? It is also not P2P because you are a middleman.
Additionally, the article only briefly touched on the lifestyle design aspect, but that's really important to us. Just like managers in the music or movie industry, we're entering a long-term relationship with our clients, and strive to understand their goals and help them achieve them. For some people, that means we save them cycles that they can put towards their startups. For others, we enable them to travel more. (I started out as a client before we founded 10x, and I spent my time on music, e.g. recording albums, touring, learning the cello.)
What programs do you have that help people like me get their life goals? I can schedule my own traveling, deal with savings, and hire an accountant to do a lot of stuff for pennies.
Also, my cofounders come straight from the entertainment world. They managed John Mayer from being an unknown singer/songwriter to playing sold-out stadium shows. They bring a really unique outside perspective to our industry.
What is this unique perspective? Can they chime in and share it with us?
And finally, as the article mentioned, our cut is only 15%. My understanding is that consulting agencies often take 50%+.
You are competing with agencies, yet you do not know their rates? No, the rate is not 50%. It is always variable. I've never had one go so high, not even half of that.
Consulting agencies do have one thing: the clients. They sell and market their services like crazy, and get a lot of work that way. Depending on how good they are, they also make sure that the place where you go to work is a good one, with good development practices.
How do you make sure that any client that comes my way will not make me sit through 5 meetings a day and then demand more work from me? Do you have any experience working with development teams?
Wait, I have to bring in my own leads AND you take a 15% cut?
Something like GroupTalent.com provides deal flow, handles contracts/billing, and tacks on a 20% fee to the employer/client. Employers have no problem with it. They get great talent. Developers obviously don't care because they still get paid what they want and GroupTalent takes care of a ton of overhead.
I've probably been their happiest customer. They provide a super high quality leads channel. When I look at something like your service, it scares the crap out of me to give away 15%. Sure consulting agencies take an even bigger cut. But that's for freelancers who have no desire to do their own sales/marketing. The best freelancers I know would never go to them.
Yeah, I'm actually the Head of Talent at a smaller startup and have worked here, larger startups, Google, Facebook, etc. I've considered starting an agency like this multiple times, and people as me about it quite a bit. I always just assumed the market was saturated with savvy people providing a better value proposition, but if the founders literally have no idea what the normal fee is (founder above claimed 50% is normal agency fee, even though the article itself correctly points out the normal fee is basically exactly what their fee is) and they seem to provide very little value, it makes me feel like I should get on this.
The fees at agencies vary greatly. You tell them how much you want to get paid hourly. They charge clients as much as possible and keep the difference.
Fair enough, but a founder of an agency saying that "standard fees are about 50%" is either an outright lie to get more business or just someone not understanding the business they run. Either one worries me.
I think its a misunderstanding or misuse of terminology. "Take" may refer too the difference of what the agency bills vs what the freelancer/developer is paid out.
E.g., agency bills at 50% markup (40-60% average in agencies in the technical space (I was a tech recruiter for 3 years)) $90 / hour to the company, while paying the developer $60 / hour.
Perhaps the founder is saying the agency is "taking" $30 from the developer, but this is a poor way of representing their service as comparative to third-party agencies and is not necessarily reflective of what the developer could make themselves directly with the company [1].
I can see why this is hard for 10x to get across, because stating "third-party agencies markup the pay for developers by 50%, we only mark it up by 15%" or "we take the 15% pay out of the developer," ergo, the developer needs to be negotiated higher in pay to make up that 15% fee.
[1] part of why companies pay the bill rate to third-party agencies is liability, taxes, ease of hiring/firing, avoiding SOW's and LLC / 1099 freelancers, etc.
Savvy developers will of course negotiate their fee's / pay upwards, but that is what 10x and others seem to be trying to take care of.
Its interesting, but misstated by the founder for "50%" take from the developer.
Will the engineers PLEASE wake up... A deal where an organization is taking a cut of your gross is NOT worth it.
So you work for an entire year, working nights, weekends, and they will take %15 off the top? At 200/hr, if you gross 400K they're taking 60K?
Are they really providing 60K worth of service? No. It's your reputation on the line. Your ass working weekends. You being called at 3am when the server crashes.
If they find you the contract, offer to pay a finders fee that seems reasonable.
They did the work up front, fine, then pay them up front. But don't let them keep sponging off of you like a leach.
"So you work for an entire year, working nights, weekends, and they will take %15 off the top? At 200/hr, if you gross 400K they're taking 60K?"
Your view is very myopic. If your best alternative without them is 100/hr or even 150/hr, then in fact you are still net ahead.
"If they find you the contract, offer to pay a finders fee that seems reasonable."
Who is assessed the fee and when? In this model, they are taking an "equity" stake so to speak. The developer bears lesser risk for a souring relationship.
Right, but the point being made elsewhere in the thread is that agencies usually can approach or exceed your goal rate, while not requiring you to share your secret sauce (ie: your leads).
> At 200/hr, if you gross 400K they're taking 60K? Are they really providing 60K worth of service?
It depends on what you would have been making without their help. If you otherwise would have made any less than $280K that year, they are definitely providing $60K worth of service. (Or, perhaps more properly, "value".)
I think there are plenty of really really good programmers who are lousy negotiators. For these people a 15% cut could easily be made up for by a good agent. It's not perfect for everyone, but for people who are better coders than business people it could easily be a win.
$60K on a $400K project sounds worth it considering that in most other contract broker arrangements the developer is the one getting $60K. FYI, you spelled 'leech' wrong.
Altay, I wish you the best of luck here - I hope this model works for you and your team. One thought for others, one for you.
>>First and foremost, our clients are the developers.
No, they're not. Your clients are the people who pay you money. The companies pay you money, then you pay the developers money. The developers are your vendors.
What you're actually saying is that you care about your developers and you want to treat them really well. That's awesome! Great agencies do this _all the time_.
I run an agency - we have a good reputation, and each of our recruiters has dozens of candidates who will answer the phone when they call, because they've built a relationship over the years that nobody's time will be wasted. All good recruiters have engineers who trust them. If you live in a town and haven't found a recruiter who cares about your best interests, keep looking. If you're in Seattle, find me.
Then when the recruiter finds the right role - or, as the article says about 10X, "the company tries to find gigs that match coder skill to client need" - you can make a match. (Note that the article forgot that 10X's "clients" were the developers. That's because they're not.)
>>And finally, as the article mentioned, our cut is only 15%. My understanding is that consulting agencies often take 50%+.
I wish! I wouldn't be typing to you, I'd have my minions do it.
OK, kidding. There are consulting companies that do bill >2x of their employee's wages, but they're not the kinds of companies you're competing with here. Those are companies that have folks on salary, that bench them and pay them in between projects, that provide training/mentorship, have management in place to help support their people, etc. (You can decide how valuable those things are.) Also keep in mind that their folks are employees, so they're paying a burden of 18-22% on top of their wages, which my assumption is you aren't doing.
You're competing with placement agencies (whether you want to or not). Those are the Volt/Greythorns of the world, who are likely taking more like ~15-25%. For example, many hiring companies will negotiate a markup rate of ~50% on top of someone's hourly rate, not including load/benefits - which when you add on load/benefits and calculate cut (i.e. margin) off the top, that's more like 20%. ($150 bill rate -> $100 pay rate + $20 load/benefits -> 20% cut)
If you can make 15% work with the cost of client loss and wasted time, etc., that's great. I hope the press gives you a lift you can sustain to get there.
>>> First and foremost, our clients are the developers.
> No, they're not. Your clients are the people who pay you money. The companies pay you money, then you pay the developers money. The developers are your vendors.
What would be the big problem with the money going directly to the developers, and then the agency billing them for their agent-y services? Presumably, the agency could just help the developers create a a Limited Partnership or something, consisting only of the developers; the clients would pay that LP, and the agency would bill that LP.
To be honest, I'm a little nervous about the fluff, too, but I do sincerely believe we're doing something different with 10x.
First and foremost, our clients are the developers. (Admittedly, this nomenclature gets a little confusing sometimes, but it's important for us to constantly remind ourselves that we work for you.)
Rather than thinking of it as a consulting agency, we see our job as making freelancing suck less. In the process, we're building a network of freelancers who share best practices. They even share customers... our customer development has revealed that the #1 complaint from freelancers is that it's feast-or-famine. Since each person in the 10x network brings in his/her own dealflow, one person's feast can ease another's famine. Imagine a P2P network for gigs.
Additionally, the article only briefly touched on the lifestyle design aspect, but that's really important to us. Just like managers in the music or movie industry, we're entering a long-term relationship with our clients, and strive to understand their goals and help them achieve them. For some people, that means we save them cycles that they can put towards their startups. For others, we enable them to travel more. (I started out as a client before we founded 10x, and I spent my time on music, e.g. recording albums, touring, learning the cello.)
Also, my cofounders come straight from the entertainment world. They managed John Mayer from being an unknown singer/songwriter to playing sold-out stadium shows. They bring a really unique outside perspective to our industry.
And finally, as the article mentioned, our cut is only 15%. My understanding is that consulting agencies often take 50%+.