Recently, an investor told he had invested in a search but not a searcher's acquisition target because the company he wanted to buy had too many employees outside of the US. In his words, 80% of the company could be gone tomorrow (the searcher would be located in the US.) There were a handful of employees in the US, the corporation was based in the US but they utilized a large outsourced engineering team.
Here is my question, when exactly does it make investors nervous that there are too many employees outside of the HQ country? In SaaS and many other industries, it's very typical to outsource engineering or manufacturing elements. I am curious if this was just one investor or if there are many others that have this concern. Is there a tipping point when outsourcing makes investors feel uncomfortable? Feel free to share any stories.
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by a searcher
from Roosevelt University
in Boston, MA, USA
in Boston, MA, USA
2yrs ago
When some or most of your target acquisition is outsourced
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by a searcher
2yrs ago
from Massachusetts Institute of Technology in Los Angeles, CA, USA
from Massachusetts Institute of Technology in Los Angeles, CA, USA
this is not that unusual. Consider the engineering firm overseas as a supplier to the company, and vet them as you would any other key suppliers. What is their reputation? how big are they? are they located where there is a market for other similar outsourced companies etc,?
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by a searcher
2yrs ago
from Roosevelt University in Boston, MA, USA
from Roosevelt University in Boston, MA, USA
Thats a good point. In this case it is outsourced, these are 1099 contractors doing engineering work. But does it worry investors if lets say the head of product/eng is based in the US but 80% of all development is done overseas?
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