Ask HN: How large can a web dev agency get? Is it a good business model?
5 comments
Lecture 20 of How to Start a Startup[1] touched on this.
> In the beginning of a company, there is no management. This actually works really well. Before 20 and 25 employees, most companies are structured with everyone reporting to founder. It's totally flat. That's really good. That's what you want because at that stage, it's the optimal structure for productivity.
> What tricks people is when lack of structure fails, it fails all at once. What works totally fine at 20 employees is disastrous at 30.
This is pure speculation, but I can imagine that this limits the size of many companies. Most web dev agencies I'm aware of weren't founded as hyper-growth startups that are willing to push through that barrier.
[1] http://startupclass.samaltman.com/courses/lec20/
> In the beginning of a company, there is no management. This actually works really well. Before 20 and 25 employees, most companies are structured with everyone reporting to founder. It's totally flat. That's really good. That's what you want because at that stage, it's the optimal structure for productivity.
> What tricks people is when lack of structure fails, it fails all at once. What works totally fine at 20 employees is disastrous at 30.
This is pure speculation, but I can imagine that this limits the size of many companies. Most web dev agencies I'm aware of weren't founded as hyper-growth startups that are willing to push through that barrier.
[1] http://startupclass.samaltman.com/courses/lec20/
Pixelpark Germany (http://www.publicis.com/capabilities/) started 1991 and scaled to 500 full-time employees around 2009. Currently claims 800 (not sure how many full-time). They even IPO-ed. No product on their own, it's still doing web-solutions for customers only. It just covers full brand management, research, SEO/SEM etc as well now.
You see under 20/30 employees in a lot of businesses; the reason (IMHO) is that this is a natural choke point. Any more than 20 employees and the principle has to delegate, hire HR, management, and develop processes—it's a natural point at which a single leader cannot scale and a business has to transition into "a company".
If you're located in a developing country clients will literally "rain" to you. It's a good business because the ROI is really high, but it's more of a "red ocean". In the short term it can work, but if you really want to start a business, shouldn't you be thinking in the long term?
Can't it be long term if you get to 500+ employees like some of the firms mentioned in this thread?
The Nerdery is quite big.
http://nerdery.com/
According to their site, their headcount is 528 developers and 52 dogs.
http://nerdery.com/
According to their site, their headcount is 528 developers and 52 dogs.
Exceptions could be companies like 37signals, which develop their own proprietary products. Successful ones seem to be rare.
It seems many dev shops are going this route. So if you have the capital, wouldn't it be smarter to start with product development?