Why You Should Hire More Consultants In 2023
One of my goals this year is to expand my consulting work—I love meeting and working with new companies, but with raising a fund and writing for FTT, I didn’t have much time to do much last year. I spent a lot of time in December figuring out how to free up my time so that I can add consulting services into my schedule this year.
Why Am I Consulting?
Selfishly, I love consulting because I love working on different problems and I learn a ton. We also are very hands on with portfolio companies at Vol. 1 Ventures and working with different types of companies helps keep my skills sharp as well. Building a venture capital firm is a really different experience than building a company and there’s not much “product development” here—at the end of the day, the product we’re selling is money. And business development for VC comes pretty natural to me, and frankly is something that’s more important for funds that are further along and on Fund 3 or 4 versus a first time fund.
Why Hiring Consultants Might Make Sense For Your Business
Bias aside, I actually think now’s a great time for fintech and crypto companies to explore working with consultants instead of hiring full time employees. With startups being more mindful about spending and a looming recession in 2023, onboarding full time employees might be a bigger risk than it was a few years ago. Sometimes, full time employees are extraneous for short term projects. Imagine you’re a well capitalized Series A startup looking to redesign your website or brand. It doesn’t make sense to hire a small team full time to execute those projects; when they’re wrapped up with that, there’s very little for them to work on and you’ll be figuring out busy work to give them. Reality’s even harsher in a down economy—you’re not going to want employees that are twiddling their thumbs looking for what to work on; you’ll probably want to re-allocate those resources or reduce burn.
Hiring an outside consulting firm to come in, bring a unique perspective based on their diverse experience, and execute and leave, makes all the sense in these situations.
The cost of consulting versus hiring a full time employee is a really interesting exercise in resource allocation. Consultants can help with preserving runway while also making sure the right stuff gets done. And whether we like to say it or not, employee benefits are getting more and more costly.
How Can Consultants Help
Consultants are ideal for setting strategy. Some are also good at executing that strategy but you might have the right internal team for that, or you might realize through strategy development that a full time option is a better fit for your company.
Here’s an example: I worked with a crypto infrastructure company last year—a really great experience. They developed an interesting product for both fintech and crypto companies and wanted help on going to market and getting customers. I helped with figuring out the competitive landscape, analyzing different competitors, figuring out who would be the right potential customers, and developing channel partnerships with other adjacent providers. At the end, the company realized that this was a large enough role that they wanted someone full time on it (since then, we also started recruiting services, so now we’d be able to help find the right potential candidate as well.)
Consultants also have a ton of value outside of the operational work too—they usually have an incredible purview of the competitive landscape and a ton of external knowledge and relationships. You should absolutely hire folks that have pertinent work experience or some sort of competitive advantage that you don’t have in-house; in the aforementioned scenario, the team needed deep fintech relationships and expertise and I was able to bridge the gap there.
They also usually know what works and doesn’t work within their sector. Consultants can help companies get to a positive outcome more quickly than a new employee trying to catch up, learn about the company and culture, and learn about the ecosystem on the fly on top of all that.
Lastly, consultants can help bring in a new set of eyes when something might not be working. Perhaps you’re stuck on a product launch and not figuring out the right go to market strategy; or you’re having issues finding product market fit. Consultants can help bring a new and fresh perspective in those situations, and help companies and employees think outside the box to figure all that out.
With a changing macro economy, I also envision consultants helping companies figure out rapidly shifting market conditions (particularly lending and buy now pay later companies.) And in crypto, a rapidly changing regulatory landscape has forced crypto companies to hire outside consultants and lobbyists to help them navigate and impact upcoming US regulations that are on the horizon in 2023. (My wife and co GP Stevie does a lot of lobbying for our portfolio companies and gets a ton of offers from late stage and public crypto companies to help them out as well.)
What Type Of Companies Should Hire Consultants?
This is the key question—not all companies should hire consultants, in my opinion. It only really makes sense for 2 types: super early companies that have just raised and can benefit from the baked-in institutional knowledge consultants have, or very established companies that have a lot working well but need some help with a new product or getting to a new stage of growth.
In my opinion, the key is to hire a consultant at the beginning stages of a new product or strategy refresh. If you’re a later stage company, it might make sense to hire a consultant when you’re expanding your product suite or you’re looking to develop new channels for growth and sales.
If you’re an early stage company—it’s frankly a bit trickier. I made some mistakes around hiring consultants vs full time for Fintech Today—the key is to figure out what’s critical for your company and your vision and hire for those internally and full time, and making sure they’re excited about that long term journey. For all other roles though, that are sort of adjacently important but not critical, you might want to look at hiring consultants.
Here’s an example: let’s say you’re a consumer fintech company building an app—hiring a consulting engineering team doesn’t make sense; that’s your main product and you’ll want that institutional experience in house for a long period of time. But if you’re looking to figure out how to acquire users, you might want to look for a growth consultant that has worked across a number of different channels and can help you identify your audience and figure out the best and cheapest way to acquire them.
At the end of the day, hiring consultants might be cheaper and help you execute faster. Later stage companies have more breathing room than early stage companies but based on my experience and anecdotal experience, consultants can be super important for young companies trying to figure stuff out and don’t want to take a lot of time iterating and going through trial and error to figure out the right strategy.