How Nearshoring Helps Startups Thrive Amid a Global VC Crunch with Brian Samson | Nearshore Cafe

Brian Samson: Welcome to the Nearshore Cafe podcast, hosted by Plug Technologies. Plug is the best way to find software developers from all over Latin America, connecting them with US companies. If you’re a startup founder, a software engineering director, VP, or CTO, this is going to be the podcast for you because we’re going to get into the nuances of funding. Over the last couple years, it’s been a rocky, rollercoaster world, and we’re going to explain how nearshoring can sometimes fit—sometimes not—into this crazy funding environment. So, let’s get right into it. It’s just going to be me today, Brian Samson, your host.

Brian Samson: So, I’ve been in the nearshore world for nine years now. It all started with about a year in Buenos Aires, Argentina, living there, seeing it all firsthand. And then, ever since, I’ve been working all across the region: Central America, Mexico, South America—like Peru, Bolivia, Argentina, Brazil, and so forth.

Brian Samson: So, what are we seeing in funding right now? Well, I want to read off a few things that I think we can all see and relate to. Global venture funding is what we’re talking about. So, the third quarter of 2024—this is super recent, hot off the press Crunchbase data—reported 66.5 billion in funding. Now, that’s down a little bit. The last quarter, about—I’m sorry, one year ago, so Q3 of 2023—was about 78 billion. But this is going on 10 quarters where funding has kind of been suboptimal, not trending with the boom times of late 2020, 2021, and the first half of 2022. So, we’ve just seen funding kind of limp. And it’s been a long time since—we have to go back to 2017—when funding was this much down. It’s almost always been north of 70 billion every quarter, globally, venture funding. All the way back to 2017 is when it was lower than 70 billion, just like it is today.

Brian Samson: So, what does all this mean? To sum it up, everyone is working with less capital and more constraints. If you’re a startup company, a tech company, you are probably in this environment unless you’re OpenAI or anderl or something. That is a very rare circumstance today. I can tell you, three years ago, everybody had capital. Today, very few companies have capital, and certainly a surplus of capital. So, that means you’re working with constraints, and you’re trying to hit your hiring bar and, at the same time, preserve capital. How do you do this? I want to explain a little more about nearshoring, why this is hotter. And before I do that, I want to talk about some of the different stages that we’ve seen and what’s going on with each of these. The biggest hit, the most affected, have been late-stage tech companies. So, these are companies that were on the road to be unicorns—maybe they’re still unicorns today—private tech companies with billion-dollar valuations. And they are working with really tight constraints. They were probably thinking about going public, you know, two, three years ago. If you told them where they’d be in 2024, 2025, they’d be on their roadshow to going public and having a big liquidity event. Wow, have the tides changed! So, now instead of going public and everyone getting crazy rich, they’re doing bridge rounds. They’re conserving. They might not raise again. So that means all that money that they raised has to stretch. If you run a household budget, you can relate to this. You’re trying to stretch your dollars, same thing with day-to-day Americans. You’re stretching your budget because groceries are more expensive and pay increases haven’t kept up. Everybody’s trying to stretch their budget. So, late-stage companies are the ones with the biggest teams, probably had the biggest layoffs in the last couple of years, and you don’t know where your next big round is coming from or when you’ll go public.

Brian Samson: Next, we have what I call early to mid-stage, like your Series A, B rounds. That’s mostly flat. Seed has really been clobbered, and then, you know, angel investments are kind of flat as well. But obviously, you have a lot less capital to work with to begin with, so it’s kind of hit everybody across the board. If you’re an early, early-stage company, nearshoring might be for you, but it also might make more sense to just hire fewer team members, bootstrap as long as you can. But for all these other cases—early to mid-stage, late-stage, and early-stage also encompasses seed—it’s really going to matter if you can maintain your hiring bar because these hires count, the team really counts. But you’re probably at a scale where you can onboard people. In the last couple years, you’ve probably been forced to do remote hiring. You might not love it today, and you’re trying to get as many people as possible in one particular office or location, but you know how to do it remotely. So when you’re thinking about that, that’s where nearshoring makes a lot of sense. And you know, if you’re in any hiring capacity, you probably have hired people across the world. You’ve thought about it; you’ve looked at Asia, you’ve looked at Eastern Europe, you’ve looked all over the place. What has attracted people traditionally to Eastern Europe is they’re getting really excellent talent, like very rigorous, rigorously vetted, great universities, especially for math and science, you know, STEM. With Asia, it’s typically been about price, and of course, there’s great talent everywhere. There are no hard biases here. But what I will tell you is whenever any hiring manager is thinking, “Should I look at Asia? Should I look at Eastern Europe? Should I look at Latin America, Africa, wherever?” what they’re really most concerned about is hardly ever pure price. What they’re really looking for is the fewest tradeoffs possible with talent. They’re looking for arbitrage. They’re looking for great value at a reasonable price, but they don’t want—they’re not looking for average developers at a cheap price because that’s not helpful for a tech company. They’re looking for somebody who can hit their hiring bar. That’s what I want to talk about today: how Latin America, time and time again, has produced critical thinkers, clever problem-solvers, those that have faced a lot of adversity, and by sheer will, they’ve made themselves into relied-upon talent. These hiring managers have put a lot of pressure, critical applications, iterations, new products. They put this on these software engineers in Latin America, which means that they’re used to it. They’re used to having to work through constraints, take a product roadmap, work on a sprint agile environment, make tradeoffs, hard architectural decisions with design. They’re thinking through all this, and they’re doing it at a level that’s very comparable with not just average engineers in the States, but great engineers. So, that’s where you see this arbitrage, this value-added, this big differential. If you can get somebody comparable to a great engineer in the States out of Latin America, that’s the most important thing to you. Again, you don’t want a bunch of average engineers in Latin America; that doesn’t really get you very far. It just gets you scale, and it becomes a body shop. But if you’re working with constraints, you have less headcount to work with, you want to maximize the capacity, the ability to produce great code, great software products, think through all the different ways your customers are thinking about it from a QA perspective and all that. So, if you never thought about Latin America, the time zone is there, of course. It’s a little bit lower cost, but more important than anything is great engineers who meet the hiring bars of companies that are working with constraints.

Brian Samson: I’m Brian Samson, founder of Plug Technologies and your host of the Nearshore Cafe podcast. I encourage you to check out Plug.tech to learn more about how Latin America could be a solution for you in these tight fundraising times. Thanks for listening. Take care.