Global Funding Shift: Why Nearshoring Is Key for Tech Hiring

Sam. Welcome to the Nearshore Cafe podcast hosted by Plug Technologies. Plug is a best way to find software developers from all over Latin America, connecting them with US companies. If you're a startup founder, a software of engineering Director, vp, 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 roller coaster world. We're going to explain how near shoring 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 Sampson, your host. So I've been in the nearshore world for nine years now. All started with about a year in Buenos Aires, Argentina. Living there, seen it all firsthand and then ever since working all across the region, Central America, Mexico, South South America, like Peru, Bolivia, Argentina, Brazil and so forth. So what are we seeing in funding right now? Well, I want to read off a few things that I think we can all. We're all seeing. We can all relate to funding in global venture. Funding is what we're talking about. So the third quarter of 2024, so this is super recent, hot off the press. CrunchBase data reported 66.5 billion in funding. Now that's down a little bit. Last quarter was 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, 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. 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 Andre L 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, 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 near shoring, 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 are on the, they were on the road to being unicorns. Maybe they're still unicorns today. Private tech companies, billion dollar valuation 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 got crazy rich, they're doing bridge rounds, they're conserving, they might not raise again. So that means all that money that they raise 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 years and you don't know where your next big round is coming from or when you'll go public next. We have the, what I call early to mid stage, like your series A B rounds, that's mostly flat. Seed has really been clobbered and then angel investments kind of flat as well. But obviously you have a lot less capital to work with to begin with. So it's kind of hitting everybody across the board. If you're an early, early stage company, near shoring 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 probably have 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 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's 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, it's hardly ever pure price. What they're really looking for is the fewest trade offs 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 is 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 in a sprint agile environment, make trade offs 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 is 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 I'm Brian Sampson, founder of Plug Technologies and your host of the Nearshore Cafe podcast. I encourage you to check out Plug Tech Plugg Tech to learn more about how Latin America could be a solution for you in these tight fundraising times. Thanks for listening. Take care.