This is an awesome question! As a fellow entrepreneur and strategist I can tell you that this is way more common than you may expect. I think social media and public figures like Gary V and the like have built sense of quick scalability by simply getting going and that is simply not the case. In fact many tech startups aren't founded by programmers they are ideated by entrepreneurial minded individuals who through trial and error find their CTO and manage to build MVPs to promote and validate.

With that said, the startups that do find themselves pitching to investors, aside from being lucky, are in the driver seat when it comes to validating your own efforts - even if that decision was to outsource to India. As long as you have an ability to make quick adjustments to your code and pivot as needed, launch test campaigns and measure everything as far as the product itself - you should be fine with angel investors and some VCs.

I decided to respond to your question here, because through our team, BetaBulls has been helping startups for several years now with MVPs, mobile apps and custom software solutions for medium sized businesses. In fact it has gotten to the point where 3 out of 10 startups founded in the U.S. by non-techy founders hire Beta Bulls as their interim CTO. If you're interested in more information please message me or visit www.betabulls.com :)

I run services at Gun.io, and as such I spend most of my time on the phone with businesses who are doing software projects. Though we don't tend to do a lot of MVPs (just because of the budget hurdles you identify), I speak to a lot of entrepreneurs in your position. The main thing you want to ask yourself is how comfortable do you feel managing the outsourced partner to actually do what you need them to do. Be wary of the bait-and-switch where the guy on the phone seems amazing and then dishes you off to the lower level people who can't communicate and don't have a clue what you are trying to build. I see this all the time. I'm not going to say there aren't amazing engineers and shops everywhere in the world (there are). However, you have to be aware that 80% (generally) are not very good. The same 20% exists everywhere, and even with good prices because of geographic arbitrage, but you need to search for them.

If you really need to go offshore I'd check Eastern EU, Russia, Ukraine, and strong recommendation for Costa Rica and other Central/South American countries. Nearshoring is awesome because they are on the same timezone. You can actually work with them instead of trying to Skype in the middle of the night (assuming you are US).

There's a huge proliferation of shops who "specialize" in doing MVPs for startups. I'm sure 20% of them are awesome, and the same 80% are not, so you really need to do your diligence. I speak to people every single day who have blown their entire budget on $30/hour shops and on $300/hour shops. There seems to be an equal number of lousy performers at every level.

Also, be careful to understand that an hourly rate as a comparison assumes productivity of an hour is the same for everyone, which is clearly nuts. I also have some issues with the economic incentives that are created by fixed bids and other agency models. Not to say anyone of these things are bad in their own right, but when you study the models it's clear that certain incentives are built in and you need to be armed with those things in mind when searching and negotiating.

If you want an impartial subjective party to help you choose I'd be happy to consult with you.

I have been working with VCs from all across the world since long. Trust me VCs are more concerned about what saves the cost for the startup without reducing the quality? They are not concerned about the work is being done in India or any other part of world as long as you are frugal. VCs invest in the jockey and not the horse, so if you know how to win the race with any horse then you are their first choice.

I can help you in getting your MVP done. Provide me more details.

I agree with the others, having been on both sides of the fundraising table where you develop your IT is not an issue as long as your MVP works. How well it works is another matter though and that depends on whether you are looking to build a MVP that you can build upon or one that you will completely replace once you receive funding - that is something important for a VC to know

I've been working with offshore teams in India since 2000 and there are many things you need to be wary of, so you should ensure you have the time and skills to closely monitor the offshore team otherwise you may find out that in the long run it is as not as cheap as you had hoped

As David mentions, if you are not in India then nearshoring is a much better option as you'll be able to manage the team more easily. I recently switched from offshoring to a nearshoring model and it works much better.