Most hardware startups should outsource firmware for the first product and hire in-house once the product is shipping and the roadmap is clear. The reason is timing, not cost. Before you have a working device, your firmware needs are wide and shallow: bring-up, drivers, power management, radio stack integration, production test. After launch they become narrow and deep: feature work, field bugs, OTA updates. Those are two different jobs, and they suit two different staffing models.
What a first firmware hire actually costs
The salary is the smallest part. A senior embedded engineer in Western Europe or the US runs 90k to 160k a year fully loaded, and hiring one takes three to six months if you are not already known in the field.
You also need someone qualified to interview them. If the founding team is mechanical or commercial, your first embedded hire is effectively unsupervised, and a bad one costs you a year.
Then there is the coverage problem. One engineer cannot do RTOS work, BLE certification, analog debugging, and a production test rig equally well. Firmware outsourcing gives you a team where a single hire gives you a single skill set.
When outsourcing works well
Outsourcing fits best when the scope has a defined end: get the board to boot, get the radio certified, get the device through a pilot run. Those are milestones you can specify, test, and accept.
It also works well when firmware is coupled to hardware you do not fully control yet. Schematic changes early on ripple straight into the firmware, and a team that does both PCB design and embedded work absorbs that churn without a renegotiation every week. This is one reason embedded systems outsourcing tends to be more efficient at firms that also do the board, the enclosure, and the manufacturing under one roof, with EMC testing through a partner lab. In our experience the projects that stall are usually the ones where firmware and hardware sit at different companies.
When outsourcing goes wrong
It goes wrong when nobody on your side owns the technical decisions. An external team will build what you specify. If you cannot evaluate the architecture, you inherit code you cannot maintain.
It also goes wrong on open-ended scope. Contracting a team to "own firmware" indefinitely with no defined deliverables is more expensive than hiring, and it leaves you without institutional knowledge.
The fix is contractual, not technical. Require source code, build instructions, a documented toolchain, and a handover session before the final payment.
The hybrid most teams end up with
The pattern that works for hardware startup firmware is to outsource the bring-up and certification phase, then hire one strong embedded engineer around the time you commit to volume production.
That engineer inherits a working codebase rather than a blank repository, which makes the role far easier to fill. The external team stays available for specialist work, such as a new radio, a compliance retest, or a factory test fixture.
Judge the decision by what it does to your schedule and your risk, not by hourly rate comparisons. A three-month delay in shipping usually costs more than the entire firmware budget.
If you are weighing this decision for a specific product, we are happy to talk it through at https://warning-engineering.com.