I'm currently off-shoring the development of my startup to India and it’s been working out great, but it took a lot of trial and error - kissed a lot of proverbial frogs so to speak.
Here’s my experience and if this helps someone gain a better handle on how to deal with the issue, great! The first time I looked to off-shore my development, I went with traditional off-shore development providers and was severely disappointed. The developers I found had big firm coding experience – having worked on projects for Goog, Msft etc and probably could build software on a consulting basis but just didn't get "startup" development. They needed a defined set of requirements within which they could work and needed for those requirements not to change. You can forget about pivoting. This "big-company, back-office" mentality obviously won't work for startups. They don't understand agile software development and are terrible with communication. And by communication I don't mean English, that’s usually not the issue; the issue is their approach to communication with a team - closing the loop on emails, replying in a timely manner (or doing anything in a timely manner for that matter) and addressing all the issues you communicate with them.
After spending time with 2-3 different teams I changed my approach and started searching for people who were passionate about and contributed to open-source, were active on forums, on Twitter & Fb, and were excited about working on my idea – as opposed to guys wanting to make money from a consulting gig. I found my current developer through such a search and so far it’s been great. There have been some hiccups, but I daresay these aren't issues that would have cropped up even with a team located stateside.
So I’m running a distributed company and it’s working out to be very cost-effective - which was the reason I started down this path in the first place. Anyways this is my experience. I may be one of the lucky few; but I do believe that you can find folks with a mentality suited to startups. And if you do, the cost savings are worth the pain.