In this episode of Startups For The Rest Of Us, Rob does a discussion show format with guest Derrick Reimer. They discuss multiple topics including the pros/cons of remote work, value vs. stress of Twitter, and more.
Items mentioned in this episode:
- The Art of Product Podcast
- Baremetrics Blog Post: “I almost sold Baremetrics for $5M”
- Baremetrics Blog Post: “5 things I learned failing to sell Baremetrics for $5M”
Rob: Welcome to this week’s episode of Startups for the Rest of Us, I’m your host, Rob Walling. This week, I’m trying out a new episode format. It is a discussion show, so it’s a conversation between myself, my old friend Derrick Reimer, and we talk about a number of topics. We talk about the value versus the stress of Twitter and social media in general, the pros and cons of remote work. We talk about Cal Newport’s new book Digital Minimalism, and then we wind up talking about Josh Pigford’s blog post in the Baremetrics blog that’s titled, I Almost Sold Baremetrics for $5 Million.
What I like about this episode format is it’s pretty casual and we’re covering topics that I think are relevant to many of us and a lot of us are thinking about. I originally thought of structuring this in some type of news, round-table, or show where we’re talking about topics of today. We do that with a couple things, I think the ability to introduce topics that aren’t necessarily news articles or news headlines also works, and the fact that Derrick and I know each other as well as we do really helps with just the rapport in the conversation, it’s not stiff or stilted. I hope you feel the same way about that.
If you don’t recall who Derrick Reimer is, he and I have known each other for years. We met back when I lived in Fresno. He was a young kid who was participating in a startup competition that I was the judge of. He won a couple years in a row. Then, he was thinking about starting to do some consulting work and I said, “Look, why don’t you come, write some code for HitTail?”
He wrote all the early code for Drip and later on, became retroactive co-founder of Drip. So, he and I have known each other. We’ve worked together. He’s been on the show several times talking about starting an app on the side called Codetree that he sold for $128,000 a few years back. Then, he moved to Minneapolis when we sold Drip. So, he and I now live six or seven minutes apart.
We see each other once a month or so and it’s always a good time to hang out and chat. So, I wanted to mix up the format just a little bit and do something that’s not an interview, not keeping up with Mike Taber, not just question and answer, but actually just bringing topics to the table that (I think) might be of interest to you. So let me know what you think.
You can tweet me @robwalling, you can email email@example.com, or you can post a comment on this episode, episode 482 and just say, “Yeah, I enjoyed the mix-up of the show format and the fresh ideas in a conversation.” Or you can say, “Got five minutes in, didn’t hold my attention, and I was out.”
That helps me think about and consider maybe we had one of these to the line up every couple months. It doesn’t always have to be Derrick. I could bring on different co-hosts and folks to weigh in, so we have different perspectives.
And with that, let’s dive into the show. Derrick Reimer, thank you for joining me on the show.
Derrick: Hey, thanks for having me again.
Rob: Yeah, I think this is going to be a fun one today, just talking through some interesting topics. I had a few in mind over the past couple weeks, some things have come up where I’m like, “You know, I really want to discuss these with someone,” and I don’t know who to bring on the show to do it. Then, you and I were having dinner last night and we got on some really good conversation topics, so I figured we could jump on the mic and record a few of these.
Derrick: Yeah, we both are a couple of old-fashioned, but we probably should have brought our mics, to be honest.
Rob: I know, I agree. One thing you kicked off with was just talking about something on a lot of our minds, social media in general but Twitter specifically, because that’s big in our circles and the value versus the stress of it.
Derrick: Yeah, for me, my personal journey with it has been the last remaining piece of social media that I really use these days. I’ve given up Facebook, technically, I have an Instagram account but I don’t really use it, and I’m not really hooked on checking those things. But Twitter is a tricky one and I think it is for a lot of people in the text space because it’s where a lot of our industry news is coming from, where a lot of the camaraderie among software developers and start up people is happening. There’s not really (to my knowledge) another platform like it.
There are niche communities in Slack and things like that, but Twitter is the public square for that. It’s been a struggle (I think) for the last few years. I’ve been saying things like, “Yeah, I’ve given up all social media,” but I can’t on Twitter because that’s where work stuff happens. I just become so aware that, for me (and I think it varies from person to person how they deal with it) it’s like Twitter is always the default. I hit a rough spot on something I’m working on and what’s my first inclination is to go check Twitter, go get a dopamine hit, and I’m over it at this point.
Rob: Do you still have it on your phone?
Derrick: I took it off my phone (which has been good) and I actually did another trick where I put all my apps in one folder, so now I just have like a blank desktop screen essentially on my phone. I keep email on there, for example, because I just want to be able to do email mobily, but I don’t want it to be something I compulsively check if I have a break during my day. That’s been a good way to deter that.
Rob: When you put them all in one folder, was it just to make them hard to find?
Derrick: Yeah. It’s like I had muscle memory built where I knew where to tap my thumb subconsciously to open email and now it adds friction to that.
Rob: Yeah, I do that. I’m compulsive with email and Slack, specifically the TinySeed Slack. I don’t do it with Twitter or Facebook and I’ve never really had that problem, but I definitely can see getting into that habit and I try to avoid it. I think the thing with Twitter is I check Twitter a couple times a week and (for me) that’s a pretty healthy balance.
I might post to it more often. A few months ago, I was posting every day and I fell off that wagon. I’d like to do that again, but checking it all the time is not healthy. That’s what you were saying last night. It doesn’t feel good because you’re going for the dopamine hit of someone replying to you, a conversation, likes, or retweets?
Derrick: Yeah. I don’t know if I’m feeling particularly just unsure about something I’m working on or just my business in general, all these existential mini crises we have all the time into building startups. That’s an easy place to turn where I’m going to share some piece of work that I’m doing and it’s going to have some marketing benefit. It’s going to increase awareness about what I’m doing and hope people will spread it around. Maybe someone new will discover my app.
I can justify that there’s some benefit to it, so then I’ll share something and it feels good to get people liking, engaging, and commenting, but it’s pretty hollow and it’s a veneer that’s providing a short-term benefit, but I don’t think it’s the healthiest way to engage with that. Then, when you don’t get the response that you were hoping for, then you feel bad. It’s like, “Why am I doing this in the first place?” This is not a solid way to go.
Rob: Yeah and the struggle is that it’s not just the social aspect. I know you got off Facebook years ago and I think it was easier to justify because there was no work component. There was no way Facebook was going to help you build or grow a company, whereas Twitter might (and I want to put it in italics and bold). We know folks who have personal brands on Twitter, social media empires. I don’t know of anyone who has built a SaaS app and the marketing was all Twitter.
I view Twitter as you can get a small audience and you can get those first few customers or you can get the first people who are going to give you good feedback. It’s part of just building that relationship with people, but realistically, once you have any type of product market fit and you’re actually trying to build a scalable marketing approach, Twitter is not it. If you’re looking at it purely as a utilitarian thing, there’s definitely times and places to do it and be on it, but with all the negatives, it does feel hard to justify to me.
Derrick: Yeah. You can definitely come into it with the strategy of like, “I know the best times a day to post where I’m going to maximize engagement,” I figured out some of those things for myself. Some of it, you can apply methodically. Other parts of it are a lot of the benefits that have come to me has been serendipitous and that’s where I have a little bit of fear that if I were to give this thing up, I don’t know what I’m giving up entirely. I don’t know what random encounters or interactions I might be missing out on and I think that’s for the fear that comes. This could be the thing that catapults my nascent start up into a different realm, if I were just there engaging in the community on Twitter. In reality, I’ve become pretty convinced that’s probably not a very good reason to accept all the negatives.
Rob: I keep doing it, yeah. You make a good point because it isn’t just finding customers, but what about that one relationship you build with the business development where someone says, “Let’s integrate. We’re a web host so let’s integrate.” You’re like a kid and you’re like. “Yeah, that could move the needle.” That’s what you’re saying, it’s like, “Do I want to miss out on those? What’s the potential?” and that’s where they get you. That’s where […], is it has all these negatives, and yet we still want to consider doing it.
Derrick: Yeah. If I think back, I’m frustrated by how many Twitter DMs have actually led to productive business meetings or chats and it’s like, “Why does that have to come to a Twitter DM?” because that’s just reinforcing that I struggle to actually get off of there, because people would have to find my email address or something.
Rob: Yeah, and it does seem like Twitter has declined pretty substantially in popularity. That’s been my sense and just the number of people on it. Obviously, the tech community, the Silicon Valley, plus MicroConf and just startups in general are on there. And the press. It does seem like there’s a lot of journalists, not just like TechCrunch but like Wall Street Journal, big-named journalists are on there and there’s certainly still some value. Remember Arab Spring, there is communication there, there is value to the world that that stuff is able to get out.
It really does seem like people have moved on to Instagram and what are the others? Snapchat, although I guess they’re on […] now. You mentioned TikTok last night and I was like, “Yeah, I’ve heard of that. No idea what it does.” I’m so old dude.
Derrick: Yeah, we’re getting old.
Rob: What are you going to do? If you listen like I was asked on stage, “Are you bullish or bearish on Twitter?” and I was like, “Bearish.” This was last year. I was on my 2016 or 2017 prediction. This is when Twitter was still going strong. There are going to be too many trolls. People are just going to move on, and the nature of social media is that it’s pretty rare for a platform to actually stick around for that long. People just move from one to the next.
I don’t love Twitter and struggle with a lot of stuff on it, although I am still on it. I think there are benefits, especially now with the MicroConf stuff, the podcast and all that. I’m not going to quit Twitter anytime soon, even though I do have some struggles with it. But I’m curious, you’re seriously thinking about getting off of it or quitting it basically. Is that right?
Derrick: Yeah. I’m getting dangerously close to that. For me, my big fear is how am I going to keep a similar type of connection to people in the industry who I’m not so close with? I’m texting or private messaging all the time. How am I going to maintain that? How am I going to still get up-to-the-minute news about stuff? I see a lot of things in the React community, for example. New things emerging or new releases of things and a lot of that I’m getting through Twitter right now.
It’s important for me to know about that because I’m building tooling in that ecosystem. I don’t always want to be the guy who’s a month behind late to the party knowing about stuff, but a lot of these you can think of it as, is that really so bad if you’re a few more days delayed in finding stuff out? Probably not. In that case, for me, I’m trying to look for what are some digests newsletters for example that are in the industry? I’m already a part of some of these.
The Changelog is one of them. They send a weekly summary of what’s happening in the open source world. There’s one for the Jamstack community, too, and I’m on that one. I get a lot of good info from that. These are probably good enough for the news part. For me it’s like, how am I going to keep connection to my “audience?”
The podcast is a good one side of a way to do that. Again, returning back to the fundamentals. My email list, my newsletter list, how can I invest there? The time I maybe would have spent on Twitter carve out some of that time to try to invest that in the email list. Those are some of the ways I’m thinking about it.
Rob: Those are good alternatives. I was going to propose that mailing list and a couple of those other things. The bottom line is, yes, you may miss out on some things, but take the time and invest in stuff. I would say, investment in stuff that is less ephemeral.
That’s what bothers me about social media. It’s just here today and gone tomorrow. It’s not a blog post. It’s not even a podcast episode people go back and listen to. It’s not a book that people will read for years.
With your email list, if you can invest in an email list and repost that on the blog, because email is a bit ephemeral even though it’s a pretty deep connection. That’s when I’ve been off because the entire time we were doing Drip, I was not on Twitter at all. It was the right choice. I didn’t quit it for life though, I came back. Obviously, I’m a little more active on it now, but I do hear what you’re saying. If you tried it for two weeks or 30 days, or something, my guess is you’re not going to want to go back.
Derrick: That’s a good segue, because I’ve been reading a book, Cal Newport’s latest book called Digital Minimalism, which is like Deep Work. A lot of people know about that one. It’s Deep Work principles applied to more of your personal life and how you interface with things like social media.
One of the things you he talks about in there and recommends doing is like a digital declutter. That’s a term he coined for. Basically, taking 30 days and eliminating the things that are causing you problems like social media, that are pulling at your brain and causing it to be distracted, and all the negative side effects that come with it.
Think of this as you’re eliminating all this stuff and then at the end of it, be really deliberate about what you add back in. Don’t think of this as just a temporary detox where you remove all and then at the end, I’ve reset and now I can go back to the way I was doing things.
I’m in the midst of one of those right now. I’m not deleting my Twitter account, but I’m not checking it. I started this off going on a trip where I had very little internet access. That forced me to step away from it and even coming back from that after five days, I already had much less desire to go check it. I do feel a certain amount of Zen just from that. That’s becoming a reinforcing thing already for me. The more time I spend off of it, the less drive I have to go and check it all the time. That’s been healthy, I think.
Rob: That’s cool. How long have you been doing that?
Derrick: Since really the turn of the New Year, so we’re about two weeks in. It’s been good.
Rob: It’s a trip when you change habits like that. How scary, you don’t know if it’s going to work, and then you get in a few days and suddenly you feel this clarity, and then trying to come back to it. I’ve done this with drinking alcohol, social media, or just anything. I enjoy it. There are pros and cons to each of those things. It’s like if I have an old fashion, I feel better. In the short-term, it’s a good thing. Much like checking Twitter. Then in the long-term, I question the value of doing that and going off of those things. Coming back, you just realize how much it impacts your day-to-day or just how it actually affects your life.
Rob: And you were saying last night because I haven’t read Digital Minimalism, but you piggy-backed on it and it got you thinking about remote work.
Derrick: Yeah. A thing that he spends a fair amount of time talking about in the book is what does it mean to have relationships and have real connection with other human beings. This is heavily tied in with the era of social media there of text messaging. The fact that we rarely call each other anymore. We are always texting. There’s all these norms that were established in society and a lot of them were around lower fidelity means of communication.
He makes a good point. This is based on some research he pulls into his thesis. We’re wired after millennia of communicating with each other, talking to each other, being able to read non-verbals and verbals, the whole picture, and now we’re reducing our communication down to very binary things. If you think about what’s a reaction in Slack or a like on Twitter? It’s literally a binary piece of information. You compare that to all the richness that comes with someone reacting to something in person. You get to see their face, you get to see them smile, or see them look inquisitive. There’s just so much more you can get from it.
In the one sense, you can think of it as more efficient using these productivity tools like Slack, but on the other hand, how much communication are you missing out on and what does that do to our mental state? You make some pretty interesting points that there’s high rates of depression and mental health among college students in the generation that grew up with smartphones. That’s starting to become really evident. There’s been some research at universities about this and just a really sharp increase in a lot of these issues that weren’t a problem before.
You take all that, bundle that all up, and I start thinking about how are we architecting companies? How are we building teams? I feel like a struggle that you build a 100% remote company. How often do you really have that high fidelity communication with each other? That’s what got me thinking about that.
Rob: It’s tough. My personality is I want to go against the majority opinion. It’s like, “Hey, everyone’s raising venture capital.” “Cool. I’m going to go start one without venture capital,” and that’s going to be a bad thing that I talk about. Or, “Hey, all these Fortune 1000 companies or even venture capitalists want you to be located in one place.” “Cool. I’m going to go start a remote company.” That was what you do and it’s a natural thing that I want to do.
In addition, we have the Remote book by DHH and Jason Fried. It’s definitely a thing and we know tons of startups, especially more in the non-venture track space that we write in, that are remote. And there are advantages to it. You can hire people in cheaper locations. You can hire the best people around the world. Everyone doesn’t have to be local, all that stuff.
I see the value of that for sure, but I’ve always said that the situation we had with Drip where half of us were in one city, and I would have loved for all of us to be in one city. We just couldn’t find the talent in Fresno. Half of us were in one city and we were in the office 2-3 days a week. That was my dream setup and I wish every job that I worked and every company I run, because now with TinySeed, there’s three of us and then with MicroConf, there’s two of us, and we’re all remote.
While I don’t think we should all need to live in the same city—it wouldn’t be practical, because (again) we wanted to hire the best people, and Einar and I are co-founders, he’s in California and I’m in Minneapolis—I would love to see them once or twice a week in person, which is what we did back when we’re doing Drip. And that’s so healthy.
Derrick: Yeah it felt pretty ideal. The nice thing was we can write the rules for how this works. There was inherent flexibility, we weren’t always on the same days every week. If something in life happens and you need to be out of the office an extra day a week, no big deal. But to have that as the default, it felt really good, like hopping in front of a white board with […] getting to work through some tough problems. I was never able to reproduce the same benefits over digital means and maybe someone still needs to solve that. Maybe we’ll get there.
Rob: Yeah, that’s the question that’s like will VR solve that at some point? Can you imagine if VR was super, super high fidelity, you and I can look around, literally feel like we are in front of a whiteboard together, and to get social cues, to where it’s uncanny “Valley” type stuff, like you see these amazing video games or even a Pixar movie. Humans look human enough that you can pick up all the stuff. If you and I can be in a room and literally look like that, maybe that would do it.
It’s a bummer. Some of the things I enjoy the most are lunches and hanging out, but I don’t know if you need that. Maybe that’s the point where it’s solved because video chat isn’t enough. Zoom is not enough because you are not going to sit on a Zoom call for 2–4 hours and shoot the breeze and get those moments that you need.
Derrick: That’s the thing. A lot of the way we are thinking about building companies and the tools that we are building for them, it’s introverted Silicon Valley-type engineers who are helping architects how we socially interact with each other. There’s an inherent bias in that. The fact that we are all about using tools for productivity, an important part of building a healthy team is actually having a relationship that has nothing to do with direct productivity. That’s more of a long-ball type of thing. If we are going to build cohesion, we’re going to be able to go to lunch together.
A friend of mine shared this anecdote, coming back after a long break and catching up on work over the holidays. His wife was relaying this to him and she said, “How was work today?” He’s like, “It wasn’t a great day, but I got to see my friends.” It was powerful. That’s something that you don’t necessarily have if you just stay, show up, and be productive. If your day is not productive, then you feel like you had a good day. If you get to see your friends, you get to see the people you built relationships with, then perhaps you’ll feel a lot more well-balanced.
Rob: Yeah. In Slack, you get the emojis and you get some fun stuff shared on a random channel. That’s fun, but it’s definitely different and it’s hard. Think about with TinySeed, we are a remote accelerator, so this is an issue. We get together three or four times a year and those times are really cool when we’re together. There’s a lot of bonding that happens being in person. That’s something that we are going to be facing and trying to overcome for sure.
In a perfect world, again, I just like seeing people more often. I’m pretty introverted, too. To your point about Silicon Valley people building tools, introverted Silicon Valley people thinking that remote work is, I won’t say infallible but it is the ideal. I don’t think it is for most of the world. I don’t think it is especially for extroverts for people who want to be around other folks. The loneliness and isolation is absolutely being shown. They are doing research on it, there’s going to be a real swing here depending on personality type. There’s a lot here that is not as clear cut as just saying, “Here are the pros of remote work and therefore we should all do it,” because it’s nowhere near that clear-cut.
Derrick: I feel like I’m starting to look at a lot of these things that I previously saw as absolutes and I’m starting to see a lot more gray in them. There are benefits, but there’s also drawbacks and you have to weigh them against each other. One cool anecdote that was from Cal Newport’s book, he talks about the Amish and he talks about how a lot of people just assume that it’s this community of people that decided arbitrarily like, “This is the peak of technology and we shall not accept anymore technology.”
That’s what I thought for many years. It just feels very arbitrary, why are horse-drawn carriages better than cars? I don’t know. It’s just a form of technology. But he talks about if you actually learn about their culture, they always evaluate technology. They are very open to it, but they also evaluate the pros and cons against their value system.
Look at cars back in the early 1900s. They try to mount for a while and then they determine that people who are driving cars tended to leave the community, go to neighboring cities, and engage with people outside the community that led to a breakdown in relationships. They just decided like, “This is not coherent with our values, so we are not going to do it.” I think there’s something really powerful to being open to looking at pros and cons and weighing them against value systems and what you are trying to do.
Rob: Yeah and that’s the thing. There are so many fewer absolutes than we would like. They talk about how it’s a sign of intelligence being able to hold two conflicting ideas in your head at once. That’s what both of the things we just talked about are, Twitter and social media conflicting there has a lot of pros and cons.
The same thing with remote work where you can get a little too gung ho in either direction. I think it’s situational and having the willingness to really think it through on a case-by-case basis, to see the realities of it, and know no matter which choice I make, neither is ideal. That’s the hard part is that neither one is ideal. They are going to come with pretty major cons and figuring out how to work around them as best as you can.
As our last topic before we wrap up today, did you read that article, Josh Pigford almost sold Biometrics for $5 million. That was the title, I almost sold Biometrics for $5 million. He published it about six weeks ago.
Derrick: Yeah, I did check it out. It’s a pretty interesting read just because you don’t generally see this level of transparency about something like almost selling your company. It was pretty fascinating to see someone outline their thought process and what was going on through that.
Rob: I know. Super gutsy to do it. I think that’s why because there can be backlash. If you sell it, obviously it goes public that you sold it, but if you don’t sell it and you talk about doing it, there’s danger there. You could have customers leave. You can have employees be upset. Kudos to him for sharing that and sharing his thought process because it sounded tough. A really tough process.
To start with, he kicked it off and he said there’s always a price. Some people get too hung up. A lot of people are, “I’m never selling my business. Why would I sell my business?” I just don’t know. I don’t think that’s the right choice for most people. If you could become independent wealthy, why would you not do this? I don’t hold it against people certainly if you are going to keep your company but don’t just say something out of principle or out of some belief that this is the right thing to do to never sell your company. Think this through.
Now it’s easy. Let’s say I was running a company. It’s doing $50 million a year and I’m pulling $5 million or $10 million a year right off the top, which is totally easy to do with SaaS because it’s so profitable. If you really enjoy what you are doing, then yeah selling your company for $250 million. How much is it actually going to change your lifestyle?
You can afford a jet or whatever, but if you don’t want that and you are doing what you’re doing, why would you do that? But most of us are not in that situation. If you’re running an app doing a million or $5 million a year, somewhere in there, you are not pulling that much money off typically. Typically at that stage, you are in danger of riding it over the top, the growth can die, we can have a recession, you can get killed by a competitor. There’s all these things that could happen and selling a company for a 3X, 4X, or 5X revenue multiple, which Josh was offered 3.75 revenue.
You are doing $2 million a year and you are going to sell your company for $7.5 million, that is absolutely life changing. If you are making $150,000 or $200,000 a year and suddenly you can sell it for that, life-changing in the real sense of the word. It will change your life. You will have options that you never knew you had at that point.
Derrick: A lot of this talk of like why I would want to sell the thing. I’m working on my best idea. I can’t help but think of the Basecamp guys and that was their narrative for a long time. I feel like nowadays there’s a lot more nuance coming from them, which is really refreshing. Jason Fried was at MicroConf, was it last year or the year before?
Rob: Yeah, last year in 2019.
Derrick: Yeah, talking from the stage and he has been one, much more quick to plan the fact that they early on took some money off the table enough, to where him and JJ were millionaires after a couple of years and felt like, “Okay, we’ve made a healthy amount of return of this business. Now we can write it for longer.” A lot of founders go in blind and say, “Why would I want everyone to sell my company,” and yet, what usually ends up happening is that you are not as financially rewarded upfront as you would be if you were taking your raw skill set and having a salary job.
You’re foregoing a lot of money you could be making. A lot of opportunity cost and you are messing that into your equity that you have in your company. If you do end up five years down the line, things are competitive, whatever market conditions, and now suddenly you can’t achieve profitability, you are unable to sell it when you really want to, and you find yourself not able to extract a return from all of the investment that you’ve put into it.
For Basecamp to say, “Why would we want to sell?” because you were able to take some money off the table early on. Then, he also compared now Basecamp to like, “As if I’ve won the lottery and I’m taking the payout over time as opposed to a lump sum.” That totally makes sense.
Rob: Yup. The odds of them going to a business or something is infinitesimal and they get to work. They love their jobs, they have built a great team, and they get to build whatever they want. They’re building Basecamp version three, already built that. Jason Fried was talking a couple of weeks ago on Twitter, like they’re launching two more things this year. They really are a kid in a candy store.
If I were them, I wouldn’t sell, either, but I wouldn’t tell other people. I know they don’t tell other people not to, that’s not something. But I do think that people hear that and then take it upon themselves to think, “Well, I respect Jason Fried and […], I want to be like them, so I’m not going to sell my company either.” I don’t think that’s smart. I think you should evaluate.
Again, if I were Jason Fried, I would not sell Basecamp either because that sounds amazingly fun, but if you’re not in that situation, where you’re tens of millions a year in net profit is what he said, up from the market […], if you’re not in that situation and maybe you don’t enjoy your job, maybe you’re in a really competitive space, and you think that you could flat line.” Once your growth flat lines, your sales multiple plummets. There’s a really good time to sell and if you ride it over the top, suddenly you’re selling for 1X revenue or less. If you’re doubling every year, you’re selling for 4X or 5X revenue, again, it can be a life-changing amount of money or not.
I’m not encouraging people to sell. I think you should do what you want to do, but just really think things through. Back to that whole article we were talking about where Josh basically says, “Hey, there’s always a price. I wasn’t really that open to it,” but he got an offer for $4.95 million and it was like, “Wow, that would change my life.” Then he talks about just how it was a dead end and the buyers had claimed they had the money, but in actual hell, they got him under LOI (letter of intent), they went out and tried to raise money from investors, it was pretty dang shady. It was not cool. That must have been very, very hard.
Derrick: I can only imagine if that had been the case with our Drip story, because I just know how much stress we were under, you especially because you are really bearing the brunt of it, how long the process was, the due diligence stuff, just even getting to LOI. I’m glad that it moves a bit faster, like things didn’t drag out a year, and then Josh discovered this.
I guess on that sense it’s good that it didn’t go on too long, but even for as long as it did, I can only imagine how much you build up all this anticipation. You start to think, “Well, this is looking like it’s going to happen, they seemed very serious about it. Everything I’m hearing from them seems good.” It’s really hard to shift your mind into the gear of like, “I’m about to have a life-changing exit,” and then for that to be torn away is really a mental struggle.
Rob: Yeah. He said, “We’d spent nearly $20,000 on legal fees, months of time gathering all the docs, and they just disappeared. It was crushing. I was and still am furious with them. They wasted an epic amount of our time and money and then crawled into a new hole when they realized they couldn’t do the deal.” Crushing is an understatement, I would have probably crawled into a hole for weeks because your momentum is gone.
It’s one of those really hard decisions to make, but once you make it, you get a sense of peace about it and then that’s all you want. I remember almost hanging on to it too much because you don’t know if the deal is going to go through until it’s all signed. A month before we were selling Drip, it was like, “I’m so ready to sell this company. But I can’t say that out loud, because then if it doesn’t happen, I’ll be crushed.” I definitely feel his pain.
Derrick: Yeah, it’s tough. I don’t know how you could combat that. You have to enter the process, you have to trust what people are telling you initially. You had counsel, you had advisors and stuff, so I wonder how can you avoid that from happening or can you?
Rob: Yeah. I have no idea. I certainly did not and do not believe that I personally could. You would have to be someone of real fortitude to do it. I do like he links over to another article, where he says, “Five things I learned failing to sell my company,” and one of the things he says is avoid needing to sell. This is something a lot of people forget. If you need to sell, if you’re a desperate seller, you will have terms that are not as good.
Always having the abilities to, “Hey, we are growing, we are profitable. I don’t need to sell.” Those three sentiments will get you the best price, that plus getting a lot of different offers. That puts you in the driver’s seat. It’s the same thing with raising funding. Unfortunately, so many people go out to raise funding when they really, really need funding to do anything and nobody wants to fund those companies. They want to fund the companies that don’t need the funding as paradoxical as that sounds.
Derrick: Even on a small scale. When I sold Codetree, this is happening about around the same time that the Drip sale is going through. I was so focused on the Drip stuff that was going on and this was a side app that wasn’t really growing much, but was still just a nice side income for me. I decided it was time to not have to worry about that anymore, but even just having that, going into that with the mindset of like, “I want to sell this thing because it seems like the right time to do that, but I don’t have to,” it could just keep running on the side for a while and no big deal.
Even just going into the negotiation with that attitude. The seller then later on wrote a blog post about how they felt, like they were at a disadvantaged position because they could come in and say, “No, we really want $20,000 off.” My broker was like, “No, we don’t need to do that.” I’m like, “Cool, then tell them no.” Of course, I’m not going to do that, and then ultimately, I think, trying to keep that mindset of like, “If this doesn’t go through, no big deal. I don’t have to do this.” It helps.
Rob: Yeah, having your backs to the walls. Never good, whether you’re selling a car, selling a house. If you’re in a big hurry, you just get the worst deal. Kudos to Josh for that and for sharing. These are helpful things because (again) so many people don’t talk about it when deals fall through like this because it could have negative repercussions, but that’s something that I do love about our community, is that people are often willing to share experiences to help others avoid the mistakes they’ve made.
As we say in the intro, whether it’s to avoid the mistakes or just to understand, if I get into that situation, what will I do? What is this really like? That’s the other thing. If you have not heard of these stories, if you haven’t heard Josh, you haven’t heard you and I talk about selling Drip or any (I’ll say) real startup acquisition, then all you’ve heard is that on TechCrunch, that Instagram sold for $1 billion to Facebook over a weekend, when they had seven people and not much revenue. It’s like, “Well, that’s how startup acquisitions work.” It’s like, “No, they never do. Never.” This is like one in ten years does that.
The real startup acquisitions take a long time, they’re a grind, they’re typically for a revenue multiple or a net profit multiple if you’re running a different type of business or at a smaller revenue scale. There’s just a bunch of pretty common things that are realistic. If you don’t know that and you’ve only read the popular articles about the outliers, your sale is probably not going to be an outlier. So level-setting expectations with this post that Josh wrote is (I think) good.
Derrick: A helpful piece for the community archive for sure.
Rob: Yup, indeed. Thanks, man. Thanks for coming on the show.
Derrick: Yeah. It was a blast, thanks for having me.
Rob: If folks want to keep up with you, you release an episode every week, podcast episode at the Art of Product, you and your co-host Ben Orenstein. That’s a good bootstrap for podcasts over there. Then you are at @derrickreimer on Twitter. We’ll just send people there, but that is what it is.
Derrick: Yeah. Twitter and derrickreimer.com newsletter. Sign-up there.
Rob: That’s probably the one. That’s almost what we should recommend more, derrickreimer.com. I know you’ve blogged a bit over the years. I think all of us probably wish you blogged more.
Derrick: Yeah, it’s always the thing. It’s interesting to think about trying to do more, like higher frequency, less trying to spend 10 hours writing a piece, and think of it a little bit more like Twitter. That could be an interesting thing, too.
Rob: Sounds good, man.
Derrick: Cool. Thanks.
Rob: Thanks again to Derrick for coming on the show. He is working on his new startup. It’s called StaticKit, statickit.com. If you’re working on static sites stuff or interested in that whole ecosystem, he’s building some pretty interesting tools for static site builders.
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In this episode of Startups For The Rest Of Us, Rob and Mike talk about the pros and cons of having a remote versus local team. They also discuss a hybrid approach that Rob used with Drip that he believes is superior to either methods.
Items mentioned in this episode:
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about building a local versus a remote team, and we also weigh in on what I think is the ideal way to build a startup team. This is ‘Startups for the Rest of Us’ episode 326.
Welcome to ‘Startups for the Rest of Us’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:37]: Well, there’s a little bit of snow on the ground and, fortunately for me, next week I’m headed out to Big Snow, Tiny Conf in Vermont. So I’ll be headed up there with a guy named Jeremy from Forecast.ly. And then there’s about a dozen other people who’ll be meeting us up there, and a couple of days of skiing, and mastermind’s during the evenings. It should be a lot of fun.
Rob [00:55]: Sounds great. Who puts that one together? Is that the one that Brian Casel puts together?
Mike [00:59]: Yeah. It’s Brian Casel of Audience Ops and Brad Touesnard of Delicious Brains. The two of them put that together, and they also have a couple of sister conferences I’ll say. One of them is in Colorado, and that one is mostly put together by Dave Rodenbaugh but Brian and Brad are involved in that. And then there’s also Big Snow Tiny Conf in Europe which is done by Craig Hewitt. Brad I believe went to that one. That was last month. But the two in the U.S. are actually being held during the same week.
Rob [01:26]: Sounds like fun. And you’ve gone to at least one in the past, haven’t you?
Mike [01:29]: Yeah. I think I’ve gone to two so far. This is the fourth one. So this will make my third.
Rob [01:34]: That’s cool.
Mike [01:35]: Cool. What about you?
Rob [01:36]: I am also off to a conference next week. I’m repping Drip and Leadpages at SaaStr in San Francisco. So Jason Lemkin’s SaaStr has grown up to I think it was 5,000 attendees last year, and it’s supposed to be more than that this year. So it’s quite an event, and not something that I’ve ever gone to purely because of that. You know how we built MicroConf into the conference we wanted to attend. A 5,000-person conference is not a conference I like to attend. I just don’t love big groups of people. I’ve heard a lot of good things about it on a number of fronts in terms of the networking opportunities, just that everyone’s there, blah-blah-blah. I’m interested in checking it out, exploring that, and I’m already setting up meetings, and just meetups, and trying to figure out who’s going to be there that I can connect with that I haven’t seen in a while. It should be an interesting experience for me as someone who doesn’t particularly like these big – it’s a big multi track conference, and it’s a lot of the Silicon Valley stuff that doesn’t necessarily jive with the way that we grow and build businesses. So it’s going to be the assumption that everybody’s raising funding, the assumption everybody wants to get to 100 million, the assumption that if you’re not doing that, you’re crazy. That kind of stuff. With that said, there’s a lot of value still that can come out of – I really like Jason Lemkin’s thinking. I respect his outlook and opinions on so many aspects of growing SaaS businesses, and there’s a lot of folks who are going to be on stage that, I think, have a ton of knowledge and experience to lend to anyone starting a SaaS company. I do like that it is focused. It’s not just startups. I’ve been to some startup conferences where you’re just standing amid the health care startups, and the food startups, and the drone startups, and 3D printing startups. As much as I like those things as a consumer, I have really no interest in doing any of them as an actual business, and so I find that it’s less relevant. The more focused a conference can be, the more interested I am in it. So that’s it. I’m going to be out in San Francisco for four or five days just kind of getting it done.
Mike [03:31]: Yeah. You’ll have to let us know how it goes and see if we should multiply MicroConf by 100.
Rob [03:36]: I know. It’s just such a different conference. It’s not better or worse, it’s just a different way to approach an event. It’s such a different way than MicroConf. And it should be interesting.
Mike [03:47]: I just realized how terrible I am at math because it’s not 100 it’s –
Rob [03:51]: It’s 180. Because we have what, 220, 230 at MicroConf? And the fee is 5,000 – Yeah. So anyways, it’ll be good. I’m genuinely looking forward to it. I love San Francisco. I’m from about 30, 40 minutes east of San Francisco. The Bay area is my town, San Francisco is my city, and so I’d love to get back there, and I will probably see at least parts of my family who can make it out to see me in the city. I don’t want to sound like I’m not looking forward to it because I very much am. I’m just a little bit skeptical I guess that how much value I’m going to be able to get out of an event that’s that large. I’m excited to go in with both feet and see the rubber meet the road and see what I can get out of it.
Mike [04:32]: You just mentioned how close some family, and where you used to live in relation to San Francisco. I used to have a little joke in my back pocket where I would tell people I lived about an hour east of Boston just to see if they would catch on to the geography.
Rob [04:44]: Well, yeah, right. Because you’re west. East is in the water.
Mike [04:48]: Right.
Rob [04:50]: Indeed.
Mike [04:50]: So what are we talking about this week?
Rob [04:52]: This week we design an entire episode around a listener question. And the question is from Johannes Akesson. He says: “Hi Mike and Rob. Johannes from SQL Spreads at sqlspreads.com. One idea I have for a topic is the pros and cons of a local versus a remote team. I’ve been thinking a lot about this. So far, I have used mostly remote employees and only local subcontractors. I’m in the phase of growing my team and I’m thinking a lot about this. Should I go for a complete remote team, a mix, or 100% local? I see pros and cons, both from the companies and from a personal viewpoint. With a remote team you’re more flexible to work from different places or from home. It can be more cost effective and maybe easier to bring in part-time employees. With a local team, I see a lot of benefits like better collaboration, building a group of people pushing each other, etcetera. It would be good to hear your experience in this area.” So that’s what we’re diving into today. I don’t know that I had many opinions on this a couple of years ago. I think it was kind of like, “I’m building a lifestyle business.” This is four or five years ago. So everyone should always be remote and this gives me the most flexibility. And then as I dug into Drip and realized, ‘Boy, to really do this right I actually think you do need people to be able to see each other face-to-face, and not just once every three to six months at a company retreat or whatever. So, we’re going to dive into the pros and cons of being remote versus local, and then I want to dig in and talk about kind of the hybrid approach that we used with Drip that I think is by far better than remote or local. Ready to dig in?
Mike [06:17]: Yeah. Let’s get started. Why don’t we cover remote first?
Rob [06:20]: Yeah. Let’s talk about a couple of the pros of having a remote team. The first, and probably the biggest, advantage to it is that you can hire the best people no matter the location. This relieves you from having to live near a bunch of good software developers, and sales people, and customer success people, and HR people. It means that you can basically look worldwide and probably find better people than you can in your locale.
Mike [06:46]: I think there’s another advantage here which is also the cost of being able to hire people who are at the skill levels that you need and you don’t necessarily have to pay local rates for them. So whether that means going overseas, or just going to parts of your home country where it’s on the outskirts, it’s outside of a major city and you don’t need to basically outbid larger companies for the same level of talent. If you can give people that freedom to work remotely then it works well for them, and it also helps you because you don’t have to pay as much for the people who are just as talented as you would get assuming that you lived in a large city.
Rob [07:22]: Yeah. It’s a good point. And I think that’s the second advantage of going remote is that you don’t have to pay the wages of a major city – if that’s where you live – and you still have the advantage of being able to get people on your team. In essence, if you think about it it’s just like arbitrage. It’s like you might be able to live in a major city and then hire in a less expensive area. I’ve seen companies do it the other way, though, where they’re in a really inexpensive area and then they’re hiring out of San Francisco. I was always thinking to myself, “Why would you do that? I know there’s good talent there, but you can find talent outside of the Silicon Valley.” It was a really funny kind of almost reversal of how you shouldn’t do this. They turned the pro of going remote into a con.
Mike [08:02]: Yeah. That is odd. But sometimes, depending on the talent that you’re looking for, you may need to do that. It just kind of depends on who you’re looking for and where those people are located. You can’t always find specific types of people that you’re looking for in remote areas.
Rob [08:18]: I think the third and final advantage of remote that we’ll talk about briefly is this gives you as the founder a lot of freedom. You don’t have to go into an office every day. You can travel and it doesn’t matter. It doesn’t impact the business any more than if you were to be at home, or wanted to work from a coffee shop, or wanted to work from Europe for a month. Aside from the time zone, no one is going to notice the difference. So it really gives you the most flexibility and, I think, kind of the most freedom as a founder if that’s something that you’re looking for.
Mike [08:47]: I think there’s actually another pro here which is it gives freedom to the people that you’re hiring, so that – depending on what they’re circumstances are – they may want to — let’s say that they already have a fulltime job and they want to work part-time because they’re saving for a wedding, or they’re trying to go on a trip next year, or something along those lines. It gives them the flexibility to work a full-time job, and then, in addition, work on your things, or be a consultant and work on your stuff part time. There’s a lot of advantages to being able to hire somebody for part of their time, not necessarily all of their time. That’s, obviously, much more on a contractor basis, or a limited basis, but a lot of times it’s very difficult to build your business and then you happen to have an extra $10K coming in every single month and you say, “Okay, now I can hire somebody.” It doesn’t usually work out that way. You usually end up in a situation where you need some additional help and you might have a couple thousand dollars extra a month, but it’s obviously not enough to hire somebody fulltime. So you have to decide, “Am I going to hire somebody part time, or am I going to hire in advance of the revenue in anticipation of that?” And that’s obviously a little bit dangerous, but it gives those people some flexibility as well.
Rob [09:54]: Yep. That’s a good point. Let’s talk about the negatives, the cons of hiring remote. I think the first one, and the one that I noticed the most when we were remote, and then when we switched to a more localized approach, is that it’s hard to collaborate. Period. Even with the software and webcams and all the cool technology. The Slack. All that stuff. The digital whiteboards. It’s just harder to collaborate. There’s nothing better than being able to look face to face. Especially on the really hard problems where it’ll take you three, four, five hours of going back and forth in discussion, and these hardcore meetings, and these chance encounters, and overhearing a discussion. Those things just aren’t replicated the same way when you’re remote.
Mike [10:33]: Yeah. It’s hard to put your finger on exactly what the problem here is, because if you could then it would be a lot easier to say, “Okay. Well, let’s solve this in this particular way.” But there’s a lot of subtleties here to that collaboration problem which are not easily pinpointed. You talked about some of them where – the digital whiteboard, and SKYPE and headsets and cameras, and stuff like that. It helps to some extent, but I don’t think that it’s quite the same. You don’t get the same feel working remotely with somebody as you do if you’re working five feet away from them, or even 25 feet away if you’re in a larger office space. It’s not quite the same feeling when you’re trying to collaborate on particular problems. It’s also hard to get on a SKYPE call for several hours, to be honest. It’s difficult to maintain your focus on a particular problem, because there’s usually so many other things going on, and you’re at your computer so naturally there are other distractions that will come up like email. And if you are just at a whiteboard, for example, then there’s no popups coming up. There’s no additional notifications. There’s no other people pinging you on SKYPE or Slack or anything. You can kind of get away from that if you’re physically located next to each other, but you can’t do that when you’re collaborating over a computer.
Rob [11:45]: Yeah. I believe that, hands down, you will build a better product, and you will solve problems faster and better, if you’re all in the same location. I just don’t think there’s any way to argue with that. Now there are other pros and cons of both of these, but that one has just become ingrained in my mind over and over and over, in terms of being able to collaborate with people. This is not something you can schedule. You can’t say, “Well, every quarter we’ll get through and then we’ll get together and we’ll plan the next 90 days. Or every month we’ll get together for two days.” It isn’t the same. It’s not the same as being able to interact and collaborate on a day-to-day basis on an ad hoc basis where you’re hammering out a bunch of stuff. Especially in a startup, with as frequently as things change. I can imagine being in a fortune 500 where you have this waterfall approach, and you probably could plan out months at a time and things move so slowly that there’s no need for those ongoing conversations. But when you’re remote, it makes it harder. The second con, or negative, of remote is – it’s a subtle thing – but it’s this lack of comradery, or lack of team unity. I know you can get together every three to six months and all hang out in a house and it’s really cool, and the buzz you feel from that does carry over for the next week or two. But you’ll notice that it fades, and that being together every day – like we were in Fresno with the Drip team – it really was like that kind of all the time. It’s weird to say, but we went out to lunch once a week. That was staff meeting. We hung out outside of work because we liked working together so much. We developed friendships. And there was just this thing of everyone being on board with the mission of the company, and doing the best for the team, and it meant there was a lot of cohesiveness in our thought, and a lot of unity and everyone trying to help each other out a lot and getting things done very quickly. Going out of our way to help each other in a way that when you’re remote, yeah, you’re totally – you’re friends, you’re colleagues, you’re cordial. But, again, there’s that unspoken – that thing that you just can’t get when you’re not around folks in person every day.
Mike [13:45]: The next thing is a little bit country specific, and this pertains specifically to the United States, but it you have people that are located in multiple states, then you are considered to have what’s called a tax nexus. And a nexus is essentially every place where you have an employee working for you, you are considered to have a nexus there, and you are supposed to be collecting taxes from people who order your software in those locations. Now there’s a lot of subtleties here that you have to deal with in terms of whether or not you’re offering software as a subscription or it’s a downloadable product. But that said, it complicates the issue when you have contractors and employees working in different locations, whether it’s in your country or in foreign countries, and sometimes, these tax nexuses can be established even if you just have an employee who’s working in another country, for example, and then you are then subject potentially to collecting taxes for people who order your software in that country. It becomes a complicated headache to some extent, and governments certainly don’t make this any easier. They want their money, to be perfectly honest. But they don’t really consider the ramifications for much smaller businesses, or ones that operate entirely online because, quite frankly, that’s not really their concern. Their concern is the retailers, and they’ve never really quite caught up with the times in terms of being able to make an easy way for you to collect taxes based on sales over the internet.
Rob [15:09]: Yeah. This is something that most people don’t talk about, but if you start hiring people randomly, especially in the U.S., if you hire 10 people across 10 states, your tax nexus becomes very large, and it becomes very complicated. It’s not just the amount of money you’re paying. It’s a tremendous accounting headache just to track all of that. So really be, I would say, be careful before hiring new employees in just any random state, because it will get complicated on you quick. The fourth negative, also relates to this, is the additional administration time for every state that you run payroll in. I know that with paychecks, as I even tried to add states, it was a nightmare. With Gusto it was a little easier, but someone on my team had to go out and get the unemployment number from the state which is some random website. Then there was the disability number. And then there was the actual state income tax number. There’s all these numbers and each of them took 30 to 40 minutes of filling stuff out just to get some type of approval. And then it took three weeks to get it. And then I couldn’t run payroll while we were waiting on that. It was just this whole project that I wasn’t counting on. So as you add states, count on four to eight hours of killed admin time right at the start. And then plan on dealing with a bunch of kind of bureaucracy, in essence. Then they screwed one of them up and it didn’t work. Again, it’s just one more thing that really isn’t moving your business forward. And it sounds like a small thing of like, “Oh, I’ll just kill a day doing that.” But it’s a lot more of a pain in the butt than I think you realize. And then every time you run payroll now you’re paying all these multiple states – Gusto does that for you – but anytime there’s confusion, or a dispute, or whatever it’s more manual interaction that you’re dealing with. It’s just that added accounting complexity.
Mike [16:50]: I’m just going to point out that every time something goes wrong, which it inevitably will, it chews through several more hours of your time. Let’s say that you chew through four to eight hours just setting things up, and then you have to wait for three weeks for things to go through with the state, they might not have been correct. Or they may have left out something. I remember having to go just to the Department of Motor Vehicles here in Massachusetts to get my license when I transferred it over. I ended up going back four times because they said, “Oh, you just need this and this.” And I’d have to go back and they’d say, “Oh, you need this other thing.” I’m like, “Well, why didn’t you tell me that last time I was here?” Finally, by the third time, I just said, “Is there anything else I need? Is there a list of everything that I need?” And they said, “Oh, yeah. Here it is.” And there were two other things that they didn’t tell me about. It’s the exact same thing when you’re trying to pay payroll taxes, because there’s all these things that they’re not going to tell you about, and every single state has a different mechanism for getting all that stuff done. Some of them require certain things. Some of them don’t. It’s just a mess. And, like you said, if any little thing goes wrong, or if one state changes rules a little bit, or requires a sign-off, or a signature, or a new piece of paperwork filed. Sometimes it’s quarterly, sometimes it’s annual, they expect you to know what those things are and they won’t tell you in advance. There’s no mailing list or whatever you can sign up for that says, “Hey, here’s all the things that you need to know about running a business in such and such state.” None of them do that. It’s kind of a fighting against the machine at that point. It’s just awful.
Rob [18:11]: Yep. I’ve run into it. Another negative of remote is that it does take a unique employee to make it work. Not everyone is able to work remotely for sustained periods. A, it can be isolating, even when you’re working remotely with a team. B, folks get distracted – and especially over long periods of time. Like, you hire somebody, six months they’ll be good, a year they’ll be good. Two or three years into it a lot of people really run into challenges of just being able to stay focused, stay motivated without folks around them. Because it’s the norm to be in an office. As sad as that might be, or as disturbing as that might be, that’s how we’ve done it for the past 80 years since offices were invented, or 100 years or whatever. So people are used to having that interaction with other folks and, as a result, I’ve known founders who have hired people and they’ve worked out really well on the technical side, but they haven’t been able to be productive and to really produce long term as a remote employee in essence.
Mike [19:06]: I think part of that goes back to what you said before about one of the cons being a lack of unity. It’s just that comfortability that you get, the socialness of working with other people. Because as you said working remotely is very isolating and if you don’t have a mechanism in place, or a system in place, for getting out – whether that’s you or the people who are working for you – then it can be very easy to fall into this trap where you basically fire up your laptop every day and you work for eight hours and you don’t leave the house for days or weeks on end. Long term that’s going to be detrimental, and that’s part of why offices work so well, is because you get that social aspect that, as humans, we kind of need that. Whether that is social engagement at work or outside of work. But if you don’t leave the house to go to work then it isolates you that much more. Especially if you’re sitting there for long hours working on code, or different things, and you’re not really talking to a lot of people. It can be very difficult both for the founder and for the people who are working for them.
Rob [20:03]: And then the last couple cons for going remote or having a remote team. The first is time zone complexities, and this depends on how remote you are. If you hire someone in Europe or in Asia and you’re in the States, you’re talking nine to 12 hours’ difference, if you’re on Pacific time versus Asia. I think it’s even 14 hours’ difference. That becomes kind of a pain in the butt when you have this day or two-day delay because everything’s asynchronous. We’re trying to hire within three time zones, three hours’ difference of Pacific when we were in Fresno, and I felt like that was a pretty good way to manage it. I think trying to do an eight or nine hours off reduces even more of the ability to collaborate, and the team unity, and that kind of stuff. So depending on how you arrange it, this may or may not be a major con for you. And lastly, this kind of plays into needing unique employees, or unique team members, to be able to pull it off. But, unless you’re on top of things, some people will naturally start to slack off. It may not happen in the first week, it may not happen in the first month but over time things will come up, and they realize that they don’t need to, necessarily, clock in and clock out, because I imagine you’re not running a startup like that. I think that you can see people start to become less and less productive over time unless you do hire people that are really able to stay focused, or there’s some other thing that’s motivating them, because if they look at it as a job, there’s always something else that they can be doing. They really need to be bought into whether it’s working with the team, or the vision that you have, or loyalty to you. Because if you don’t have that, people will inevitably try to find ways to basically not put in the full-time work.
Mike [21:42]: Yeah. I don’t think that that’s necessarily intentional. It’s just a matter of how things tend to work out, in terms of the workloads and the ways that people put time in. So, if you’re working remotely it’s very easy to get up a little bit later and then call it a day early, for example, and you don’t think very much of it because sometimes you’re just thinking about things after work or you start including that extra time. It’s difficult to track it as well. Most of the time the founder’s got other things going on that they’re not going to track that. For them, their sole focus is working on the business and trying to get things up and running and, quite frankly, micromanaging employees or contractors is not at the top of the priority list. You don’t want to have to do that. This can be a problem longer term. I think in the early days it’s much easier – and by early days, like early on working with somebody – you tend to not see this very much. But as time goes on it can become a problem, and then it becomes difficult to address because you don’t have the clarity of when they’re working in the office, and not that them being in the office equates to productive time, but it’s difficult to judge how much people are actually working or how much time people are putting in.
Rob [22:52]: Yeah. I like that thought. I agree with you. The sentiment is that most people won’t do this intentionally, but it can happen pretty easily unintentionally.
Mike [23:00]: Yeah. And then it becomes uncomfortable to bring up.
Rob [23:03]: Right. And that’s the thing. If you’re going to build an organization and you’re like, “Boy, we’re a startup and we’re going to be cranking on this for a good solid two years, and then we’re going to sell, or then we’re going to IPO” or whatever it is. Then a lot of these things don’t matter. These are longer term things that if you want to build a business that’s sustainable, and that is actually generating revenue, and you’re thinking out two, three, four, five years, some of these things will creep in. And these are not often talked about because so many of the startups that we see remote workers and how all that works just haven’t been around that long. There are a few. There are a couple. Like Basecamp comes to mind and Buffer. But most of the big high profile ones, or even just the ones that we hear about in our circles are like, these are like one and two-year-old companies, and there’s a lot of stuff that’s going to creep in after that. Let’s switch over to talking about local, and just doing the traditional having an office, you hire everybody in the same locale. When I say everybody, I mean almost everybody. Sometimes there’s a really specific position that you may need to hire remote for. But imagine it’s like someone who’s kind of an independent contributor and they don’t need to work with the rest of the team on a day to day basis. So, I’m saying mostly local here. The pros to this are kind of the cons of being remote is the ability to collaborate, look eye to eye, work on hard problems. The comradery and the unity of being able to go out to lunch with people, of being able to be in the room and have conversations and plan things. And number three, I’ve found that that all builds into the team basically being more invested in the business outcome, or in the outcome of the startup, than if you were to build a completely remote team. I do think there are ways to work around these and to, even if you are remote, to try to get as much benefit as you can from these. But I don’t see that there’s any way that if you’re remote that you can possibly nail these three as good as being local in the same office.
Mike [24:48]: I think some of that has to do with the fact that you’re not getting the feedback from the business, or the founder, when you are working remote. For example, if you added some code to the product that really made a difference for a particular piece of it, and you work in the same office, it’s much easier – and probably much more common – for somebody to say, “Hey, great job doing that. I really appreciate that you did that.” Versus if you’re remote, then those people have to make it a point to kind of go out of their way to provide that feedback to the people who are working remotely. So, as you said it’s not that it can’t be done, it’s just that it’s more difficult and you have to put forth a conscious effort to do it. In those cases, it’s more likely to get swept under the rug, or just not addressed, or you’re not giving that feedback to people because you’ve got other things that you’re thinking about that are probably overtaking a lot of the other things that come to mind including that feedback to the people who are working on stuff.
Rob [25:39]: Right. And, of course, you can do this in Slack or via email or something, but it doesn’t have the same impact as looking someone in the eye and, in front of everybody else, being like, “You totally rocked this. Nice job.” Something we did at Drip when we were coming up, and we still do, is have stuff we call “launch juice”. It’s fire cider. It’s a nonalcoholic, very strong – I think it’s like habanero and honey and apple cider vinegar. And we do a shot of that when we do a big launch of anything. So, major features. So maybe we’ll do a shot once every month or two. And that’s just a really cool thing that you technically could ship bottles and shot glasses out to everybody and then all get together on video, SKYPE and then do it together. But there’s just something about being in that room, pouring them, and being like, “Cheers team! We totally rocked this.” And doing it together that you just can’t quite get with a remote team. All right. So let’s talk about some of the drawbacks of being local. The first one is that it can be really expensive. You can higher salaries, especially if you live in a major city. The second is the talent pool may be thin if you don’t live in a major city. If you need to hire six developers and several support people over the course of a year or two as you’re growing, if you don’t live in a major city that’s actually a lot harder than it sounds to find people who can all make it to the same office that are of the quality that you’ll want. And I think the third one that comes to mind is just the expense of having an office and of having to manage all that. And maybe there’s even the admin costs of having to find that and sign a lease, and the commitment, and how all that shakes out. Again, referring back to my experience with Drip, we were in a good position that we were able to find really inexpensive office space in a little local tech hub called Bitwise Industries in downtown Fresno. It was a revitalized warehouse building, in essence, and so our lease term was not very long. Our lease cost was exceptionally low compared to other founder friends who I talked to. But I would have done a co-working space, and just rented out more and more desks, or rented out more and more office space, rather than sign some big three to five-year lease, because that would never have felt comfortable to me. But this is another thing that you have to think about if you’re going to be local that is not even on your radar if you’re going to be remote.
Mike [27:49]: The other thing is that you have probably a lot more competition for the types of people that you’re looking for. Even if you are in a smaller area, the pickings are thin in terms of trying to find those employees or local workers. But at the same time you’re also competing against other companies that have open job listings. I remember when I had an office over in Hudson, Massachusetts here, because we were in the same region as Monster.com, all of our job listings that went out to Monster.com inevitably got pushed down by, quite frankly, them, and several other large companies that were in the area. And it was very difficult to get noticed by people who were out there actually looking for jobs. Then once you did get noticed you tended to get a lot of people coming from the recruiters saying, “Hey, let me try and help you fill this position.” which just drastically increases the cost for that position to just find somebody. So there’s a lot of things that go into it that just increase the costs overall. The other thing I’d probably mention here is that you’ll find that there’s probably less flexibility for the people who are coming into your office and saying, “Yeah, I’ll come in for a couple of hours to actually do an interview.” And those people are looking for the type of 9-to-5 job that they’re willing to come in the door and spend eight hours there and then go home at the end of the day, versus the types of people that are looking for a remote position. Maybe they’re looking for it because they can only work a couple of hours in the morning and then a couple of hours in the evening. And the scheduling flexibility that those people are looking for is different than the type of scheduling the people who are local are looking for.
Rob [29:27]: Yeah. I think that’s actually a really good point and something I left out. Another pro of going remote is that people look at being able to work remote as a big perk, and so you may be able to find people who think differently about work, or just who are more willing to come work for you and wouldn’t necessarily – there’d be too much completion if they were only local. So, that remote ability allows you to basically land folks who you otherwise wouldn’t be able to. Cool. I think those are kind of the pros and cons as we see them. The approach that I want to lay out that we stumbled upon with Drip was this hybrid approach. It’s where we spent about 40% to 50% of our time in the office and then the remainder of the other 50% to 60% remote. And by remote, I just mean we worked from home or from coffee shops, but we found that it was crazy in terms of our ability to collaborate. We would all come in on let’s say Tuesday and Thursdays, and so we had all the touch points, we had the unity because we did the lunches, we had the comradery. The team was invested in the business outcome. We were all in one state. It’s like the Goldie Locks zone is what we found. It eliminates the time zone complexities, the tax complexities, and it allowed us to solve really hard problems when we needed too on a recurring basis. But we also were able to go home and do maker time. And that was a big deal for developers especially to be able to two and a half to three days a week – depending on what they wanted to do – and be able to basically be on their own. Of course, we were all communicating via Slack and stuff, but it really helped them get stuff done on the days they weren’t in the office, and then to use the office days as the days to have the interpersonal and the collaboration time. I think that if I were ever going to grow another business – which presently I have absolutely zero plans of ever doing it again – but if that were ever the case, I would strive really hard for this in-between, hybrid approach of having people that are local enough that a couple of days a week together is a possibility.
Mike [31:26]: I think with the hybrid approach you’re kind of trading certain cons for pros in some situations, and then trading certain pros for cons in other situations. For example, if you have that situation where you’re coming into the office a couple of days a week, yes, you get the pros of being able to collaborate with people, and getting the team unity, and lots of other things that you wouldn’t get from a remote team. But then you’re also accepting the responsibility that you still need to hire people who are reasonably remote. You can’t just expect them to commute for four or five hours or whatever. So, you’ve still somewhat limited yourself in terms of the geographic region that you’re hiring in. But there are a lot of benefits to, what you said, that hybrid approach. Some of it has to do with concentration and being able to just take a couple of days and focus on the problems, and then revisit it and come back to a physical meeting place where everybody’s working together and get all that comradery that we had previously talked about.
Rob [32:17]: And I’ve got to be honest. I think before really building the team at Drip, and at our peak – I shouldn’t say at our peak, because we’re actually higher than that now in terms of employee count – but when we were acquired we were at about 10 people, and there were two contractors, eight employees, and five of us were there in Fresno and five were remote. But before growing that team, I hadn’t realized the value of this collaboration and the comradery/team unity piece, but it became very apparent to me as we grew the team, the value of those things. And that’s why I think we landed on the whole hybrid approach.
Mike [33:52]: Well, Johannes, I hope that answers your question. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at email@example.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and well see you next time.