6.

Establish a Distributed Team

Tap Talent from across the Globe

Entrepreneurs in emerging ecosystems face a tough decision: Should they go where the customers are but where finding the right staff will be more challenging? Or should they optimize for places where team building is easier but that are farther away from the customer base?

Zola faced this exact conundrum. As founders Xavier Helgesen, Erica Mackey, and Joshua Pierce were considering launching their platform, they realized there was no “natural” place to start the business. On the one hand, it made sense to stay put in London, which has easy connections across Africa. On the other hand, the technology talent pool in London was much smaller in comparison to the wealth of Silicon Valley engineers specializing in batteries and solar panels.

And then there was the option of Tanzania. Erica speaks fluent Swahili and had previously managed a large nonprofit that operates across East Africa. The team knew that in the early days, it would be important to be close to their customers and intimately understand their challenges, as well as build relationships with key local stakeholders. Tanzania, therefore, was a logical first market. The country was ripe for electrification: fewer than 15 percent of Tanzanians had access to the grid in 2010.¹ It also had one of the fastest-growing mobile money ecosystems, which is critical infrastructure for managing payments. Third and most important, Erica knew the country well and had a local network.

But for every advantage, Tanzania had an equal drawback. It is a large country (more than double the size of California) and sparsely populated, with poor infrastructure and roads, a situation that makes for costly distribution. It had a nearly nonexistent startup ecosystem, with a limited number of programmers and little venture capital.

In many ways, Silicon Valley made more sense. Zola’s product would require significant technological innovation, and San Francisco had a budding clean-energy technology sector with a large talent base. The team had a strong network there as well. But Silicon Valley is a ten-hour time difference and twenty-four hours of travel away from Tanzania. And the distance is not only physical: startup life in San Francisco is radically different from the Tanzanian reality of blackouts, brownouts, and unpaved roads.

The Zola founders decided to build their operations in a distributed manner. They combined local distribution on the ground in Africa with Asian manufacturing, European logistics, and research and development in Silicon Valley. They started in Tanzania to develop the product in close proximity to users. After they had a basic product, they built an R&D team based in San Francisco to access the best solar energy and battery talent from companies like Tesla.

As Zola built its supply chain, it created close partnerships with firms in Asia to source its solar system hardware. When Zola expanded across Africa, it built an operations team in Amsterdam, which shares a common time zone with and good transportation links to its current and planned future markets. In short, Zola built a distributed organization from the get-go and has doubled down on that approach with every passing year.

Increasingly, Frontier Innovators are not choosing a single location. Instead, they are building the piping of their organizations in a globally distributed manner.

Distributed as a Strategy

Distribution refers to an organizational structure in which the team is dispersed in multiple locations.

This strategy counters Silicon Valley’s conventional wisdom, which suggests that the integration of engineering, product development, and strategy is essential to spur creativity. Steve Jobs exemplified this ethos, going so far as to place office bathrooms in a central location to catalyze spontaneous interaction among departments. When Marissa Mayer took over at Yahoo, one of her first directives was to ban remote work. While there are certainly valid reasons to avoid being distributed, however, times are changing.²

The Distributed Spectrum

There is no one-size-fits-all model for distributed organizations. In its simplest form, a distributed organization may place the technology development team and sales team in different geographies. At the extreme, an organization may choose to build its teams entirely remotely and may not even have formal or central offices. Figure 6-1 highlights a range of options, which you will explore in turn.³

Earth and moon models are perhaps the most centralized among the distributed options. A dominant headquarters (Earth) tends to be the center of the organization. As the organization enters a new phase or market, a moon, or hub, is launched.

Peek Travel is an example of this strategy. The company was launched in San Francisco to offer a marketplace for activities, similar to the way OpenTable allows customers to book restaurant tables directly. Over time, Peek evolved to offer a booking-management solution for merchants. To sell this solution, it built out a dedicated sales team and effort and launched it in Salt Lake City. This became a moon with a specialized function. The company will launch other moons over time for other specialized functions. Similarly, Gojek, profiled in chapter 2, has centralized operations in Indonesia but has separate distribution offices across its markets.

A second model of distributed teams involves separating the customer-facing operations from product and technological development. Some refer to this approach as reverse offshoring, particularly when customer operations are in developing markets and technological development is elsewhere.⁴ Branch, which you met in chapter 5, embodies this approach. It delivers microlending products and services across emerging markets but centralizes product development in San Francisco. Similarly, Frontier Car Group (from chapter 3) has its product and technology development in Germany, with local sales offices in multiple countries.

Some firms go one step further and build a multipolar model, in which different regions run different core functions. Zola’s model reflects this structure. Fetchr (from chapter 4) built a similar multipolar model. Since technology talent is limited in Dubai, Fetchr formed an eighty-person team across Jordan and China. Its sales and customer service are in Egypt.

Sometimes, multipolar models are self-sufficient hubs, each with its own unique functions. Cimpress and Globant, which you are about to meet, employ this model.⁵ Each separate location enjoys relative autonomy and self-sufficiency.

Finally, some companies are fully remote, more akin to a flat network. Basecamp, InVisionApp, and Zapier, all formally based in the United States, have employees all over the world. Although remote companies can have a “head office” (as Basecamp does in Chicago), they are in name only; the team is free to work from anywhere.

When I refer to a distributed team, I mean employee location and regional office specialization. A related but separate topic pertains to decision making; some distributed companies are centralized, with power sitting in a particular location, while others are decentralized, with decision-making authority delegated across the organization.

As a general rule, as companies become increasingly distributed, decision making also becomes decentralized. However, this is highly dependent on the internal dynamics of the company, the type of product it is building, and the markets it is serving. Therefore, recommendations on decentralized decision making are not within the scope of this chapter.

Advantages of Distributed Structures

Frontier Innovators build distributed teams because they confer unique advantages. Through distributed models, Frontier Innovators draw on a diverse pool of human capital, manage costs, often increase team integration, and prepare the foundation for future expansion.

Drawing on a Diverse Talent Pool

One of the central advantages of distributed teams is the flexibility it gives you to tap the best talent regardless of location. Some regions have particular centers of excellence. Building in a distributed manner allows organizations to leverage these best-in-class ecosystems. For instance, while there is a shortage of machine learning programmers in the Bay Area, Toronto and Montreal are becoming hubs. Launching an office in these cities can tap that vein.

Certain regions are also known for behavioral skill sets. Peek built its inside sales division in Salt Lake City before even raising its Series B. Ruzwana Bashir, Peek’s CEO, explained: “To find the best talent with the highest return on investment, we picked Salt Lake City. Within a two-hour radius, there are multiple top universities with dedicated sales programs. Their students have worked with many of the great local enterprise technology companies.”⁶

In fact, many sales-driven companies scale successfully out of Salt Lake City. Dalton Wright, a partner with Kickstart Seed Fund, says that the city’s sales expertise “is partially founded on the resilience, strength, and experience of its residents. Many young Mormons go on two-year missions, and, as any missionary does, they receive rejections all day, every day. They bring an unflappable and relentless mindset back from their missions, and many go on to become leading executives and salespeople in rapidly scaling tech companies.”⁷ Peek is one of many companies, including Qualtrics, Podium, and MasteryConnect, that rely on Utah’s sales expertise.

Building a remote structure is arguably the most extreme way to tap global talent. Zapier, a Missouri-based startup that provides automation for websites, was an early pioneer. Its staff of 250 is fully remote, across twenty states and seventeen countries. Wade Foster, Zapier’s co-founder and CEO, explains that the strategy has serious advantages:

You have access to a worldwide talent pool. If you restrict yourself to thirty miles from your headquarters, you’re going to have a hard time hiring. And you see this now in the barrier where Google, Facebook, Apple, they price out any other employer because they can afford to . . . The Bay Area challenge is really, really competitive. But when you open yourself up to remote, you’re able to work with folks from all over the world, and so that makes it a lot easier to find great folks.⁸

In the first year since instituting its “delocation” package, Zapier’s employment applications have increased 50 percent, and retention is up meaningfully as well.⁹

Building remote teams (and distributed teams more broadly) is associated with increasing diversity. According to research by Remote.co, an industry association, remote companies have a greater percentage of female leaders: some 28 percent of remote companies have female founders, presidents, or CEOs (compared with the 5.2 percent of S&P 500 companies that have female CEOs).¹⁰ The study attributes this to a few factors, including greater work flexibility, the ability to balance multiple responsibilities, and decreasing bias (working remotely obfuscates preconceived notions of what a leader looks like).¹¹

Managing Labor Cost

Often, the primary reason for distribution is to access a broader talent pool beyond the home market. Building distributed companies is also a powerful way to manage labor and other costs.

The Bay Area has the highest rents in North America and unsurprisingly also commands some of the highest salaries. In many places in the United States and around the world, tech talent is much more affordable. In Silicon Valley the average engineer costs $124,000, but in Chicago the cost is $90,000, and in Cleveland it is closer to $75,000.¹² The cost advantage only increases in places like Canada that also benefit from a cheaper currency.¹³

Lower labor costs can profoundly impact a startup’s viability, as explored in chapter 3. Early-stage venture rounds are geared to helping founders find a fit between product and market. This often involves learning and pivoting. The largest cost for startups at this stage is salaries to support technology development. For a similar round size, lower salaries mean innovators have many more months to experiment, increasing the probability of successfully finding a sustainable business model. This advantage only compounds as the company scales.

Distributed models can help employees be at their best as well. Take the case of InVision, which was founded by Ben Nadel and Clark Valberg in 2011. InVision provides users with tools to research, design, and test products. The company has more than five million users, including 100 percent of the Fortune 100—organizations like Airbnb, Amazon, HBO, Netflix, Slack, Starbucks, and Uber.¹⁴

InVision built a remote organization from the start, in part to better leverage a global workforce. An internal analysis credits the approach with enabling InVision employees to enjoy a better work-life balance. They can avoid long commutes and work from an environment that allows them to avoid distractions or be more present at home.¹⁵ In this way, distributed models generate happier and more productive employees. InVision is now worth nearly $2 billion and has raised more than $350 million.¹⁶

Being More Integrated, Not Less

The tech sector is challenging the Jobsian notion that in-office connectivity is irreplaceable. Jasper Malcolmson built his company Skylight in a distributed way from the start. Skylight has no official headquarters or offices of any kind. As Jasper sees it, “By being distributed, we’re actually even more connected.”¹⁷

In his home, Jasper’s desk has two screens, along with a high-resolution microphone and high-fidelity speakers. These come standard for all employees. On his left screen, he sees an array of live feeds of his colleagues at work. Whenever he wants to make a conference call, ask a question, or just say hi, he double-clicks on a colleague’s face to open a live microphone link. “Open offices decreased barriers to in-office communication. In many ways, through technology, we’ve lowered them even further,” Jasper reflected.¹⁸

Being distributed alerts companies rapidly to challenges—like a breakdown in communication or lack of collaboration—and forces them to react and adapt quickly. Kevin Fishner, the chief of staff of HashiCorp, a distributed company that was recently valued at nearly $2 billion, explains:

There is a popular understanding that a remote company is different than a “regular company” or whatever you want to call it. It’s not necessarily different, but it does make your weaknesses more obvious. All companies have communications, collaboration, and alignment challenges. Making these challenges more obvious can be a strength, since it allows you to see them and fix them quicker. Of course, you do have to fix them in order for this to be a strength.¹⁹

A distributed structure doesn’t necessarily mean disavowing in-person connectivity. To the contrary, distributed firms structure in-person interaction. This includes regular retreats, weekly live videoconferences, and an integrated digital communication platform that emphasizes live interactions.

Training to Expand Markets

Being distributed is often a natural consequence of being multimarket. As companies scale across geographies, they naturally build out multiple offices around the world. But things go in the opposite direction as well, since distribution confers a surprising advantage. Building a distributed organization early on forces companies to build and manage communication across geographies, to trust distant colleagues with more autonomy, and to foster a shared culture across the organization. Expanding internationally requires exactly the same skill set. Many entrepreneurs confirmed that building a distributed team prepared them to scale internationally.

Of course, building a successful distributed organization is no easy feat. In the next section, you’ll explore several strategies for success.

Effectively Building a Distributed Organization

The best Frontier Innovators implement strategies regarding the kinds of people they hire, the incentives they put in place, the technological tools they employ, and the internal processes and culture of the firm. Let’s explore each in turn.

Hire for Distributed Teams

Building in a distributed way theoretically means anyone can be your employee. The reality is that not everyone will be a fit to work remotely or at a satellite office.

Frontier Innovators often select candidates based on demonstrable independence. For example, Zapier focuses on employees who have a “default to action” and are able to drive outcomes independently, according to CEO Wade Foster.²⁰ Jason Fried, CEO of Basecamp, underscores the importance of employees who are great communicators, particularly via written communication, since that ends up being a key format.²¹

Hiring is further complicated as the global range of an organization expands. Frontier Innovators look to hire candidates who thrive across cultures and geographies. For Matt Flannery, CEO of Branch and founder of Kiva, hiring candidates who value global culture and impact is paramount. This means prioritizing those who have traveled extensively, according to Matt. As he puts it, “I like candidates that have been beyond the typical tourist places. One candidate told me recently she lived and worked in Guatemala. That signals both a sense of adventure, but also a good heart. Someone that was focused on impact. We hired her.”²²

The ability to work in a distributed context can also be tested within the hiring process. Recruiting can be done entirely by videoconference (even if the candidate is local). Many Frontier Innovators ask candidates to complete assignments to test how they collaborate with others at distance. Chapter 7 focuses further on how Frontier Innovators hire by testing for character and behavior. Testing for candidates’ performance in a distributed context is an example.

Incentivize Distribution

Frontier Innovators eschew traditional Silicon Valley perks. Instead, they use compensation and incentives to reinforce values like global connectivity. Branch offers its employees the option to work from any of its many global offices and pays for flights between locations. Teammates are thus better integrated across the geographies, know their colleagues across the world, and have some understanding of the different local markets. Matt credits Branch’s global culture as a key catalyst for the company to iterate rapidly and adapt to local contexts.

Basecamp offers its employees annual vouchers for vacations so that they have the opportunity to connect with their families and to travel, leaving their remote locations. As Jason explains, “We encourage our employees to travel. This is not work travel but personal travel. This is more genuine.”²³ InVision offers its remote employees a preloaded credit card to pay for coffees and lunches to encourage them to get outside during their work day.²⁴

Reinvent Processes and Culture

Taking a distributed approach requires building it in to both the strategy and the culture of the firm, as Globant did.

Founded in 2003 in Buenos Aires, Globant is an IT and software provider and a NYSE-traded public company worth more than $3 billion, with more than $400 million in revenues and a sprawling workforce of nearly ten thousand people in forty offices.²⁵ As Martín Migoya, Globant CEO and co-founder, explains, “We built a distributed organization from the beginning. In our second year, we opened our second office. In our third year, we opened a third location. By year four, we started opening multiple offices a year.”²⁶

To manage a distributed organization, Martín wanted new tools. “A new kind of company needs a new type of operating system,” he says.²⁷

Globant reinvented company processes around its organizational structure. To reinforce values, Globant created “Star Me Up.” The platform allows anyone at the company or its customers to give employees “stars” for doing anything that aligns with the company values. On the one hand, it serves as a crowdsourcing mechanism for the best employees. On the other, as Martín views it, it is a powerful attrition prediction engine. Those employees who are not active users of the tool are most likely to leave, and thus can be proactively engaged.

Similarly, Martín believed a traditional annual evaluation process would not work in a distributed context. He replaced it with an internal system called “Better Me.” Through the platform, employees receive reviews after any interaction, either in person or remote. Globant has also experimented with an internal “Tinder for ideas” to allow employees across the firm’s offices to surface new ideas or processes. The most promising suggestions are elevated to senior management.

Other companies have seen value in Globant’s tools for distributed organizations. “Star Me Up” and “Better Me” have more than two million users at a range of companies.²⁸

Structure Integration

Day-to-day interaction is of paramount importance for successful teams. Therefore, connectivity is structured into the fabric of distributed organizations. At Zola, the time difference between San Francisco and Tanzania is a whopping ten hours. To create as much overlap as possible, the San Francisco teams start very early and the Tanzanian teams work late. To foster a personal connection, calls are videoconferences.

InVision has made this overlap formal. Employees work “core team hours,” with at least a four-hour overlap in the 10 a.m. to 6 p.m. EST window. Although employees can be anywhere, they are at least working part of the day at the same hours.²⁹

Remote companies also look to re-create informal water cooler interactions digitally. Globant uses an internal Instagram-style photo-sharing platform for staff to share cultural moments across the firm. Zapier created a range of chat-based channels in its internal communication and regularly matches employees with random colleagues around the firm for virtual “coffee dates.” HashiCorp instituted a “chat roulette” to spur new relationships inside the company.³⁰

Internal communication should be done in a manner that is equally accessible to all. Team announcements can be via videoconference (even if there is a physical meeting room where the announcement is made) and recorded for others to view.

Of course, distribution should not minimize the importance of frequent face time. Mark Frein, the former chief people officer at In Vision, has found that “in-person time is important. People get used to the idea of getting on a plane to work on a deal, but most meetings can be done by video. When we do bring people together, we focus on having people getting to know each other and building strong bonds.” Successful distributed teams find time for this kind of in-person connectivity. In Vision holds one company-wide retreat annually, as well as individual team meetings.³¹ For Branch, this means an annual retreat in Africa. Basecamp, which is fully remote, does a twice-yearly retreat.³²

Invest in Technology

Building a decentralized culture is easier than ever in our high-tech, globalized world. Language barriers are decreasing as more people become multilingual, often including English. Digital translation services have improved significantly and now are often free. Videoconferencing quality has improved so dramatically and the costs have fallen so steeply that some people argue remote conferencing is preferable to meeting in the same physical space.³³

There are now a range of tools that facilitate remote work, but this requires investing proactively in technology.³⁴ Skylight’s Jasper Malcolmson estimates that each installation for a new employee costs a few thousand dollars. This includes multiple screens, high-bandwidth internet, a camera, a microphone, and other office setups. It also includes a range of subscriptions like Zoom Rooms.

These may seem like large absolute numbers. Yet these costs still pale in comparison to office expenses.

Distributed Models: The Key to Silicon Valley’s Future

In 2018 and 2019, Amazon’s decision to expand from its single base in Seattle, along with its multistage process to select the new location, dominated technology newsrooms. The first stage of the saga was the call for applications from American cities. More than two hundred applied, eager for the promised fifty thousand new jobs and $5 billion in construction investment.³⁵ Stonecrest, Georgia, even offered to create an adjacent town called Amazon.

The company decided to split the prize between Long Island City in New York and Crystal City in Virginia—that is, until public backlash forced it to pull out of New York.³⁶

The heated drama about Amazon’s second headquarters illuminates a broader trend. Rising costs have made Silicon Valley and other major startup ecosystems increasingly expensive. Even well-paid software engineers can’t afford studios in San Francisco.³⁷ Many are leaving: surveys in San Francisco report an astounding 46 percent of residents intend to leave in “the next few years.”³⁸ Yet talent remains the most critical resource for companies. In response, even venerable Silicon Valley institutions are considering deployment of distributed teams in different locations.³⁹

US startups like Automattic, Basecamp, GitHub, GitLab, InVision, and Zapier provide successful role models of companies relying on large distributed teams. Buffer’s “State of Remote Work Report” highlights a shift in attitudes: today 90 percent of entrepreneurs claim they support remote work.⁴⁰ Remote work is on the rise; Mary Meeker’s “Internet Trends 2019 Report” shows that 5 percent of the American labor force works remotely (nearly double the 3 percent in 2000), representing more than eight million Americans. Nearly 50 percent of the US workforce has spent at least some time working remotely.⁴¹

Some venture investors argue that distributed teams may have as big an impact for startups as the cloud once did.⁴² Boris Wertz, founding partner of Version One and board partner with Andreessen Horowitz, summarizes this trend: “Among our Silicon Valley-based portfolio companies, not a single company past ‘A’ does not have a distributed team.”⁴³

The Triple Threat

Over the past three chapters you have explored three aspects of the born global nature of many Frontier Innovators and their companies: cross-pollination, being multimarket, and building distributed teams. Combining all three of these approaches can lead to a powerful and successful result.

Take Robert Keane. Originally from Buffalo, New York, Robert was a cross-pollinator. After an international career working in multiple countries, in 1994 he started Bonne Impression—a printing business that had a distribution partnership with Microsoft—in the second bedroom of his Paris apartment just after graduating from INSEAD, the international business school. At the time, the cost for small businesses to print marketing materials was astronomical; a typical minimum of five thousand brochures cost $1,000.⁴⁴

But growth stalled after Robert exhausted Microsoft’s client roster. He realized scaling the company with its current business model was going to be challenging, if not impossible.

Robert saw another option. He envisioned online in-browser publishing, which would allow small businesses to self-design and order their printing via e-commerce—an offering that was far ahead of its time. In-browser publishing complemented another innovative technology by which algorithms would automatically aggregate many individually small print runs to radically decrease the cost to produce each run. Robert had to decide whether he’d abandon the current direct marketing catalog-based strategy and bet the company on this new internet-based distribution model.

He decided to bet, and the company took off. In 1999, Robert rebranded first to Vistaprint, sold the consultative business in Europe, and moved the company to Boston. “We always were thinking global. In this case, we retrenched to be even more global,” he explains.⁴⁵

Robert built a distributed organization and a multimarket sales strategy at the same time. The headquarters and technology development were based in Boston (given the higher concentration of developers), and the customer service team was centered in Jamaica (for English customers) and Tunisia (for speakers of Romance languages). Early logistics development was based in the Netherlands. Canada served as the first core production facility, leveraging its proximity to and connectivity with the United States. The next production facility catered to the growing European business and was located in Germany. This distributed structure was economical, and it allowed Vistaprint—now renamed Cimpress—to tap the best talent from specialized centers and leverage cost differentials across regions.

Cimpress survived the dot-com crash, even as many of its competitors that had raised considerably more money did not. Robert credits his company’s survival to “the luck of not having raised enough capital, which forced us to cut back until we were cash-flow positive.”⁴⁶ The company outlasted its more profligate, better-funded competitors.

Today, Cimpress is operational in more than twenty countries, and more than half of its revenue comes from outside the United States, including Europe, Asia, and Australia.⁴⁷ It is a Nasdaq-listed company with a multibillion-dollar valuation and more than twelve thousand employees around the world.⁴⁸

Cimpress took a multimarket sales approach and built itself in a distributed way. Robert credits his success in part to his global experience, and to the multicultural and international culture he built. As he reflects, attitudes have clearly changed. “When we started, building a truly global value chain as a small startup was highly unusual. Today it’s more common, even in Silicon Valley.”⁴⁹

Like Robert, when Frontier Innovators take the leap of faith to cross-pollinate, be born global, and adopt a distributed structure, it pays off.