When Bill Hewlett and David Packard founded HP in 1947, it made logistical and fiscal sense to have all their workers housed under one roof. Ditto for Apple. It even penciled for Google in 1998, and it still worked well enough that Facebook chose to establish its headquarters in Palo Alto, California, in 2004. Standout startups like Stripe, InVision, and Github exploit a competitive edge every startup should leverage. The boundaryless era, the time for distributed teams.
In the past, it made sense to build companies where everyone worked in one place.
But the world has changed. Companies are relying on the engineering talent provided by remote, distributed, or as we call them, boundaryless teams. There are concrete reasons why your company should adopt a remote-first mindset. Fascinating trends are driving the boundaryless revolution presenting positive disruption opportunities. Influential business thought is accelerating the boundaryless space in education to advance this change further.
Remote-Distributed (a.k.a. Boundaryless) Teams
For some time now, it has been possible to outsource engineering labor to other countries. There are plenty of companies poised to serve your needs in Bangalore, the Philippines, and across Eastern Europe. They’re low cost and capable of delivering specific — but mostly basic — engineering services.
But that’s outsourcing development — it does not mean have a boundaryless team.
For companies like Automattic, one of the first unicorns to be 100% remote, a boundaryless team consists of elite level programmers that live almost anywhere. These are highly-skilled people that make up critical parts of your software development teams. These people may be permanent employees, or they may work on a project-by-project basis, but they are managed very much as if they’re working right alongside you.
According to Toni Schneider, a Partner at True Ventures, and a Team-Lead at Automattic, boundaryless teams confer a real advantage;
“You can hire great people wherever you find them: Once your company is untethered from one physical location, your pool of available job applicants becomes the entire world. Hire anyone who fits the culture and mission of your company wherever they live.
Also you get to better insulate yourself from the competition and ups and downs of a particular local job market, and you’ll automatically get better coverage of multiple time zones and languages when your team is more distributed.”
What’s impressive about Toni’s quote is that he wrote it back in 2010. At that time, Automattic had just 50 employees spread across 12 US states and ten countries. As of this August, the company employed some 940 people that call more than sixty different countries and 47 US states, home. And they just announced a new round of funding; $300 million from Salesforce Ventures, pegging the company’s post-funding valuation at over three-billion dollars.
So what’s changed? Why have remote, distributed teams suddenly become the smart way to build software companies? More importantly, if you’re building a company yourself, why should you be paying attention to this trend? Why should you consider — and probably employ — a remote-first mindset when building your technical team?
“Historically, the challenges associated with remote teams have outweighed the benefits. But today, the equilibrium is shifting for many founders. Distributed teams are more common, and companies know what to expect when managing remote offices.
Collaboration tools have improved. Next-generation chat, video calling, and project management software help keep teams in sync. Perhaps most importantly, there are now many examples of very successful businesses with distributed teams.” Tom Tunguz, Redpoint Ventures
Reason One: Software is Eating the World
More and more industries are becoming software industries. And as they do so, the demand for high-quality engineering talent is going up exponentially. Toyota is a software company. Johnson and Johnson is a software company. Many more companies have realized they need to become software companies; otherwise, they risk becoming the Nokia or Blackberry of yesteryear. And because of this, the demand for Silicon Valley caliber talent is growing exponentially. Local supply cannot keep up. Today, the smartest CEOs are focused on building Boundaryless distributed teams.
Fred Wilson of Union Square Ventures says:
“I feel that the ability to spin up and then successfully operate remote engineering locations is a skill that technology companies need to develop earlier in their development than used to be the case.”
The best way to win the talent war? Don’t participate.
In the race to build a great software product, engineering talent is oxygen. Even the most well-funded startup has limited resources. It might seem advantageous to recruit people that live within twenty miles of your HQ. But if your company is located someplace like Silicon Valley, Seattle, Boston, or New York, you’re entering the race with a handicap.
Massive rivals like Google, Facebook, Apple, and Twitter are already sucking all the oxygen out of the room. It’s hard to recruit against a profitable enterprise with a “wow” campus, unmatched employee benefits, and a reputation that’s leagues beyond your tiny new company.
Hiring local talent will force you to pay more than you can afford. The best people are either getting offers from or already working for, an 800-pound gorilla that won’t even notice a salary that might break your bank.
And this doesn’t even begin to address the time-suck of recruiting high-level engineering talent. Sequoia Capital, one of the world’s most successful venture funds, recently published a blog post that put the challenge of recruiting a world-class engineering team of 12 into stark perspective.
From their article:
Got 990 free hours?
Not likely. Yet that’s how long it takes the typical startup to hire 12 engineers. Even if you spread your hiring over the course of a year, you’ll need to spend more than 19 hours a week recruiting candidates to hit that target.
A shortage of engineers is the biggest challenge facing Silicon Valley startups today. Hiring is what enables you to execute your product roadmap. So falling behind on recruiting is a competitive issue.
If you’re a startup CEO trying to guide your company through the choppy waters of hiring talent, building a company, creating a product people want, identifying and building into product/market fit, and developing your own company culture, do you really have 19 hours a week you can devote exclusively to bringing great local talent into your fold?
Reason Two: Ridiculously High Cost of Living in the Bay Area
It isn’t just competition from other companies that make local hiring problematic. If you haven’t looked at the price of a two-bedroom apartment in a tech-hub like Silicon Valley, prepare yourself for sticker shock.
A new report from the Department of Housing and Urban Development says that a San Francisco metro area family of four bringing in $117,400 a year qualifies as “low income.” Last year, the cut off was $105,350. An annual salary of $82,000 now puts single adults in the “low income” bracket as well.
A recent rent-survey in San Francisco found that the average cost for a one-bedroom apartment in the city is $3600 per month. Rental guidelines suggest that someone should be earning at least 3x their rent to qualify. Can you afford to have your starting engineering salary run your company at $130,000 per year plus stock and benefits? We couldn’t at my last company, Rover. That’s why we went boundaryless for a portion of the team with the other portion based in Palo Alto.
Reason Three: Stratospheric Office Rents
And office rents? Brace yourself for another gut-punch. In a San Francisco Chronicle article from October of 2018 they wrote:
In the past year, Facebook signed leases for two new towers where real estate sources say rents have surpassed $100 per square foot. Google now owns and leases a row of five office buildings near the Embarcadero. Last year, Amazon signed a major lease at 525 Market Street. In the third quarter, the Seattle company expanded by another 143,000 square feet in San Francisco, space for more than 700 additional employees, according to brokerage data.
It’s a safe bet your newly hired $150K per year engineers aren’t going to be excited about working in a closet, or with five people in what should be a one-person office. And they probably won’t be thrilled about a 2-hour commute because they can’t afford to live in a decent place within striking distance of your HQ.
Reason Four: Environmental Responsibility
According to research conducted by the US Federal Highway Administration, 93% of commuters travel alone, and they average 12 miles of travel in each direction on their typical 5-day per week trek to-and-from work. That’s a fraction of the typical commute in Silicon Valley, for example. And while this may not sound like much, a regular midsize car that gets around 20 MPG will spew 2.6 tons of carbon into the air with a weekly average commute of only 10 miles per day.
With no need to commute, the ability to be at the office by going down the hall, and the considerable reduction in time spent trapped in a vehicle. Remote workers are doing your company, themselves, and the environment a real favor by not reporting to an office. Not to mention getting 10-20% of their life back to spend on work or personal priorities.
What makes the Boundaryless enterprise possible now?
One of the reasons it still made sense for a company like Facebook to hire locally in 2004 was that immature technology made effective remote work challenging. But these challenges no longer exist.
At the birth of companies like Apple, there was less competition, and living costs and real-estate was less expensive. But the most significant changes from 2004 to today include the rise of fast mobile networks and broadband, breakthroughs in communications technology, and a shift towards decentralizing educational opportunities.
Reason One: Widely Distributed Broadband
Up until just a few years ago, sufficient bandwidth for real-time video only existed in the most developed countries. In many places, mobile data and hardwired internet were still billed based upon usage. Meaning that even where the net was fast enough, it was usually too expensive to be used for efficient remote employees.
Today, even developing countries have fast wired internet. And in many places, the distribution of LTE mobile networks have untethered people from wired networks altogether. The spread of high-speed internet has uncoupled location from opportunity.
Reason Two: Now, Communication and Collaboration tools for Distributed teams are mature enough
For Boundaryless teams to be efficient, communication is paramount. The ability to spontaneously interact with your teammates is critical for any enterprise. You can’t walk down the hall and knock on someone’s door if that door is halfway around the planet.
It has only been in the past few years that applications like Zoom that make multi-party video conferencing good enough at a low enough price have even existed. Tools we nearly take for granted now were still in labs or garages a very short time ago.
Audio-visual applications aren’t the only key communication technologies required for distributed teams to shine. Highly efficient asynchronous communications platforms, like Slack, were years away from release when Facebook was scaling. Today, what we do at Turing would have been impossible, as late as 2015.
We have excellent products for communication, collaboration, knowledge sharing, and project management like Asana, Trello, Notion, etc. Microsoft and Google have some phenomenal products in the space that make distributed teams of developers and product managers highly effective. A lot of these products are mobile-optimized, which makes them well suited for a boundaryless team.
Reason Three: The Democratization of Education
And there’s another reason, also technology-driven, why boundaryless teams are possible now — the democratization of education for software engineers.
Almost every university that matters now allows exclusively online education. You can attend Stanford from Nigeria or Oxford from El Salvador. The smartest companies have expanded their recruiting pool to the planet; institutions of higher learning have done the same. They’re leading the revolution. They’ve not only leveraged the same technologies that we do; in some areas, they’ve jumped well ahead.
And there are technology startups that have focused on disrupting and democratizing education. A number of these, like Lambda School, have focused exclusively on preparing students for careers in software development. In other words, highly qualified people are distributed more broadly than ever. Provided you know how to find and then manage them — a topic we’ll be digging into in detail in an upcoming post.
MOOCs like Coursera, Udacity, and Udemy have unbundled university content to make education more accessible on a global scale.
The Real Question.
From my perspective, as the CEO of a company that lets you hire the world’s best remote developers with a distributed team spread across the globe, the question isn’t why should your company be boundaryless, but how.
In the next installment in this series, we’ll talk about the different configurations of boundaryless teams. We’ll explore the frameworks and strategies you need to consider to manage a distributed team effectively, disintermediate your geography from talent, and we’ll talk about the disciplines you’ll need to develop to leverage boundaryless teams and build a thriving company.
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