A version of this article previously appeared Forbes.
When I published This Remote Working Experiment Failed And Succeeded on the Wall Street Journal last year, I had no idea it would generate so much social media attention. Given TimeHop’s failed experiment, I was especially intrigued when I learned that a team of a dozen remote entrepreneurs hack the typical corporate structure and creates a company that generated nearly $100 million in revenue.
Creating an effective remote team is often difficult, especially for a startup, as the core business issues are ill-defined and the pace is chaotic. Thus, even though it is enticing to start a company based with a remote working structure, it is often a challenge to maintain a decentralized approach as a company expands beyond its founding team.
Two Virtual Organizations That Worked
To gather hands-on remote team building advice, I sought out two companies that have done it: TaxJar and FastSpring. Both companies’ success proves that it is possible to coordinate and motivate disparate team members, even during a startup’s early, chaotic days.
Some companies allow employees to work remotely one day a week or on an ad hoc basis. In contrast, TaxJar, a SaaS solution which makes automates online sales tax calculations, reporting and filings, is an entirely virtual company. Although the company has a vibrant, collaborative culture, no two employees work under the same roof. (Note: I am an investor in TaxJar via Rincon Venture Partners.)
I asked TaxJar’s Co-Founder and CEO, Mark Faggiano to list five reasons his decentralized venture has flourished.
Early in his career, Dan proved to be a valuable contributor on my GoToMeeting business development team (acquired by Citrix). He then joined Picasa and was instrumental in its acquisition by Google. He then started several successful companies, including FastSpring, a company that provides outsourced e-commerce services to over 3,000 software companies.
Dan shared his entrepreneurial insights with my UC Santa Barbara students, including the manner in which he built a virtual organization. The following four-minute excerpt highlights his comments focused on creating an effective remote work environment. You can watch Dan’s entire talk here.
As Dan notes, “FastSpring these days is over a $100M business and it wasn’t much less than that when we had about twelve people. And we did it all with about $30,000. No venture capital.”
From the start, Dan and his co-founders, (who were also all remote, in four different US states), focused on building the optimal team to tackle the specific type of opportunity they faced, rather than the best team that could be placed under one roof. According to Dan, “In terms of people, we had an approach that had to do with finding the best people, the best fits for the positions and not the best people who happened to be in the same zip code.” Dan later noted that, “This actually turned out to be a huge advantage for us. We gave our people a large amount of flexibility… those that showed they were able to get their job done, we left them alone. They could work on their own terms.”
One way this advantage was evident was with regard to customer service. “Our competitors had customer service where you got an auto response. Whereas (at) FastSpring, we were responding 11:00 on Saturday night. Christmas day, all throughout the day. I didn’t have to ask anybody to work those hours, it’s just that they cared. We hired the type of people who slept with their laptop in bed with them so to them it was like, ‘Well, I’m checking my email anyway.’”
When FastSpring was acquired, the entire team was comprised of twenty two people, of which, “… we had three people in Santa Barbara and everyone else was working, generally, from home and some people were in other countries.” Unlike TaxJar, which meets as a team twice a year, Dan notes that FastSpring’s four co-founders, “… went through a period of three years… where we didn’t even see each other, we didn’t get together once. We would communicate through email… and every once in a while, if there was something important, we’d get on a call.”
Such an organizational structure and communication style would not work for many companies, but in FastSpring’s case, all of the co-founders were former CEOs. Per Dan, “… so we kinda knew what we were doing and we had the division of labor pretty strong. I didn’t need to know what they were doing in their area (because) they knew what they were doing.”
Although the structure worked well for Dan and his team, he did note that it wasn’t without its pitfalls. In particular attempts to raise money and ultimately to sell the business were hampered by the company’s virtual nature. In Dan’s words, “… we did run into potential partners, buyers that would say, ‘Oh, well I really don’t like that the company is spread out all over the place.’ The larger that you get, the harder stronger that argument gets because you have bigger firms (wanting to buy or partner) who want stability and control things from a single place.”
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Image credit: John Zich/Bloomberg News.