Why we fled Denmark the day we received funding
GUEST ENTRY: Accordium never even bothered hiring engineers in Denmark. An alternative in Malaysia has helped them cut their time to market immensely.
My name is Alexander Brix, I’m co-founder and Chief Operating Officer at Accordium. We create beautiful software that helps sales teams improve their performance. From day one, our team was split between Copenhagen and Kuala Lumpur (Malaysia). In this article, I want to explain why we didn’t even try to hire engineers in Denmark.
When we founded Accordium in January 2017 our primary goal was to launch a product as quickly as possible. Having raised ~$500k from SEED Capital and Perch Capital, we knew we had little over 13 months to ship a product that not only works, but that people would be willing to pay for. This was important, as we knew that our 2nd round of funding would be based purely on sales metrics and product traction, and not our ‘great reputation’ or vision.
Why Copenhagen wasn’t an option for our tech office
With my cofounders having been early Trustpilot employees, we knew that without a employer brand, cash, or much network, we would probably need 3–4 months to hire a fully functioning team of engineers in Copenhagen. This was an immediate red flag for us: With 13 months to live, we would need to ship a product within 6–7 months, in order to have 3 months to get out of Alpha/Beta stage and have another 3–4 months to actually sell the product and show some traction for the next round.
Pleo’s Jeppe Rindom gave his opinion on the whether Copenhagen’s tech talent can meet the growing demands by startups — I couldn’t agree more with him. Copenhagen makes it hard for young people to relocate, salaries for developers are extremely high, taxes are insane, and costs of living are exploding.
So we needed an alternative.
Since one of my co-founders Andrew Whittaker and I both lived and worked in Malaysia before starting Accordium with Barrington Russell and Daniel Richardson, we explored the idea of setting up our engineering office in Kuala Lumpur instead of Copenhagen. We realised that with the network we had in Kuala Lumpur, in combination with the luxury of being able to pay above-average salaries due to European funding (Malaysian startups rarely receive more than $100–200k in pre-seed money), we could hire a fully functioning team of full-stack developers within 4 weeks. So we decided to go balls to the wall and do it: I literally drove to Kastrup Airport myself with 7000kr in cash to buy tickets to Malaysia for the next day ON the day we received funds from our investors (we didn’t even have a debit card yet). So we flew to Kuala Lumpur, hired Zul and Uways as our first full-time employees in addition to our founding-employee and VP of Engineering Ashik Salahudeen, found and moved into a office in a co-working space and kicked off development of v0.1 of Accordium in under 5 weeks and were consequently able to release a Alpha within 5 months.
In addition to a fast go-to-market, we were able to save a lot of costs. A very experienced developer in Malaysia has a salary of DKK 84–135k per year — that’s a third of what you would pay in Denmark (!), which meant we could hire more people from the get-go and thus ensure an even faster go-to-market. With one VP of Engineering (Ash) and three full-stack developers by April, we spent around USD 150,000 (~DKK 900k) per year on the whole tech department in Malaysia (incl. all office costs, overhead, contractors, etc.).
3) Tech Talent in Malaysia
Not only do you get ‘better value for money’, but you also get extremely dedicated, passionate and talented engineers. It was important to us from the beginning that the team in KL knew that they are not just an off-shored team to cut costs, but are the backbone and basis of everything we do. They get full flexibility, freedom and responsibility to work towards our united goals.
Another benefit is that we have above-average employee retention rates. So far, no employee has left the company and we have zero reason to believe that that might happen any time soon — in fact we just hired two additional tech employees, bringing the local headcount to 6 (12 in total). The reason for our high employee-retention is not above-average salaries — I actually believe salaries are only a very small contributor to employee happiness. Our employees like to work with us over (lets say) a Malaysian bank or consultancy, because we actually value their input. We challenge them to come up with their own ideas and solutions, AND give them a stake in the success of the company through an Employee Stock Option Plan. In Malaysian corporations they would be treated like ‘keyboard jockeys’, delivering solutions for customers they will never meet and that most likely never creates any meaningful value. One great example is a recent hire who took a pay cut of 23% (remember, salaries are already much lower than in DK) and bought himself out of his old employment contract with his own money only to join Accordium — when was the last time you heard of a Danish employee doing that?
All of the above has lead to a culture where people are not asked to go the extra mile, but will do it out of their own will.
Obviously having your tech team ~9,700 km and 7h worth of time zones away from the headquarters comes with a couple of challenges.
There surely is some loss of productivity at times, as communication is often limited to slack and email. However, we are very diligent in our hiring process and ensure that every new employee understands our vision and values, which leads to a great team spirit where goals are aligned and communication doesn’t have to happen instantly at all times. Additionally the tech team has adapted their working hours: Usually starting around lunch time and working until late at night, which leads to plenty of overlapping working hours between CPH and KL. Another way to counter this issue, is by frequently flying to Kuala Lumpur and being with the team whenever we can. Barrington flies down at least once per quarter, while the rest of us try to come every 6–8 months, especially when we kick-off the development of a new product (I’m writing this article from Malaysia as we speak). (it’s also a great way to escape the beautiful Danish winter…)
(Read this article by my Co-founder Barrington Russell on how or product and tech development is structured: Startup tales: How to completely screw up your prototype by not hiring penguins.)
Having two offices and entities not only means double the costs for lawyers, accountants, corporate secretaries, office, etc., but also requires additional overhead to manage.
3) ‘Malaysia Boleh’
Having an entity in an emerging and extremely fast-growing economy like Malaysia comes with some risk: Corruption is still a thing (Malaysia’s PM has channeled more than $700M of state funds into his own accounts), media is censored (this very page medium.com is banned in Malaysia), and capital inflow is restricted. However, as in all emerging markets, these are just hurdles that are usually relatively easy to circumvent if you know your way around. Having lived in the country for some time and worked in the startup scene, we know the tricks and ‘Malaysia Boleh’ (translated as ‘Malaysia possible’ which means ‘there’s always a way in Malaysia’) way of doing business. Additionally we have hired an extremely persistent and experienced consultant that helps us navigate the red tape.
Also, only since 2015 when I first moved to Malaysia, I can already see how government bodies are becoming more efficient and faster. Three years ago it could take months to get a visa for a foreign worker approved, now its a matter of days and almost completely online. Malaysia is generally doing a better job at making it easy for entrepreneurs to hire foreigners (only 2 of our local employees are actually Malaysian, the rest is from India, Bangladesh and Indonesia), something Denmark is not nearly as good at. Malaysia has realised the potential for startups and is working towards becoming the most attractive tech hub in Southeast Asia. MDEC, the Malaysia Digital Economy Corporation Sdn Bhd is continuously improving the situation for foreign entrepreneurs, its only a matter of years before it will be at European level.
It’s yet to be seen how scalable our solution will be. Is there enough talent in Malaysia to support our long-term growth? Will the distance to customers in Europe and the US become a problem in tech-support? Will the growth of the economy lead to accelerating salaries and thus kill the operational advantages? All these questions will have to be asked in 2–3 years from now. However, there is always the option to simply open a second tech office closer to our target markets in Europe and America, e.g. in Eastern Europe or Portugal. In this scenario, we would split development into “close-to-customer” and “far-from-customer” teams. The former being responsible for the latest features, product designs and support, while the latter focuses on infrastructure, APIs and the backend.
Would I do it again? YES! — Would I recommend anyone else to do it? Probably not in Malaysia.
For us this setup continues to make total sense. We saved a lot of money that we could invest in development speed, we managed to get follow-on funding thanks to our early traction, and we have built a high-output tech team that is still growing.
However, for most Danish companies a far-away country (both in culture and distance) will not make sense to build a tech team. Without knowing the local laws, the way of doing business and the culture that defines and motivates the way people work, it will be impossible to build a successful business. Luckily, there‘s plenty of options that are closer to Denmark to build a tech team: Portugal, Ukraine, Estonia, or Lithuania are just a few of the amazing fast growing startup scenes that easier to tab into.
The belief that a startup needs to be sitting in a garage or basement when starting out is an outdated romantic idea. We live in an age where distance doesn’t matter any more; Slack, Bitbucket and Skype are all you need to build a great product when you have hired the right people.
At the end of the day, there is one argument above all others: It’s simply a great experience and invaluably inspiring to be working in a team of 12 employees, across 9 unique nationalities: India, Malaysia, Indonesia, Bangladesh, England, Germany, Denmark, New Zealand, and Romania. This allows us to build an open-minded and inclusive culture with a global mindset, something I feel some Danish startups are lacking.
The opinions expressed in this article are those of the author.
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