Barbarians at the (Golden) Gate
“She looked at us as if we were a bunch of barbarians coming on their little ponies declaring they are here to conquer their empire” said Booksy co-founder after interviewing our first senior position candidate to be based in the US. Booksy was back then a small start-up out of Poland dreaming about making it in America.
Analogy was on point. We came out of nowhere, competed in a unique way and succeeded running often against classic Silicon Valley start-up playbook. Couple of years later, Booksy was a leader in beauty salon management space with over 10 million people in the US using it to book services even though we competed against better funded Silicon Valley incumbents.
This post is about why the story of a start-up out of the CEE winning in the US is not and should not be unique. Such a set-up offers a number of unfair advantages for tech start-ups. Make the most of them
Advantage 1. Access to Talent
Let’s start with the obvious
- CEE is home to 1 million software devs, more than California and Texas combined
- The average cost of software developer is 20–30% of that in the US
So either you can build more efficient or you can take a machine gun to a knife fight. I prefer the latter approach (especially in winner-takes all/most markets), but choose your way based on your specific market and the capital availability.
But you could say — in post-covid-remote-first world — can’t anyone hire devs anywhere on the planet?
Yes and no.
You can easily hire developers anywhere on the planet, often at a lower cost than in the CEE. What is extremely difficult is to integrate them and make them feel part of the team.
This is doable. At wonga.pl we had a 20-people strong team in Kyiv hired through our partner in Ukraine. But it took real commitment of the Product leadership to gel the team. From daily huddles to quarterly planning sessions in Kyiv, non-stop communication. On top of that a fair share of pierogi/varynyky (depending on offsite location) and vodka consumption (independent of location). This worked due to the amazing commitment of the Product Team, and the geographic and cultural proximity. I am yet to see a Silicon Valley based Product Team to work so tightly with their offshore devs teams.
Secondly, this is not about devs only. While CEE may be known for engineering talent, you have an amazing and increasing number of talent in revenue operations, operations, product, media buying, design and so on. A person who can add up two numbers in Excel in the US starts with $100k/year. For this money you can hire Machine Learning PhD in CEE
Third is the quality of free, college-level education. You make take it for granted if you are based in the CEE, but it is far from obvious in the US (in fact politicians who propose free college education in the US are labeled extreme left at best). Free college education means a conveyor belt of high quality, quick learners for entry level positions — a vital resource for any scale-ups, where tasks of the job can change every month. All of that at a way lower salary (easier if you don’t spend $500/month on student loan servicing)
And the final most important point — working for a global start-up in a CEE country is aspirational. Young people in the CEE learn early on that working in English is the thing to do for their careers; that an international career is a worthwhile pursuit; and that America is the ultimate prize. Start-ups with global reach can pick and choose talent they need. You build in Poland/Baltics/Romania/etc and sell in America! How cool is that? Definitely way cooler than the story of one of 100,000 US-based start-ups selling in America
Advantage 2. Flexibility
We just mentioned that access to talent is more than engineering talent. There are plenty of advantages of colocating your engineering talent with commercial teams, including product.
Some are probably obvious, some less so. Two are worth mentioning:
- You can postpone automation of certain processes and devote your engineering resources to product development. Long term it is a trap (more on that in future posts), but in the short term an intern+spreadsheet+scotch tape is your superpower. Do you really need this fancy marketing automation platform + team or a student who knows SQL and can prompt chatGPT for a marketing copy is enough?
- You can run more experiments. First of all, you just had a spreadsheet based process. Congrats! An exception to the process is a short slack message to its owner. Secondly, the person behind the process is likely not earning an entry level Silicon Valley salary of $100k. More like $10k. It gives your Product Owners great flexibility to run experiments before automating the right solution and using those precious engineering resources
Advantage 3. Grants
When you combine cost of talent and access to public funding you end up with amazing capital efficiency early on. Before we invested in Aether Biomedical I asked a friend for his point of view. He has been a healthcare/biotech VC in Silicon Valley and who had dozens of medical devices investments behind him. He was amazed. He almost paraphrased Churchill saying “I have never seen so much progress in going to market in so little time for so little money”
Grants can be however a double-edged sword for a number of reasons:
Obvious: They come with strings attached in terms of bureaucratic reporting, lack flexibility in terms of capital deployment and rigid timelines
Less obvious: Grants undermine future fund-raising in two different ways:
- They delay the pressure to commercialize technology (perfecting the product vs shipping and showing results)
- Grants give founders a false sense of their own fund-raising ability, which makes them underestimate the effort to raise money from return-oriented investors
However, as long as you are aware of these traps, grants are amazing way to improve your own capital efficiency
Advantage 4. PR clout and employer branding
Media in the CEE markets are starved for a local tech success story. They constantly search for their own Skype to trumpet the coming of a local unicorn. As a result, any four-legged animal with a budding horn is hijacked by the local story-tellers.
Play the game. Ride this wave, build your clout, and give the media what they want to hear. Cutting through the PR clutter is way easier in your local market than in the US.
This ties to my previous point above — that it is aspirational to work for a local start-up making waves globally. Because of the scarcity of global success stories, it is easier to stand-out, cut through the clutter and attract exceptional talent
Uphill from here
That’s it when it comes to the advantages. Future five posts will address all the things that can go wrong. One-to-five ratio of advantages to hoops you need to jump — sounds about right. Stay tuned, comment, ask questions
