Can A Startup Do OffShore Development? Part 2
In my previous article (Can a Startup Do OffShore Development? Part 1), I talked about alignment of interest and trust as being the two most critical aspect when starting a new offshore development team. Now on to more operational considerations.
Hiring
Of all the issues we ran into when we first built our team, hiring was the most critical. It was very difficult to find the right people. By and large, a lot of it were macro challenges that Malaysia itself faced.
The first was an over-emphasis on certifications. You can find the latest and greatest Microsoft and Java certified developers here and indeed the entire consulting industry is built around certification. You need someone qualified to build something in “X”? Find someone who is “certified” in it. There is this delusion that certification in a computer language or vendor technology (Microsoft etc) equates to mastery of the art of programming itself. Hence instead of focusing on the artist, the industry focuses on the art supplies to determine quality.
As a result, local universities here churn out thousands of new graduates each year who can spell Microsoft but understand nothing about proper software engineering.
So when you first start building your team, the most important hire should be your lead architect. Spare no expense to find the absolute best person for this role. The cliches of hiring the best of the best is as true in Malaysia as it is in the US. As they say, A players hire A players, B players hire C players etc. The Ruby community in Kuala Lumpur is fairly small. Everyone knows everyone’s reputation and ability. If you hire the best, this person will lead you to the rest.
Company Culture
Once we completed the hiring of our key staff, the next step was to create a great startup culture. Culture creation is not easy.
Silicon Valley is a great place for technology startups in no small part due to its culture of entrepreneurship and innovation. There is this drive to create something new, crazy, innovative and globally game changing. You work long hours at below-market rates for stock options, a chance to participate in the financial payout of the company’s success. Everyone does their best for the company because they are incentivized and correctly aligned. How do you emulate this culture outside of Silicon Valley? Turns out, not so easy.
In order for stock options to work, your employees must first have a vision of what stock options can do for them. There must be a healthy acquisition or IPO pipeline in the market. Without an “exit”, you will never exercise your options. If you don’t have a chance to exercise your options, you’re not incentivized.
Malaysia unfortunately does not have a good technology IPO pipeline. Nor does it have the equivalent of a successful tech-based exchange like the Nasdaq. Malaysia tried but there simply wasn’t enough liquidity, or institutional demand. As a result, most people in Malaysia are not familiar with stock options or equity participation. When we first explained stock options to our employees, many of them either didn’t care or didn’t understand enough to care. In other words, it wasn’t even a consideration.
Stock options, in its simplest form, is a vehicle for employees to participate in the ownership of a company. If the company’s stock price went up, your stock options have value and it makes you a co-owner of the company. You have a strong incentive to make sure the company succeeds, with a strong alignment of interest between the employer and the employee. Being co-owners of a company creates an impacting culture of productivity simply because employees stop being employees, they start becoming owners. And owners CARE about their company.
I think we were successful to a certain degree in creating this culture. Some cared enough but not everyone did. Certainly if Zoecity was mature enough within an imminent exit (IPO or acquisition) this might have worked greater. I think what Malaysia needs today is at least one success story of a technology startup that made it globally. This would then give developers here an identifiable vision of what startup success looks like and how to participate in its reward.
Next blog post: the issues that really impacted our execution.
Colin Wong lives with his wife and three kids in the always sunny, never rainy wonderful land of Seattle.
