Crowd sourcing human capital to a for-profit business

I had great fun talking at SSES Start-up day. The video below is a little presentation of how we have rolled out our project SkrivaPå since the inception in Feb 2010. The talk includes some general tips and tricks such as how we have managed to crowd source human capital to contribute to our for-profit business even though we haven´t had anything to pay and some useful tools for manageing distributed teams.

Further down is also a related blogpost that I wrote in November 2010 (6 months ago) but haven´t dared to post until now.

The blogpost

Original title: "The Help Me Toolkit: Essential bootstrapping techniques to help people help you in your start-up venture (in other ways than by paying)"

Background

At my current start-up SkrivaPå we now have a strong team of 12 [has grown to 18 since this background was written 3 months ago] and about another 8 senior business people in our Board of Advisors. Even though the size of the team and helpers is quite large for a start-up that started for real no more than half year ago [9 months currently] we have managed to keep the burn rate down to almost zero, spending a total of 12kEUR up until we launched this week [that was our beta-launch we will launch a stable version next week]. When I tell people about our story they are often amazed of how I have got so many highly talented people to work in a dedicated way (50-100%) without being payed. So of cause they ask: how do you do it?

To answer the question I wrote a blog post about it in November 2010. When I was done I sent it for review to some friends and other people that had asked for it. Even though I got great feedback I didn´t dare to publish it because I was afraid how people, and maybe mainly, how my employees would interpret it. That people would think that I´m a rotten bastard that make people work for free to make me money. I now picked up the text and read it again and realized that it wasn’t that bad at all, it is actually really useful, especially if I frame it and explain the reason why we started with our “work for free”-recruitment strategy. So here it comes... I hope that you find it useful.

Introduction

The creation of our “work for free”-recruitment strategy.

Except for the small pre-seed 12kEUR that my partner Gracjan Polak put in at the inception of the company we haven’t had any cash coming in because the product (a service for electronic contracting) is actually really difficult to build and so much has to be right before you can really start selling it. So we have had to be on a starvation diet. Like most people at the start we believed that we had to pay people up-front to get things done. The problem was that we tried it and got burned 3 times in a row in just the first 1.5 month of the company existence. For some reason people seemed to strongly under-perform even though we had promised to pay them with shares or money. So we decided for a different approach. We didn’t promise anything at start or we promised very little. Then we tried the person out and they tried us out for a few weeks. Once both parts knew they were dedicated we would decide upon some type of economic solution. This way our recruitments suddenly improved drastically. Some people bounced immediately upon the bad offering and the ones who stayed got stuck and are still here to this day. Probably it worked out because by giving such a bad offering (“work for free”) we only got the ones who were really interested and motivated, not for survival or CV-building opportunities only. Possibly this is also the main reason we have such a passionate team, because only the ones who truly love the project have been able to motivate themselves to stay. Of cause there must be an end to this type of strategy and people must at some point get something material in reward if they are to stay. Actually we (me and Gracjan) feel we love our team so much and they are bringing so much passion and spirit to the table that we don’t think they should only be payed in cash, we want them to be part of the company. We are carving out the deal with our lawyers right now.

Magic can happen: example story about Emily from the finance bank in London

We found Emily on elance.com as a result of browsing the web while researching the possibility of finding Haskell programmers outside the tight Haskell community. Emily applied for a tiny job proposal that I had put up and she dumped the price and said she was interested, but not because of the money. She signed the NDA and was supposed to start working remotely from England. Nothing much happened though and soon we got a very very long email explaining her resignation. I called her up on Skype to ask for the reason she was leaving because the long explanation didn’t really communicate uninterest. Well, it turned out that she didn’t want to trouble us as she wasn’t yet great at Haskell. I convinced her that she should stick around and learn some Haskell as she goes and maybe one day when we really would need her she would be truly useful. So, she stayed. And not much more was heard of her, the finance bank had her in its claws having her working 9 to 9. Finally we set up a structure with short 15 minute stand-up meetings in the morning and asked her if she wanted to take part. She really wanted to so she applied to her boss at the finance bank to be able to take one day off a week to work with us for free. The boss was weary so we had to write long letters stating that we are completely uninterested in their technology and wont start stealing and doing industrial spionage through Emily. Finally they let her go to have fun with us one day per week and so it has been for about 4 months now. Last week we had our pre-launch party and she even came over to Sweden with her boyfriend Matt and they stayed with me at my tiny 19 square meter apartment. The big surprise was when she got back home. On Wednesday she Skyped Gracjan:

Emily: “I have two questions, do you have time?”

Gracjan: “Yes”

Emily: “Do you like my code?”

Gracjan: “Yes”

Emily: “Do you want to work with me?”

Gracjan: “Yes”

Emily: “Good, then I will go and resign from my job later today!”

Gracjan called me just moments later and we were both jumping up and down.

“OMG! Does she know we don’t have any money!? We have to ask her!”

We tried to contact her over Skype but she was gone. Soon she came back:

“I´ve just resigned. I feel like Im on top of the moon.”

Then she was gone from Skype again. When I talked to her later that evening I asked her if she knew we don’t have money. She said that was what she expected and she had calculated her savings and figured out that she would make it for some time anyway. Now we are thinking about how to make her boss let her go as soon as possible. Maybe we can write a letter stating that we intend to use Emily to steal their technology?

So to the original blog post…

The Help Me Toolkit and some philosophy

Building a successful startup = loads of external and internal help needed

When building a start-up there is so much that needs to work out right that I believe its virtually impossible to succeed in making it work unless you get loads of help on the way. Nobody, not even the most shining star on the entrepreneurial sky, has all the necessary skills to do it all alone, not if you really want to build something big at least. Help is not something that just happens to you, it’s a two way process, someone is able to help because you help them be helpful, you make yourself helpable. Therefore I perceive the opportunity to be helped as a set of techniques that the entrepreneur applies in order to make himself helpable. Of cause there is no natural law that guarantees help just because you apply the techniques, there is no 100% formula. Rather I perceive it as a game of numbers, the more techniques you apply and the more efficiently you apply them the higher are your probabilities to be helped. In this blog post I wont get into details, I rather want to share some general ideas that I practice and that I think have been extremely helpful in helping me to get great help.

The cash transaction obsession: The most common misconception

I believe that the most important reason people restrict their ability to be helped is that they incorrectly analyze the driving forces of the helpers. People tend to overemphasize the transaction of money, goods and practical services. The problem with this type of transaction is that it most often only satisfies the most basic needs of the person: food, shelter, clothing etc. If the person is fully satisfied with these needs, why should he ever help you out? This fact is especially important as many of the people you will need to help you are getting their basic needs met by someone else than you. Also employing everyone you need isn’t a feasible opportunity as often the only help you need in a specific situation is 15 minutes of advisory or the contact to someone else that is the real helper. So, many of the helpers you will need will be outside your organization doing something totally different and actually often completely uninterested in what you are doing. Also many of the people that can actually help you most are already very successful and thus already materially have everything they need and much more, so unless you pay them absurd amounts your contribution could never be felt enough to make a real difference. So for a bootstrapped start-up, the amount of help you can get through material transactions is really limited and you wont get very far if you think you have to pay everyone for everything. Actually you will probably not get anywhere. I think this might possibly be the number one reason many people get nowhere with their start-ups, because they don’t know how to ask for help. So what can you offer if not a material transaction in order to get the help you need to make your business grow?

Three other motivators

I believe that that people want to feel good and therefore they are opportunistic in exploiting opportunities to feel good. As we all know, at least in the developing world, money is just a small part of what makes us happy. Once the basic needs are met, we want other things. These are some of the needs I think you can help people satisfy to get the help you need in return:

1. Opportunity to learn

People love to learn and grow, it makes us feel good as we develop. I don’t mean forced learning as in school, I mean real learning as in satisfying your curiosity and want to become. So, if you have the opportunity to offer some kind of knowledge and an environment to learn something that is perceived as valuable to the person you want help from then that might be perceived as valuable enough to make that person engage in solving your problems. Of cause this situation rarely applies when doing a cold call to an expert, rather I think the knowledge sharing is possible in more long-term relationships, especially with people that would have the opportunity to work for you. What?! Opportunity? Work without payment? Why? I can think of several reasons, here are two of them:

• Because the creative process is exciting: You are an entrepreneur, an artist, you are creating something and it is exciting to be part of a creation process. To be part of that process is an opportunity to learn how to be an entrepreneur and how to create like an entrepreneur. This is a truly scarce recourse. There are not to many start-ups out there, and especially not many doing something exciting and also inviting people to be part of that process. The trouble here is of cause how to communicate in a believable way that you are really doing something exciting. In most cases, unless there is real proof of how great you are and what great things you are capable of achieving, like if you would be Mark Zukerberg or Bill Gates or some other outstanding entrepreneur, you must be able to show something external that is convincing enough. I guess the most apparent proof would be having a real product or service to show off or an organization that is clearly rocking it and on good way of creating something exciting. For these reasons I guess the first recruits will be the hardest.

• Because there is something at the core of your business that is new and exciting: This something can be the idea, the technology or the methods you are applying to organize your work. In the case of SkrivaPå we have been lucky: with an idea that many perceive as the obvious future (electronic contracting) and is clearly scalable (everyone needs contracts), with a technology (Haskell) that is perceived as very interesting and unexploited amongst certain types of functional programming nerds and with an interesting and new approach towards the organization of work (as all of our work is organized virtually through a whole set of cloud apps). So this opportunity aspect requires some thinking. What is there at the core of your business that could be an opportunity for others to learn, who is interested in that knowledge and how should you communicate that in a compelling manner? If you really believe in your business I cant imagine you cant figure out something that could be an interesting learning opportunity to someone.

2. Opportunity to be part of success

People like success and being part of success makes people feel good because we feel it reflects on us. If people really believe your project will be successful then the opportunity to be part of success might be a compelling factor that makes them want to join in. This is close to what has already been mentioned in the part “opportunity to learn”. A compelling idea or a successful person can communicate the opportunity to learn but also it can communicate the opportunity to be successful. Again I believe this motivator is most likely to be found in more long-term relationships with continuous transactions being made, relationships such as an employment or a mentoring relationship.

3. Opportunity to be acknowledged

People love to be acknowledged as it makes them feel important and valuable. The crux here is that the only way this can be achieved is by transaction, by externalizing and sharing something that someone else perceive as important and beneficial. Thus sharing is a prerequisite for being acknowledged. Therefore we should not underestimate the willingness of people to help out by sharing. I think actually this might be one of the most underused help-tools there are, people don’t ask because they don’t believe in sharing. Ask and you will be surprised of how much you will get. I use this all the time. I routinely identify people that have the knowledge or are able to do something that is important to me, then I contact them and tell them that I believe that they really have what it takes to help me out. Simply put: I tell them that they are great and ask them to share their greatness. Very often this works like magic and people open up in the most unexpected ways and even share things I couldn’t imagine they were capable of sharing. We live long lives and gather loads of information, contacts and skills, a person you contact for legal advice might be a super expert in astronomy, this happens to me all of the time.

Make sure the reasons are right and be honest

Finally, I want to emphasize the importance of being careful when trying to source help in other ways than the money transaction. When paying someone its very clear what is being exchanged but when offering other more immaterial values the lines are less clear. I guess you want to be an entrepreneur because you believe it will make your life better somehow, so don’t ruin that experience by creating unpleasant situations. When working with people you really don’t want people to think they will have benefits that they probably will not have, or that are difficult to promise. Simply because they will probably be disappointed once it occurs to them that their assumptions were incorrect (or even worse, that you have misled them somehow) and the more they have invested the larger the disappointment. Its not fun to be part of someone’s dissatisfaction and the larger it is the less pleasant the experience will be. This is not good for anyone, not for you, not for them and certainly not for business. So I really want to emphasize the importance of making sure that you identify the motivators of the people you want to work with and identify your ability to satisfy those motivators. If you cannot satisfy them, don’t engage in the transaction. Also be sure they are truly comfortable with their own motivators. They might actually be motivated by what you have to offer but not enough for that motivation to lastingly overshine the discomfort of not being paid in the ordinary way. Of cause I don’t want to discourage you from calling prominent people asking them for help, no, do it as much as you can, the worst that can happen is that they wont appreciate your offer and will hang up on you. I mean people you intend to work with some longer period of time. I’ve already done this mistake a few times and it is quite time and energy consuming. If your ambitions are high you don’t have that time and energy, so try not to waste it.