Post by Gobi Dasu, founder of learningdollars.com
Recently, I had the chance to chat on the phone with my friend and Stanford GSB alum Konstantine Buhler who is a Principal at Meritech Cap. Please keep in mind Meritech generally does not come in at a super early stage. That being said there are some further-along startup with fully distributed engineering teams (like Bufferapp, Toptal, Trello, Gitlab, etc), so I asked Konstantine:
How can startups with distributed teams convince traditional and established VC firms like Meritech to invest?
This is particularly relevant to startups who build out their teams using Learning Dollars international and US remote contract engineers. Konstantine replied:
1. Fundamentally it should be the same for distributed and 100% Silicon Valley teams, but metrics and numbers are all the more important for globally distributed teams.
Konstantine mentioned that they just invested in a company that has people in Dusseldorf, Munich, Belgrade, New Mexico, and Chicago, overall totaling 100+ people. I believe I mentioned at this point that those are still office locations while companies like Buffer and Toptal are completely online and distributed. Konstantine said is that it doesn’t really matter. What we’re looking for are specific metrics of growth. For enterprise businesses for example, what is the sales efficiency like, why are things happening the way they are, what’s the OTE (on-target earnings), the user growth stats, etc.
2. It’s more challenging for a distributed workforce to demonstrate unity and good team culture.
Konstantine mentioned that when teams are remotely distributed they lose a significant amount of human to human contact which VC’s are wary of. There has to be something that the company is doing to compensate for this or at least make this worry irrelevant.
3. A distributed remote workforce may have less ability for face-to-face contact with customers for design feedback and iteration.
Konstantine mentioned that this is one of the disadvantages of a distributed remote team.
4. Distributed teams can be better for maintaining open source projects.
When I asked Konstantine about advantages he sees with distributed online teams, the first thing that came to his mind was open source projects and talent. There are some brilliant geeks out there in the world that are doing fantastic commits to open source projects, but they happen to live in Dusseldorf or Manila, not in Palo Alto. This meritocracy-based logic should win and indeed Konstantine has seen it win several times.
5. Distributed teams can be better at attracting and keeping top talent around the world.
Attrition is a big problem in the Silicon Valley and brilliant talent in Prague is certainly easier to keep than brilliant talent in Redwood City.
6. Distributed teams potentially have better access to markets depending on how global the target market is.
If your customers are global, then markets are easier to penetrate when your sales team is distributed across timezones and cultures.
Finally, I asked Konstantine about a slightly different topic that is also important for all the B2B companies that use Learning Dollars. I asked how B2B companies can sell to portfolio companies of VC firms, and whether this is a valid strategy at all considering how inundated in communication VC firms are. Konstantine said:
VC firms are not opposed to promoting a tool or service to their portfolio companies if the tool will actually help the company. They actually do this all the time.
This was a big shocker to me considering my previous conversations with VC’s but as I’ve talked to more VC’s and learned how to talk to them I come to believe this more. 5 funds have actually listed Learning Dollars as a tool for their portfolio companies since my call with Konstantine, so his advice was quite useful.
The key is to explain clearly in your email to the VC firm contact how by using your tool the portfolio company with hit desired metrics sooner whether it’s revenue or users. For instance Learning Dollars would have to point to engineering job postings that portfolio companies have struggled to recruit for, and then come in with a faster way to get introduced to vetted engineering matches.
Usually such tools are very specialized. The example Konstantine gave me was that at Meritech they referred to their portfolio companies an enterprise software product that helps with Kubernetes application management.