How does a service business raise $3M from VCs?

Jason Kirby (00:03.006) Welcome to episode 30 of Fundraising Demystified. Today we have Frank Licea, co-founder and CTO of Howdy, a tech enabled staffing firm that helps company staff software engineers from Latin America. They've raised an $18 million Series A from Greycroft, obvious ventures shortly after graduating Y Combinator. Frank walks us through what it's like to differentiate their offering in a highly competitive market to attract venture capital. and get accepted into YC after bootstrapping the business, why and how he joined as a technical co-founder of an early stage startup, and his strategy to securing a Series A round in a difficult fundraising market. As a reminder to get notified of our weekly podcasts and newsletters, please subscribe at join.thunder.vc. Again, that is join.thunder.vc. Now, onto the show. Thanks for joining us, Frank. Howdy.com (Frank Licea) (00:09.584) Jason, thank you for having me. Jason Kirby (00:11.197) Yeah, I know I'm excited to hear your story. Let's just go ahead and jump right in. Can you tell the audience a little bit about you and what you're doing at Howdy? Howdy.com (Frank Licea) (00:19.446) Yeah, absolutely. So welcome everybody. My name is Frank Liceo. I am the co-founder and CTO of howdy.com. Howdy.com is a hiring platform. It's focused mostly in Latin America. So if you want to hire software developers or customer support and so on, you can go to our platform, we make it happen. So we've got the local logistics for the hiring, the payroll and benefits, equipment and offices, whatever a team needs to really expand their operations around the world. Jason Kirby (00:50.373) And why'd you start it? What's your background? What led you to get to that point? And, you know, kind of tell people a little bit about your technical background as well and how that influenced your ability to launch Howdy. Howdy.com (Frank Licea) (01:02.198) Yeah, absolutely. So my journey here started with, uh, started around 2015 in Austin. So that's where the company is headquartered. It's where I lived. And in let's say 2014, 2015, uh, around those years, so a few years ago, Austin started to get really, really hot in terms of competition for, for talented people. And so this was a problem I experienced firsthand. as an engineering leader, trying my best to hire software developers, retain them. Not only was the market getting hotter and hotter in just Austin itself, but contributing to that were companies like Amazon, Google, Facebook, Meta, all these important tech companies moving into our city very quickly in the span of a few years, driving up the price of software developers. making it harder and harder to retain them because they were jumping ship from place to place. And at the time I was a product manager myself. So I ended up being on the hook for, I was on the hook for deadlines essentially for product releases, for new features and so on. And you can imagine how hard it is to hit a product deadline if key members of your team are. rotating in and out because they're being poached by a bunch of other companies or a bunch of startups. When all those companies come in, it also brings in a lot of venture capital. So there are new startups, tons of frothiness and so on. And so essentially the problem I had to solve for ourselves were it was a talent risk. I just didn't have access to the talent that I needed. Usually when people think about hiring outside of the US, they think salary arbitrage. But that's a really limited way to look at it. And besides, when you find somebody talented, you're going to realize that their salary expectations are going to be rivaling anybody in the U S because they know that they're good. So this really was back to talent risk. How do I mitigate the talent risk? And we started howdy essentially because, uh, I was looking for good software developers. Howdy.com (Frank Licea) (03:14.882) the good software developers weren't interested in working on or putting themselves out on the freelancer platforms because finding quality teams was at least the way they explained it to me was pretty spotty because everybody can hire on those teams. And so you might not have the best access to the most sophisticated teams where they treat you the best. The best teammates also didn't want to go work for the big outsourcing firms, which was one channel to get access to them because the big outsourcing firms also Maybe they're not so tech oriented or developer oriented. So I couldn't find them there either. And so essentially that, you know, the, the best companies in Austin also didn't, they weren't going to build amazing product teams with an army of freelancers. They also didn't want to work with big outsourcing firms because they weren't going to outsource the, I don't know, what do we call it? Like the values and culture, the engineering values and the engineering culture of Silicon Valley, right? That's something you can only find in California or so we thought. And so that was essentially the idea of howdy.com. It was, could we build a platform that has expertise in local logistics so that teams can recruit, hire, maintain, retain, provide offices for, provide benefits and bonuses and so on? for their own teams in Latin America so they could work with them as though they were just one team. So that was why we ended up coming to this problem. We just had that problem ourselves. Jason Kirby (04:50.133) And you guys chose to bootstrap the business before ever kind of chasing down venture capital and you know pursuing Y Combinator. So why did you guys bootstrap it and to what point did you guys get the business from bootstrapping it? Howdy.com (Frank Licea) (05:07.895) We decided to bootstrap this. Honestly, if I'm thinking back on it, I think it's because it's not particularly sexy. And at least I didn't think that anybody would be interested in investing in a service-oriented company. So yes, we have software, we've got a platform, and it's more sophisticated all the time. But essentially, it boils down to hiring people and staffing them. And the economies of scale there are completely different than a total SaaS product. So, but we could see how profitable it was to hire one person or when a company hired one person using our service, we could see how much, what the margin was, how profitable that was. And we could see, okay. we can extrapolate and say, if we wanted this kind of lifestyle for me and my co-founder, then we just need to grow the business this much. And both me and my co-founder had always wanted to be business owners. We'd always wanted to be founders. We, we'd been burned working for other startup companies, uh, in our careers, especially here in Austin, um, and not really coming from that, uh, like traditional entrepreneurial background, neither me or my co-founder grew up as teenagers being entrepreneurs or hustlers. You see on YouTube where you find those people that are 20 years old and they've got a $2 million business because they've been hustling since they were 10 years old. That was definitely not us. We were definitely paycheck driven, risk reduction and so on. So it was just the most natural. counterintuitively, it was just the most natural way for us to do it. It's not a very sexy business. We want control over the business, its growth, its strategy. We're tired of being beholden to boards and investors by the way that we experienced it being early employees at other startups. One of the worst experiences I can hear, and we try not to say this, but the company needs something and then you hear from the founders, oh, well, I got to get this. Howdy.com (Frank Licea) (07:23.478) the board says we need to do this or I got to get this approved by the board, right? We didn't, we never wanted to be in that situation. So that was, that's why we decided to just bootstrap it from the beginning. And thankfully after 10, 15 years of careers ourselves, successful careers, not entrepreneurial careers, but successful careers, we had some money saved in the bank and some visibility into how much of our own personal money we'd have to use. before the business was able to pay us. So that's why we decided to bootstrap it, it was kind of a combination of control in our own twisted way of reducing the things that were risky to us. When did we decide to finally take outside money and grow it bigger? It was when we got the opportunity to join Y Combinator. And I think that's what really changed the equation for us because we grew the business to about, we define success of our business by the number of people hired on our platform. And so we needed about 50 people hired on our platform for us to start to be able to pay ourselves. And when we started to approach that number, we thought, hey, this is fun at all, this is great. Like we're growing the business, we're learning a lot, we still have control over it. But two things, one, we've worked for YC companies before, we saw the credibility it lends, the visibility it can lend to businesses, the access to investors and mentors and so on. So you can see how if you have a seven-year plan, maybe through the Y Combinator channel, you can make that a two or three-year plan, right? Not guaranteed, but maybe. And then the other is it's a lot of fun to kind of change perspective where in one hand or in one view, the objective is to build a lifestyle business that pays me, my families and our immediate colleagues well. On the other hand, it sounds a lot of fun to take over an entire industry or an entire market to be a huge player on two continents in North America and South America. That's a completely different ballgame. And I think, you know, once we started to approach that growth level, once we got the Howdy.com (Frank Licea) (09:51.123) opportunity to join Y Combinator. That's when we really had to pause and think about what we wanted to do. Jason Kirby (09:57.717) No, I guess, and from your perspective, Y Combinator is probably a business development as well, because all the companies going on to raise money through Y Combinator could ultimately be customers for you guys as well. Was that part of the thinking in addition to raising the capital, or was it mostly just to raise the capital and kind of change up how you guys originally thought about the business? Howdy.com (Frank Licea) (10:20.406) That's a great question. Actually, you know, I, I'm not sure that we, for us, for me and Jacqueline, I think just being part of Y Combinator was a, was good enough. Nevermind the potential business development opportunities. However, a little bit of trivia, all, all respect to all my, my YC companies and everything. But what we discovered is that tiny, like pre-seed or pre-product market fit companies tended not to be our bread and butter and really very, very risky even for companies like ours for hiring platforms. So luckily, we never looked at the opportunity that way and it was not an important part of our business development strategy or an acquisition channel because it ended up being that the companies that ended up finding our services the most useful were, I don't know, maybe a little further along. post series A and series B companies that needed, that were big enough to see the need to expand operations in a different country, but not quite big enough that they could just do it themselves. So that ended up being our sweet spot. Jason Kirby (11:35.789) And you know, something we didn't talk about is, you know, you're, you're the technical founder, you're the CTO. And Jacqueline is the CEO. I guess, how did you guys, you know, meet and you guys kind of give it a little founding story but you know, as far as, you know, coming in as a technical co-founder, that's the holy grail for a lot of founders that are trying to start. business and you know, they're like, I got an idea, but I need someone that actually can, you know, build it and scale it and knows the technical side. You know, what kind of brought you together with Jacqueline and what ultimately, um, you know, kind of led you well, we heard that we get the starting story, but how did you guys come together and decide to work together? Howdy.com (Frank Licea) (11:58.807) Yes. Howdy.com (Frank Licea) (12:13.674) Yeah, I, you know, I get that question a lot too, as a technical co-founder. They're like, Frank, I need somebody like you, or I need to, you know, how, how do I get one? And then they have like the founder dating things and meet a technical co-founder, all kinds of tools and things like that. So for me, it was, it was, uh, me and Jacqueline happened to work for the same company. And not at the same time. And it was actually kind of like, I left the company and she joined the company. And it was, I guess, a little bit of luck through, through mutual friends. I think what brought us together was that we had the, we'd experienced the same problem only from different perspectives. She had, she was on the hook for sales quotas, but if the product team is churning people, then it's less likely that she can hit her sales quotas with the promises for new features or roadmaps that she's using to try and close. closed deals. And then I had it from like, well, I can't build it if we're, we're turning a software teammates. Um, as far as like, I don't know, uh, do you get questions like, Hey, how do I find that technical co-founder? Does your audience, uh, get those questions a lot? Jason Kirby (13:24.253) Yeah, it's a, I would say, especially for the early stage where, or they're like, do I go to a dev shop and have them build it all, but they don't necessarily have the dev know, the technical experience to manage that Dev Shop and hold them accountable. So, you know, it's, it's always, I would say in that kind of early kind of angel friends and family pre-seed stage where it's mission critical to have, you know, someone like yourself, like a technical co-founder to be able to be all in and that's what a lot of investors also want to see when they're, you know, going out on raises, they want to see that box checked. Um, so yeah, like how, you know, what's your advice for, for founders trying to define a technical co-founder? Howdy.com (Frank Licea) (13:51.915) Yes. Howdy.com (Frank Licea) (14:02.674) It's not easy, it's really, really hard. I think I'll tell you what brought me and Jacqueline together. And I think this is something that you probably want, or your audience will probably want to find or see in a technical co-founder. So Jacqueline and I, I think one of the things that really brought us together is that we... How do I put it? Like we're both very interested, share a lot of the common values for what business should be. And I think that's super, super key because if you're approaching a technical co-founder and they're, for example, equity split, right? So sometimes I'll hear advice like, okay, I need a technical co-founder, but I started this... a business and I've been working on it for a year now, a year and a half. And so if I'm going to bring on a technical co-founder, I'm only going to give them like five or 10% or whatever it is. And here's the thing, I probably wouldn't have joined. And a lot of the negotiations, so this is exactly what happened to me and Jaclyn. So Jaclyn had actually started the business about one year before me. But we had been talking about over a whole year, like, hey, Frank, I'm working on this thing. I need a technical co-founder and so on. And two things had prevented me from actually joining and jumping actually three things. The first thing was that I was working for a company called Disco that was on the way to an IPO. So I wasn't going to leave that. I wanted to leave on good terms with my existing team. So set that aside. I wanted to finish my work. And I knew that was about like a one-year project. But additionally, I was a little bit nervous about saying, like, okay, here's the thing. If I am going to give up my longstanding career as a software engineer, a product manager, and so on, I'm not going to do it for a five or 10% equity stake in something that I'm going to completely commit my life to bring my family in for, and so on. In addition, it- Howdy.com (Frank Licea) (16:17.434) If it was like a smaller stake like that, it wouldn't have gotten the best out of me because then I would have given employee Frank. An employee Frank is not the best Frank. The committed, the high risk tolerance in some form, in some twisted form, Frank is the one that needs like a 50-50 equity split. And that was... almost, you know, that was very, very hard for somebody who had been working on a company for a whole year and so on. So you can imagine that. So that would be the first thing is, are you ready to give up the kind of equity that somebody that's very highly skilled is going to is going to need? Because you're not, you don't need to ask yourself, do you really need somebody like a CTO who is going to, you know, I hope people don't cancel me, but you know, sacrifice. family, sacrifice important events to be part of the company, sacrifice immediate financial rewards to be part of this. Because if you don't really need that, then maybe you don't need that technical co-founder. Then we can explore outsourcing and things like that. So that was the first thing. Are you willing to give enough to make it interesting? I think... technical co-founders are more and more aware of being taken advantage of also, because the CEOs and the business savvy people, you know, they're very good at negotiating. They're savvy. They're, they're charismatic. They're influential. They're, they're persuasive. And so you can come on too strong for a technical founder. We're like, Oh, this guy's too slick. I'm going to get outmaneuvered and so on. So that's, you know, that's one way to show that kind of a kind of commitment to a true, a true partnership. Jason Kirby (18:04.393) I'm really glad I asked you that question. I don't think enough founders hear that. They think they can, they get so wrapped up in their head of like, well, this is my company. And albeit, maybe they still remain the decision-making power, but like. Howdy.com (Frank Licea) (18:06.094) hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah Howdy.com (Frank Licea) (18:17.527) Yes. Jason Kirby (18:23.637) There's got to be some real value on the table, especially because engineers have options, they can, you know, Google will snatch them up, you know, like all the big brands will snatch them up at any time and pay way more than you could ever pay and the probability of success is much lower with a startup and so on. And I think founders don't, you know, especially on the business side, don't respect that enough. And have these types of conversations with. Howdy.com (Frank Licea) (18:28.758) That's right. Jason Kirby (18:51.549) you know, technical people that could bring the kind of value they need to go out and actually raise capital goes, I can tell you someone that helps people raise money, if you are not, if there's no technical founders, uh, and you're building a tech company and you don't have the tech yet, and, or it's all the money's going to be going to a dev shop is incredibly hard to get institutional money at any point in time. You might be able to convert some buddies, but even those buddies are probably expecting you to go and get a technical co-founder when you get the money. Um, and if you haven't raised a substantial amount of money, like I'm talking millions, like a million plus 2 million plus, then the numbers you're talking about, uh, as far as making it more of an equal partnership, I think are more than within reason, you know, if there's like three founders, okay. Then yeah, maybe, you know, it's equally whatever. Um, I think that was a great answer and I'm glad you shared your story there. Um, Howdy.com (Frank Licea) (19:38.722) Sure. Jason Kirby (19:46.961) So you guys get together, you start working, you bootstrap, and you decide, why Combinator? That's where we're going. Did you apply once and get in? Did you apply multiple times? What was that experience? Howdy.com (Frank Licea) (20:00.292) It was actually, it was I think my third time applying. So first time getting in, I think as part of Howdy, it was our second time applying. And it was, it's not easy because it's not a, like I was saying before, it's not a sexy business. It's not a platform. It's not generative AI and so on. But I'm sure you've heard this before. Even it's worth going through the process, even if, you know, it's, if you don't feel like it's likely that you'll get in, maybe you don't have a technical co-founder, maybe you're just getting started. The questionnaire itself was a valuable day to go through to think in particular, doing it with your co-founders. Are, is everybody really on the same page? Because it's, you'd be surprised how many times, you know, there was a question and Jacqueline and I had slightly subtly different answers with major implications and it was super useful to go through it together, hash that out, get on the same page and keep going. So yeah, it was the first time, I think it was a very useful exercise. I think it's... Sometimes I wonder myself is like, what did they see in the organization? And we, and I asked them too, I was like, Hey guys, like, you know, uh, when I, when I, when I see howdy, I see like a software development agency or a staffing agency and I don't see a lot of organizations that are just like staffing agencies and that, that get tons of tech crunch, uh, media and so on and PR, um, but I think, uh, what really, I think what really surprised me about the process and them accepting us as a YC company was they, especially at early stages, even with our company, even if it was bootstrapped and operating for a little while, I think what they see more is they see traction, any kind of traction, whether that's like retention for, I don't know, some niche thing, like you have high retention in some niche thing. Or the... Howdy.com (Frank Licea) (22:16.83) whatever that happens to be, they really, really key in on because the business is probably going to change anyway. The idea is going to pivot a little bit. The founders are going to learn a little bit. So I was actually really impressed that the kinds of questions that they were asking were more along the lines of how are the founders getting together? One of my favorite tactics that they employed was they would rapid fire a bunch of questions. And then in the middle of it, interrupt me and ask both of us, which one of you is the CTO CEO, right? Because they wanted to make sure because we came, came at this as equal partners and from a bootstrap background, like which one's actually in charge here. And I thought that was really clever. Because we both immediately answered Jacqueline, she's in charge. She's the CEO, right? Going back to your other point, like it's okay to give up the equity because we're both in agreement that she will decide and you know, we'll, we'll That's the only way you can steer a ship, right? There's no other way to make it work. So yeah, that was our experience going through Y Combinator and it kind of culminated with when we actually got in, some of my closest friends looking at me and like, you guys are not a tech company or like a traditional product SaaS company. Why are you guys in? So I thought that was really interesting. Jason Kirby (23:38.141) That's kind of what I thought was interesting about having you guys on the show, was just kind of being able to share that, albeit not the norm, but still possible to go down these paths. And then once you get the checkbox from Y Combinator, especially around the time, you were peak of market coming in and everyone was looking for something new and different to throw money at. And you guys ended up raising about 3 million in total in your seed round shortly after doing Y Combinator, correct? Howdy.com (Frank Licea) (24:06.478) That's right. Jason Kirby (24:08.345) What was the fundraising process? All right, it's one thing to get accepted into WICOM. That's always an accomplishment. There's thousands of companies that apply and very few that get in. But did you wait till demo day? Did you raise before demo day? What was kind of the process and strategy that you guys used? Howdy.com (Frank Licea) (24:25.206) Yeah, that's a great question. So we actually waited just about a week or two before demo day, which I believe is the standard advice for people who go through that. It was easier for us, I have to admit. And that's at least in that particular batch or in that particular cohort. And the reason it was easier for us to raise is Number one, we had a really strong story. We had really strong traction. And ironically, the best time to raise money is when you don't need it, right? So our business had started operations in 2018. We had grown all under our own power. We were profitable. We were paying ourselves. And in that situation, the one or two weeks leading up to it, the standard process, right? They reaching out to the people who, the like, here are the investors that get the preview to demo day. And those and why Combinator is brilliant in the way that they generate that demand and that urgency in reverse, which usually the investors, the founders who are reaching out for those two weeks leading up to demo day, and then the maybe the few weeks after, thankfully, there's that urgency. And so we had investors coming to us. At first, we were, we were I guess the common advice is to take the money from the people who are like expedient, who are ready to give you money, ready to go. But what we noticed was that then the cap table was going to get really big and that was a lot of overhead. So we were in a fortunate position to decide, okay, actually we're getting some indication and interest from these bigger organizations like Greycroft who are more institutional. And so we decided in our part. in our process to actually pivot and put a little bit more effort in the firms that were offering more bigger checks. And so we actually optimized for those rather than quickly closing the smaller ones that were coming in. So we did that. For us, it was the way that we did our process was a little bit different because we, you Howdy.com (Frank Licea) (26:46.878) We actually tried to avoid the standard pitch deck. For those of you who are interested, you can find my co-founders, like she did a talk at TechCrunch, and it's a provocative name, but it's something like your pitch deck sucks. We actually used a video. And what we did was we would send out, we would have the initial conversations with the principals or the lower level, Jason Kirby (27:15.528) We'll see you then. Howdy.com (Frank Licea) (27:16.578) teammates. That's right. Yeah. And when they were excited, of course, they're like, send me the pitch deck. I'd like to take this back to my team and so on. And that's when we would actually say, no, we're not sending you the pitch deck. Here's a link to our video that walked us through the story. And the pitch deck was pretty, you know, here's the problem. Here's attraction. Here are the unit economics. Here's our big, you know, the pretty standard stuff. And we would actually just kind of push back and say, because people would reach out and say like, Hey, I love that you send the video. I love the video, but really like everybody needs to have a pitch deck. Everybody needs to this and that. They're not even going to look at it without the pitch deck. And you know, one of the funny things is that, that I saw during the process is how much, um, I guess posturing and, and ego can be involved in the fundraising process. We, this, this is all credit to, to my co-founder, right? She completely values us and values our, our values, our company. And what I found, what I watched was when she valued herself and valued us and valued our company by saying, thank you so much. This is how we do it. If you're not going to do it this way, then maybe we're not going to be able to collaborate at all. I was actually impressed like off the top of my head, something like 80, 90% of people, if they see you value yourself and what you're doing, they will value you. And kind of the harder part is just having the courage to stick up for yourself in that way. And the people that really were like, this is complete blocker. They're never going to work with us because we didn't send the deck and we sent a video instead, like maybe, maybe they're not really worth the time. And we didn't need the money. So that was, that was our process and our, our tactics to navigate that. And it ended up working out for us. Jason Kirby (28:54.353) Yeah, it's coming from a position of power when you don't necessarily need the money, write that in there and you've built a healthy business to that point and had the flexibility to kind of say no, which ironically makes VCs be like, well, no, we're flexible. We're cool. No, we, yeah, we can, we can roll with that. Guys, can we roll with that? Yeah, we can roll with that. Howdy.com (Frank Licea) (29:09.633) Ha ha. Howdy.com (Frank Licea) (29:15.466) It's, it's, I think that's what's surprising, especially, you know, the, my background is in engineering later as a product manager. So I definitely have the like technical brain and to see those social dynamics play out. We're really interesting. And you know, we, uh, yeah, I mean, it's, it's a, it's a dating process, right? It's just as, uh, it's just as complex as, as dating, which, which I thought was really interesting. Jason Kirby (29:42.673) And then, so where were you guys at? Post YCOM, raising this round, if you don't mind sharing, what kind of revenue were you guys at that point? Howdy.com (Frank Licea) (29:53.706) Yeah, so our first, so when we did the seed round, we were at, let's say we had 30, about 30 developers, so quick economics in my, for our company, just gross numbers here, for every one developer that we have on our platform, where we gross about 100k, right? So that's That's gross. Out of that, of course, you take salaries and benefits and taxes and so on. So we were at about 30 developers, so 30 times 100K in terms of revenue. Then when we started closing our series A, that's when our growth really took off. And so we were at 171 developers on our platform. Yeah, that's, I think that's pretty significant because it was only about a year. It really took off, but you know, to be, to be honest, um, I think what's, what's interesting is it was during the height of COVID. Uh, I don't know what if, I think COVID was a, a mad time because we fell in that trap. And I wonder if some of your audience fell in the trap where We thought we were brilliant at our sales and our marketing when really we just had the winds of remote work and remote teammates and the crunch for talent that were pushing us, right? Just pushing us along. And then the correction happened, right? So we had a correction where all of a sudden hundreds of thousands of some of the world's best companies, Google, you know, Facebook, Amazon, Microsoft, just laying off people by the tens of thousands, hundreds of thousands per month sometimes. And so we, you know, to be just completely frank, we, our company, our business completely did take off, which helped us put us on a trajectory for, for something like a series a then comes a correction and then comes like that, what is it, the, the trough of sorrow, I guess, you know, that you see, you know, you get that uptick and then, you know, something changes in the market or maybe you're not as, maybe you found this one channel that really worked well. Jason Kirby (32:02.965) What do you call it? Howdy.com (Frank Licea) (32:11.722) doesn't work forever because people also move into the channel, whatever the dynamics are. And so we, luckily, we had a really understanding investors too, right? So these, the investors that we have that are on our board, you know, we were a little bit nervous too, because like that, that nonlinear growth stopped while the whole market. you know, was flooded with new engineers and everybody's trying to figure out what the new value proposition for a hiring platform is when now you have your pick of the litter of more affordable engineers. So why would you need to, you know, kind of solve the talent risk problem, right? It's, it's already been solved by the market, uh, dynamics of layoffs and so on. But, uh, that's, that's where that relationship with investors really, really plays in because I remember walking into that first board meeting where we had to. It was our first quarter where we didn't have that exponential growth and we were stagnating or growing linearly, you know, slowly. And it was nothing but understanding. It was nothing but like, here's the big picture. Hiring can be very cyclical. There are booms where people are hiring, things go lower. And we got down to a very tactical level to understand what was going on, experiments that we can run. Is it the case, like how does our market proposition change and our unique value proposition change between the height of the COVID hiring spree and a place where, you know, now it's not, now the conversation isn't hire as fast as you can. It doesn't matter how much it costs. It's like, you know, people are looking to cut costs, save money, there's more competition. What's valuable about us there? And so that really taught me a lot about. You know, you hear a lot of horror stories about like bad board meetings, surprises during those tensions and conflicts when the board isn't being managed correctly. You really have to choose your investors correctly, right? Index on that, that cultural fit and how things are going to work when everybody's happy, things are easy, but when things are challenged, when it's a challenging instance, then those values really start to come out. Howdy.com (Frank Licea) (34:29.188) It's hard, but not impossible to feel a little bit of those things beforehand. Jason Kirby (34:34.257) No, I think that's, it's funny to see you go full circle to have the fears of having a board and seeing that play out at companies you were working at and choosing to bootstrap to then go on and kind of follow against that, that narrative. voluntarily, but seeing it actually work out positive. But I think all that credit is really owed to you and Jack, when you're co-founder, in the sense of building a sustainable company. Like I bet everyone was happy to walk into that board meeting and still see growth. Maybe not exponential, but there's just the fact that you were not tanking like everyone else in their portfolio. Especially like I saw a lot of staffing companies just eating dirt. It was tough to compete in that market. Howdy.com (Frank Licea) (35:05.727) Yes. Ha ha ha. Jason Kirby (35:20.921) I fortunately had some friends that sold right at the peak and got out and they made a killing and then their businesses really suffered shortly after. But if you build a great company, there's always some value there and it sounds like that's how you guys can preserve yourselves in that state. But this was, did you raise the Series A before the collapse of the market or after the collapse of the market? Howdy.com (Frank Licea) (35:48.114) It was really during the writing was on the wall, we could see that things were happening, that things were difficult and so on. So I think that also was what sort of pre vetted those conversations. We built this successful business, it was profitable, the unit economics were there. I think we were starting to see that we had the COVID wins. And yet the story that we had told, the experience that we had had, the way we had built everything, still gave confidence to our investors. And our investors had a lot of, I don't know, a vision, I should say, because they were also aware that, in the conversations that we were having, we were preparing for a storm. And so our conversations were, You guys are profitable, but would it be better to be capitalized for a recession in the United States? Right? So we can see that you guys are working at a unit level. What if we built a war chest or a buffer to get us through two years or three years of tough times? And the reason I think they have that foresight was because our company was continuing to grow even though at a... at a lower pace. On the flip side, what they told their portfolio companies was directly harmful to us too. They were telling everybody to stop hiring, don't raise salaries right now, don't give out huge bonuses right now, hold on to your money. And so they could see both sides of the coin where they see the writing on the wall for what could happen here. They're telling... most of their portfolio companies to hunker down. And then they come to us and they see how that impacts us directly. But they, but they know what it's like when the winds shift again. Right. And really it was a bit of a, a blessing in disguise because it focused us on learning to sell and market this product, our product in, in a market where there's Howdy.com (Frank Licea) (38:08.382) in a market where the hiring is softer, where it's pickier, where the bar is much, much higher in terms of talents and retention and so on. And over the last few quarters, we've managed to really overcome those. And so I'm happy to report that although we're not back to the growth rate that we wanted pre-COVID or during that COVID madness, we have twice as many customers as we had before. And we're in terms of just sheer size and revenue, we're back up to where we were pre all those massive layoffs. So the company, and we can sell ourselves and market ourselves much, much better. So overall, we're much, much healthier, but it was definitely like, I don't know, it was like one of those like self reinvention moments, right? Where you realize I've got to exercise, I've got to eat healthy, I have to go to the gym regularly and it's painful and it's hard. But ultimately, A year and a half later, you fit, you have more energy, you feel more attractive and so on. So we had to go through that ourselves. Jason Kirby (39:17.745) Well, I appreciate you sharing that and sharing those insights. And I think, you know, at this point, what advice do you have for, for founders that are looking to raise and see outside capital at this point? Howdy.com (Frank Licea) (39:32.674) I'll give the advice that ended up working for us. And I know it's not possible for every business, but it really, really helped us to set aside the thought about fundraising for a moment, right? Kind of put your bootstrapping company hat on. And how do you build a business that is profitable from the beginning? Again, I know that's not completely possible. However, there are some proxies that are very useful and that's traction or letters of intents and things like that, like subscribers, whatever it happens to be that shows that there's value in what you're trying to build. Howdy.com (Frank Licea) (40:19.678) If you can, yes, be profitable. Don't, don't, don't be beholden to needing the money to accomplish your goals. Um, the other thing I would say is it's, it's at least for me and my co-founder who didn't come from an entrepreneurial, entrepreneurial background, who didn't come, you know, we weren't very connected. I was a model employee for so long. Um, you know, I had a lot of, uh, reservations about pushing back. against suggestions from investors or saying no or rescheduling and things like that. The reason was it kind of came from a scarcity mindset where I was used to saving tons of money. My parents showed me to save tons of money. They were also very risk averse. No entrepreneurs in my family. Howdy.com (Frank Licea) (41:18.594) can make it so that people don't value you, if that sounds right. So it was kind of a learning experience for us. So I'm sure there are people in your audience who maybe have similar backgrounds, who are bootstrapping their companies and feel like, okay, I don't have the guts to send a video when people are asking me for a pitch deck. I don't have the guts to ignore investor advice. This is another one where this one kind of bit us a little bit. And that is where we... We sort of assume that the advice that our investors give, because they have so much experience, they have very important, very successful careers themselves and are very intelligent people, that the advice that they give must be correct or we have to integrate it in some way. But we made the mistake, some of the conversations we had with some investors tried to... spin or figure out a way to spin our business to become more platform oriented, more technology oriented. We actually made a few initial investments thinking, okay, this is going to make us more appealing to investors, which is going to make our lives easier and so on. We ran experiments like that and we had investments like that. We had a bit of a roadmap in our product to look more attractive to investors. And you know what we found out is after those investments, after those initial releases, it didn't really make a difference. It didn't move the needle, right? And I wish that in those instances, I had more confidence in what our vision was and what our strong opinion was, finding that balance. And we would have stuck to our guns and we would have said, look, we're never going to be a SaaS product. We're not going to try to market it that way. We're not going to build a roadmap that way. We're not going to build a product oriented engineering team like that, you know, spend millions and millions of dollars on, you know, product managers, UX designers, and so on. We're going to, like you said, you know, use tech where it makes sense, invest in people and processes more than we're going to invest in product oriented technologies and so on. Howdy.com (Frank Licea) (43:38.846) And I wish we had more of that of that courage, relying more on our instinct and the things that we were seeing on the ground, rather than over, you know, over index on, you know, investor feedback. So I think that would be one advice, one piece of advice there. Jason Kirby (43:58.445) No, I would completely agree. I think, uh, when you're at a stage as a founder where you maybe haven't figured things out, that advice can be very impactful, either negatively or positively. And then when you kind of hit a certain inflection point, your business is working, taking that kind of advice could be deadly. So, um, you know, appreciate you sharing that. So as we, as we wrap, uh, Frank, what's the best way for people to learn more about you and, uh, and howdy. Howdy.com (Frank Licea) (44:15.434) Yes, that's right. That's right. Howdy.com (Frank Licea) (44:26.606) Absolutely. So you can find our website at howdy.com. So go ahead and check that out if that's something that's interesting to you, hiring people around the world, save some money, find really talented people. If your audience is interested in how we bootstrapped, how our families dealt with it, how we budgeted, please feel free to reach out to me at my email address. That's the letter F at howdy.com. Also reach out to me if anybody in your audience is interested in reading Y Combinator applications or doing mock interviews, things like that. Super, super happy. And if you yourself are raising money right now and you need something like intros and so on, please send me a little blurb. And you know, if my investors are interested, I'm happy to make that connection, but I'll have, uh, so any way, any way that I can help in that, in that way, happy to do it. Jason Kirby (45:24.881) Awesome, Frank, that's phenomenal. I really appreciate that. We'll make sure that, uh, we'll leave your contact information. We'll be able to reach out to you in the show notes, but it's been a great show. It's been great to have a technical co-founder kind of share their reasoning for joining and hopefully inspire founders to be a little bit more, uh, conversational and, you know, kind of more forthcoming with, uh, with these opportunities with technical co-founders. So Thanks for being on the show, and I look forward to getting this out to our audience as soon as we can. Howdy.com (Frank Licea) (45:55.502) Appreciate it. Yeah, it was a blast. Thank you.