Paul: Welcome to another episode of The App Guy Podcast. I am your host, this is Paul Kemp. This is the show where we meet founders, entrepreneurs, startup people, anyone in the startup world because we are app entrepreneurs ourselves and if you listen to this as an entrepreneur you will gain a lot of benefit. I have a terrific, terrific guest lined up for us today because we're going to learn a lot about this next problem out there, which is getting a hold of good designers, good developers. My guest is Breanden Beneschott and he is the co-founder of a company called Toptal, we're going to learn a lot about that. Breanden, welcome to The App Guy Podcast.
Breanden: Thank you for having me.
Paul: Thanks for coming on. Firstly, I guess I'd love to know what Toptal is. I know that you have a very good, unique proposition which is that you search for the top 3% of talent, but give us an idea of what Toptal is.
Breanden: Sure, so we still consider ourselves a startup, we're a little over five years old and we are a pretty exclusive network of engineers and more recently designers all over the world. We work with a lot of clients all over the world, so what it means for startups and Fortune500 companies and SMBs and everything in between is when they have needs for top-level software engineers or designers, UX experts etc. they come to us and hire top talent to work on their projects as if they were hiring a core team member sitting in San Francisco or wherever he happens to be, in their in-house office.
Paul: So what lead you to start Toptal then? How did you get this off the ground five years ago?
Breanden: Sure, so we were in my dorm room at Princeton; Toptal pretty much started from my dorm room at Princeton. So I was doing this degree in chemical engineering, it was very expensive and I was responsible for paying for it myself, so the way that I did that was by freelancing as a software engineer on the side. It involved all sorts of things and I worked with all sorts of different companies and startups etc. and got pretty good at this, and inevitably various startups ended up in a position where I had to hire other engineers because we needed to scale our team, our product or whatever, and that was really hard.
The traditional methods of hiring engineers were just totally broken in terms of you post a job on like an open forum, or Craigslist, a job board or any of these freelance marketplaces and you get thousands of applicants and thousands of very bad applicants. Even the simplest things, it just became very difficult to find anybody good through all of this noise, and people pinging you from all over the world who are just totally under qualified. So finding someone very good through all of that noise was just way too difficult, and it takes months of time for us in every case, and a lot of times you hire the wrong person because unfortunately the best software engineers are usually the least aggressive self-marketers, so finding them was just a total broken model. Sometimes you can go try to hire your friends, or through your network etc. but everybody is already taken, because everybody is either working at like a Facebook or a Google and they have multiple good offers at any point in time, and especially as a startup it's very difficult to compete with those guys on a compensation level. I knew that this was very frustrating and I was able to leverage kind of this supply shortage of engineers as a freelancer myself and do quite well as a young kid, but on the hiring side - it was totally broken.
And then Taso was coming from a similar point of view - he was an engineer working at some prominent companies in Silicon Valley and feeling the exact same thing: hiring was extremely difficult. I was actually trying to hire somebody, or fill a position on a startup that I was working at while going to school, and ran into Taso who was my neighbor in Palo Alto, and I asked him, like I was asking everybody, I said "Hey, do you know anybody awesome who is available?" knowing that it was a long shot, and Taso was the first person who said yes. I said, "Really?" because I knew Taso respected him a lot and he is very smart. I said, "Okay, fantastic. I can't wait to talk to him!" He said, "He's in Argentina and he's going to be working remotely etc. etc." and a lot of red flags went up for me, like "Wait, I can't work with somebody in Argentina, across the world. I need to be sitting next to people in the office", and I had had lots of bad experiences outsourcing things overseas, and pretty much everybody had. I had come to the conclusion that this is impossible, not just difficult. He said, "Trust me." I talked to Ignacio the next day and started worked with him an hour later, and did a 180 on the whole remote thing, it was amazing. He was unbelievably smart, unbelievably proactive, super funny and just got it instantly. I realized in the first few hours of working with him that this really was possible.
You could work with somebody anywhere in the world, they just needed to be of a very specific caliber and cut from a very specific cloth. Ignacio and I are killing it, we're doing all this stuff together and I'm learning tons from him and just really building this great relationship. Taso inevitably came and visited me at Princeton and I was just blown away. I'm like "If we can do this at scale, find more people like Ignacio and build an exclusive network..." and he had already been thinking about this, so he was the driver in this initial conversation. He said, "We can do this, we could change the world in terms of if we make an exclusive network full of the smartest people that fit these characteristics that will enable them to thrive with US startups and US companies, then it will be unstoppable. This could be a multi-billion dollar company", and we started looking at how all these other companies were trying to do this, but sort of really falling short etc. and that's how it got started, in my dorm room. Taso had a lot of connections in Silicon Valley, I had a good number of classmates and stuff. As engineers, people were coming to us every day, asking us if we were available to work at their companies, so instead of saying no in the early days, we said, "No, but you should try this thing we're working on." So all of our clients came to us in the early days, they were the early adopters. We killed it with them and they invited their friends, and then the sort of virality took off in the early days, and that's really how it started. We had quite a bit of revenue very quickly and knew we were on to something.
Paul: I love that, it's so inspiring. You've actually picked up on a very major theme of this entire show. We've had 449 episodes now, and that is the biggest theme - coming across a problem and solving it. So the next problem I'm often asked is actually how to scale, because you've got something that you see as successful and you know you're on to something, but what were the biggest challenges as you did actually grow and scale the company?
Breanden: Sure, so the company started a little over five years ago at zero, basically, in terms of revenue. It was just Taso and me, and now we have hundreds of core team members, we'll fly past a hundred million in revenue this year, so it's a very fast growth rate. The biggest challenges throughout that process I think were probably knowledge transfer and training programs. Toptal had this amazing benefit in that we... Most people say that their biggest problem is recruiting. Ours is not recruiting, because any time I need to hire somebody we have all of Toptal right here, so people rise through the ranks here, giving a sort of very cool meritocracy that we've built, so that was never the issue. The issue was okay, you're super smart and super driven - how can I catch you up on the last ten years of context and everything that we've learned, so that you can thrive here? And trying to figure that out and do it at scale, so hundreds of times over and over again, and not dropping balls or having gaps, or realizing that you covered something with somebody but not somebody else, that's been the most difficult part. Because everybody here is exceptionally capable; the problem is when they didn't know something that somebody else did, or that I took for granted etc., so honestly I think that's definitely my answer. For us, the solution has been investing a lot in training programs, just making sure people have everything that they need in order to thrive as quickly as possible, and if I were to do that again I would do it a lot sooner.
Paul: Yes, what I'm learning from you is you're not a company that's a hundred years old and you've got this corporate culture to fall back on; you're a new company, and that must be hard to sustain a culture over that time. I wondered then how you actually managed to build such a huge network of talent. I mean, you said how difficult it was in the early days to find talent, but here you are discovering all this talent. How did you build that network?
Breanden: Sure, so really kind of a network effect. Once Taso and I sat down and said, "This is what we think the screening process should be. This is what an elite engineer looks like, now let's come up with a screening process to make sure somebody is that good or better." Then we started filling that screening funnel, so reaching out to people, who then reached out to other people, and that seeded a lot of it. We had very small numbers, I think the acceptance rate now is around 1%. So after a lot of hard work, we're building up this network of a few really good people. Then where it really started to take off was those few really good people were able to bring in their friends who were really good people. I think about this example all the time - if I go ping the best engineer that I know and ask them for an intro to the best engineer that they know, and then ask them for an intro to the best engineer that they know, you can quickly get to extremely good engineers. So we did that over and over and over, and now there's thousands of Toptal engineers and the network effects are amazing, and it grows itself.
Paul: I love that. I'm going to have to pick up on that 1% - that's really hard to get into then. Is that 1% of everyone that visits you, or 1% of everyone that applies?
Breanden: Everyone who applies and starts the screening process, which is pretty lengthy and it's everything from looking at integrity, communication style, and skill, to drive, to some personality characteristics, to experience, problem-solving abilities; problem-solving abilities is really where the majority of the emphasis is, but there's a lot of soft skills we look at as well.
Paul: Let's talk about the screening process and how you came up with it. I know that there's a lot of people listening who perhaps would be very interested in going through that. We've had a lot of listeners apply to accelerators, incubators, but I just wondered how you came up with the screening process and perhaps you can give us an insight into anyone who wants to apply.
Breanden: Sure. Well, we came up with it because Taso and I had interviewed at a lot of companies and we kind of took the best parts of different experiences that we had had being interviewed. So there's the coding challenge side of it that's more like algorithmic, then you have the whiteboard coding sessions, which is more real problem-solving, and then you have some of the soft skill stuff etc. We looked at how Google does it, we looked at how Facebook does it and we relied on a lot of first-hand experience, subtracted out what we thought the lowest common denominators needed to be and then added the components that we thought were the requirements of "Okay, how do you not just find somebody extremely smart, driven and talented, but somebody who's really going to thrive with a US company typically?" So they need to speak perfect English, there can be no hiccups or bottlenecks/issues there. Then we're looking for their internet connectivity, and are they showing up on interviews on time, and all of the things that you - or maybe even as a little kid you're told, like "Never be late for an interview, never chew gum." We came up with our own list of all these things that were really looking at all the engineers we had been working with and saying "What's the lowest common denominator here?"
Paul: Okay, that is great. So I guess people have gone through the screening process, so how did you manage to build a company? I mean, I'm really interested in this remote working. There's a lot of people listening to this all over the world, the podcast reaches every country, and I wondered how you actually built a company where everyone works remotely.
Breanden: Sure, so this is a byproduct of the Princeton days, where Taso was living in Palo Alto and I'm living in my dorm room, and I'm finishing the degree. It was super time-consuming and difficult to do the degree component, so I didn't have time to go meet with clients in New York City or anywhere else. I didn't have time to meet with engineers; some of them happened to be in Princeton, but we were talking to people in Argentina, for example. And Taso didn't have, he would have gone nuts if he stayed in my dorm room too long, so he's back in Palo Alto and talking to clients and doing the same thing there. So purely out of necessity, because I had class and stuff, we had to be remote at first. And then by the time we graduated six months later, we're asking ourselves very seriously... Like okay, we kind of assumed that we were going to go to Silicon Valley where we both consider our roots to be and do a big round of funding and follow the Valley way - that's kind of how we thought of it - but we paused and said: "Why?" We need all this money to do what - to grow really fast? We're already growing really fast. To do what - pay ourselves? I mean, we're single and unattached 20-somethings, we don't need that. Did we need to get an office and fill it with people? I mean, we already have people working with us and they're doing it from all over the world in their homes; why do we need a $10,000/month office just to start? And so we skipped it and we said, "Well, we are young, unattached 20-somethings, so let's go to some place super fun and super economically smart."
So we went to central Europe in Budapest, where it was extremely cheap and we had massive penthouses downtown, overlooking opera houses and stuff, for less than $1,000/month combined, whereas that would have been the worst single-room apartment in New York. The dollar went so far there, and they also had the opposite problem in terms of they have tons of really smart people and software engineers who just don't have enough opportunities, so from a lot of different directions that's why we chose to go that route, and then along the way it just made sense. When a new person joins the team, because they're scaling sales or your engineering team internally etc. they're plugging in and jumping into Skype and all the things that we're already using, and occasionally you need to sort of rethink things, because you might have a chat with 45 people on it, and that's too many. But for the most part, I think we hired more than 90 people in the last 70 days was a number that I heard, just on the core team, and very little has changed at the company in terms of how we interact - it's mostly through Skype.
We use a few other tools like Slack and stuff a little bit now, and it's really just over-communicating with people all the time and very few scheduled meetings. Everybody is very smart and has a lot of freedom, and you're empowered to take what you need, and ping people if you need to solve something. Don't email them and say "Hey, do you have time on Tuesday at 5?" and they're like "No." "How about 6?" and then it comes and goes and you only have one meeting and one communication point in like a week with that person. With Toptal, you just find them on Skype and ping them and say, "Hey, got a sec?" It's like walking over to their office physically and knocking and saying "Hey man, do you have a sec?" So the cycles just become very fast. It's a little chaotic, but it's exhilarating and I think everybody feels this incredible energy when they plug into Toptal, where there's so many things happening all over the place, and everybody is so driven and so smart, and these people are communicating all over the place. Ten hours go by and you may have forgotten to leave your chair or go get something to eat.
Paul: Yes, I mean it's interesting - you mentioned Slack as well, and they've got this big fund, 80-million dollar [I think] and they are looking for developers, but even they can't tackle the remote... I think everything done in Slack is in an office, so it's really impressive what you've done there at Toptal.
Breanden: Yes, the Slack example is interesting. I think they could if they wanted to. Slack, if I remember correctly, I read a couple of articles, they're taking a bit different approach where they are kind of strictly more 9 to 5 and take a lot of time off, and they are really emphasizing kind of a work/life balance, and for some people I think that's fantastic, but the type of people who come to Toptal, I think they'd go nuts in that type of environment, including me. I need constant exhilaration and stimulation, and I get it through working at Toptal.
Paul: There are two more things we need to do then, before we say goodbye. One is that you mentioned when you were starting out, a lot of people listening to this are starting out and one of the toughest challenges they often face is getting funding. Now, you did say you had a lot of revenue and it was a success at the start, but did you fund externally? Did you go to angel investors or VC to get the extra funding? Tell us how you kind of got the funding off the ground.
Breanden: We raised a little bit of money from a few strategic investors, like Andreessen Horowitz, Adam D'Angelo and Ryan Rockefeller etc. I think it totaled about 1.5 million. For where we are, that is very little. The way that I think of it, we skipped multiple funding rounds, by acting like a bootstrapped company. So the answer to your question is I would avoid raising money. I would think about how you can generate a little bit of revenue in the early days and run kind of via bootstrap... I think Amazon does a good job doing this. So generate some money and then reinvest it today so that you grow more tomorrow. Every little growth spurt you do, you have a new opportunity to reinvest, so that you grow even more. And don't save a bunch of money... I mean, if you have reasons, you think you need a rainy day fund or something maybe that makes sense, but I like how Peter Thiel thinks of it in terms of if you are saving money in startup mode, that means you've run out of ideas in terms of how to grow faster, and that's probably not the case. So it makes more sense to invest that as fast as possible and as intelligently as possible.
If you've decided that you really do need to raise, I think the best thing you can do is network and put together a very good deck. That is something that we did in the early days. We put a lot of energy into it, and ultra-professional - a very clear deck, very short, but it really had some of the things that I think people care about, which is what are your unfair competitive advantages, your unit economics and you clearly paint a picture that enables investors to connect the dots in terms of... They can look at this deck and then quickly imagine, like "Okay, I'm going to 10x or 100x my investment with these guys."
Paul: You know, that is so inspirational because we've had so many founders on this show who have said how hard it is fundraising, how they sometimes have to spend a year focused on the fundraising round, and just to hear you talk about actually doing it without that much funding is so inspirational. There's one other thing we need to do then, which is a lot of people get inspired by this show from our guests, and we've had a lot of examples where people have quit corporate jobs to go and do their own thing, start their own company. I'd love to know what a typical day is like for you, Breanden. I guess there's no typical day, but give us a sense of what it's like to be the co-founder of Toptal.
Breanden: Sure. Yes, typical is a little difficult. Tuesday is never like Monday, at Toptal and especially for me. My life now is changing a lot, I have a five-week-old daughter, so I'm still sort of getting the hang of things and trying to build in some routines, whereas before my life was very free. But for most people at Toptal, including me, for the majority of my time at Toptal it's been a lot of travel. When you're remote you can go anywhere you want, so I would follow the sun and spend summers in Europe and winters in South America, play lots of polo, work from beaches, and live a life I think a lot of people dream about. Now it's gotten a little bit slower, I'm not traveling so often, obviously, so when I wake up I love to drink bulletproof coffee. I drink a bunch of that, I make breakfast every day with a lot of protein and stuff. Then I will check e-mail, check a bunch of analytics dashboards at Toptal in terms of economics, trends and overall health, and maybe I have some questions. I get really deep into a lot of the data science stuff, so that might take a little bit of time, but then the rest of the day is on Skype and doing a lot of one-on-ones with people at the company, trying to problem-solve and eliminate whatever barriers they have and help them work through problems or train their team, hire new people etc. So I do that and a lot of interviews. We hire so many people as we're scaling so quickly that I get deeply involved with a lot of the interview processes here.
Paul: That's inspirational, wow.
Breanden: And the rest of that time, everybody at Toptal kind of lives on Skype, so even if somebody seems available at all times, it's not like they're chained to their desk and working, or anything. Even if I'm standing in line at like the grocery store, or I'm getting ready at the gym, or something like that, I'll probably have Skype on and be responsive, and to me it's not a burden at all. It's just helping people get to the information that they need etc. and that's kind of common across the company, so it's just kind of a non-stop thing. Now that I have a daughter, I deliberately get away from my phone or electronics and I spend a lot of time with her, so things are changing.
Paul: They are... I mean, if anyone has been listening to this show for some time, that is so inspirational - the fact that you can have this lifestyle of moving around the world, following the beaches, but then also you can change when you need to, when your circumstances change, and that's why I feel a lot of people do choose the life of entrepreneurship or working for companies that are a little bit more flexible on that side.
Breanden: Yes, I think if you're starting a company and you're choosing not to do it remotely, you're making the worst decision possible. I mean, unless you need to build a lab or something, and you need to physically be there, because you're doing hardware type stuff, it's the worst decision you can make, because you won't be able to leverage global talent for you; you're going to be stuck with employees who have to quit because their wife got into medical school across the country, and all these problems you don't need. You need to be able to go to LinkedIn and hire anybody, and you can only do that if you're set up remotely.
Paul: Great. Breanden, this has been so inspirational for me and the appster tribe listening to this, thank you so much for coming on. Just to remind people that you can go to episode 450, it's theappguy.co, search for the episode with Breanden. In the meantime Breanden, how can people best reach out to you? How can they connect?
Breanden: They can send me an e-mail, that's breanden@toptal.com
Paul: Breanden, I have to say thank you to your awesome colleague Nelson Wang who introduced us and got this set up. He's been just so amazing and terrific, and I think he's a listener to this show, so I couldn't leave without saying thank you to Nelson. It's been great, thanks for coming on and all the best with Toptal.
Breanden: Awesome, thank you very much.