Wade Foster, Founder of Zapier Discusses Scaling Zapier to $35m in ARR with Just $1.3m in Funding
|David Senra||Jan 4, 2019|
How did you decide to start a business? When the financial crisis happened I was having a hard time getting a job. I decided to learn how to build stuff myself. My cofounder and I were doing freelance work. We noticed a lot of requests to build one-off integrations. Like connect PayPal to Quickbooks. It seemed like people needed to connect all their apps together better than they can. So we decided to build it.
Startups should put in place traditional management sooner than they normally do. But can’t traditional management add inefficiency in startups? You have to be pretty big for that to be the case. Most startups never reach that size.
What are the benefits of the core founding team being the head of the management structure vs bringing in experienced outside executives? The core founding team built every piece of the company ourselves. We knew the entire history of everything. An outside management team doesn’t have that. It would take them much longer to learn about the product, the market, our customer base, etc..
When should a company transition from a jack-of-all-trades mentality to highly specialized roles? I think that happens much later. I still think you need jack-of-all-trades mentality at our size [130 employees]. We need people who are adaptable and can learn very quickly.
Ignore fundraising: Think critically about what your business needs to grow. Extra financing may not be what it actually needs. A great example of this is Mailchimp. Never took a dime. Highly competitive market. And yet they are the market leaders. The classic theory would tell you they needed to raise every bit of money they possibly could. Mailchimp is completely opposite of that. Zapier raised $1.3 million and is doing $35,000,000 in annual recurring revenue.
Be careful how fast you add employees: There is a ceiling on how many new elements you can add to an organization [without negative externalities].
Why are you paying employees $10,000 to leave San Francisco? We are 100% distributed. Companies pay to relocate employees all the time. Why don’t we pay them to move wherever they want to go. We’ve had people leave and find a better quality of life in other, less expensive cities.
Biggest cost savings for Zapier: We don’t have an office. Other companies are paying San Francisco rents for massive offices. We are able to reinvest that money in other interesting ways.
Distributed companies have many advantages: (1) Recruiting. We can find world-class talent everywhere. Not just in San Francisco. There is way less competition for talent. (2) Retention is a lot stronger. People are living in a place they love. They can stay with their family. They get paid well. Our retention rate was 94% last year. People stay longer. You will have more continuity and get efficiencies of scale from employees staying a long time.
The idea that people collaborate better in person is a myth: The best brainstorming happens independently. When you can actually sit down and think. Most of the work engineers do is heads down [building the code base, dealing with customers, etc]. You should optimize for that instead of the 10% of the time when you need to collaborate.
Why should everyone on the team do support? Because your customers pay the bills. Everyone should know what it is like to work with the customer.