How Distro Reached Profitability in Under Two Years as a Global Hiring Marketplace (Interview with CEO Chad Ingram)

Introduction and Chad's Background

Chad Ingram

00:00Okay, thanks for having me Nathan and Founderpath team. I'm happy to be here and we'll wake you guys up anyway, can see you guys on your laptops and phones and all that, so hopefully we can be moderately entertaining and that you could learn a little bit about this you know from my story and the story of distro. So to tell you a little bit about what what we're gonna talk about, are tell you a little bit

00:31about my background, so I was in my last semester at school in my undergrad and I was about to go to law school, I was literally two weeks away from taking the LSAT and I had this huge change of heart, I'm like, I need to be an entrepreneur. And so anyway, I started my first company in 2013 after leaving school, sold that 3.5 later, and then in 2016 started a company called Jump and that's what's a

01:02little bit more relevant preceding distro and having started that company knew what I wanted to do at Jump and I wanted to study, I did study like what everyone else was doing, like I looked at Silicon Valley, I subscribed to Crunchbase, I interviewed all these people and I like put together this like perfect plan of what a business should be, what a startup should be, like, you know. So anyway, I'm having a conversation with a friend

The Jump Story and the Lesson About Prescriptive Thinking

Chad Ingram

01:35and and this this friend tells me, or asked me like, alright, how's it going? How how's it going building this business? I'm like, oh, it's going really great. Like I'm I'm recruiting the right people from these really cool companies, we're we're raising we're raising money from these these big investors, and for a little context at Jump, we'd raised about 10,000,000 and we got to 80 people by the time we had sold in 2019 and I gave

02:04this whole plan of all the things that we're gonna do, right, and he looks at me he's like, dude, like you got it all figured out. You sound like very, very prescriptive, and I was like, okay, that's fair. He's like, there's no one way to do anything, and like, that's also fair. And so fortunately that conversation kind of woke me up a little bit about how to how to do things and so like definitely you could

02:29raise your hands if you want to but like who here keeps modeling and emulating everything that happens in San Francisco as the way to success? I did it. I know I know there's more of you assholes out there that have done it, okay. So anyway, the point is is that there's more than one way to get the result that you're looking for, and so I'm just gonna share a few of them that we did at my

What Distro Does

Chad Ingram

02:53last company a few years back, and some things that we did a little bit differently, you know, at distro that we're doing today. So I'll tell you tell you a little bit about like what we do at distro for for a little bit of context here in a second, but over the next little bit we're gonna talk about

03:12some strategies and product and we're really gonna talk more about strategies. I'm not gonna give you like a lot of tactics today, maybe some ideas you might get, but and then we're gonna look at product and how know, what are some things that we can we can do in product and finance and then ultimately on the on the people side. So again, a little bit more context about distro. So when I was growing my last startup,

03:37we were spending like about 1,000,000 a month in total expenses and like 900,000 or so, some somewhere in that range, it's been like four years something. We're spending on on payroll and of that, about a third of that was going to our engineering team and I remember thinking like, this is crazy. And my engineers are getting recruited like right and left. Has anybody had that issue before? Like your people getting recruited away from you? Yeah. Welcome.

Distro's Launch Timeline and Revenue Growth

Chad Ingram

04:02Right? It's still happening even though the market's been weird the last few months, but but anyway, it's it's gotten really bad and so the idea was that we could we could create another method for people to hire directly people around the globe and that's what distro is. It's a marketplace to find, hire, and pay. So we went ahead and put the idea together in the fall of twenty twenty one and then in this by the spring

04:27of twenty twenty two, we started selling in April, and then in June, we started having our first contract or customers that that we are invoicing, and you can see here going through the revenue growth and I'll talk to you in a second about what happened in September, October kind of and some lessons learned there. So going over the first section, want to talk to you about is thinking about creative ways and unconventional ways to test your

Building an MVP: Launch Fast

Chad Ingram

04:56market, to test your product by building an MVP. So who here is a product or engineering leader? Okay, cool. With more pride, raise them a little bit higher. So you're the worst offenders of what happens here. So typically, everyone says they won't do it, but everyone literally does it. They say they won't like, take a long time to build their product, but then another month gets added, another month gets added, like, who who's guilty of this?

05:23You all freaking do it. Don't lie to me. K? So whether you're building a new product or launching a feature in your product, I think the principle is the same. Like, don't forget this, figure out a way to launch faster. That is so important. You can drive a lot of revenue very quickly by by launching faster. I can't tell you how many startup, you know, or wantrepreneurs, whatever you wanna call them, keep telling me like, oh

05:49yeah, I'm building my product. Well, when did you start? 2.5 ago. Okay, you've lost. You've lost before you've even begun. So I'll show you some examples of that. So getting to a sellable version as quick as possible and then funding,

06:04talk a little bit about that, and then how to launch now. So I pretty much already said that, don't wait like at all, like launch as soon as you can. There's always arguments that it's not good enough, there's always a reason to wait.

How Distro Tested Its Model Manually

Chad Ingram

06:23Okay, in the particular example of distro, here was our challenge. We had just enough seed money that I put in to get the business started and we didn't want to wait very long. We wanted to start selling immediately. We thought a full blown product would take us about a year to build, really at best nine months, but I knew like, you know, we were sandbagging ourselves a little bit, and so I remember we took our team

06:45together and we're like, you know, a few are founding members, and we modeled out what the product should look like which is over here on this right side. Okay, I know you can't read all the details of it, but basically this is the user journey and customer experience. Then what we did is we tweaked it to say what components can we test manually or using someone else's product? Okay. Again, you can do this with a like

07:10a full on product, you could do this with a feature.

07:14So we did this right away. So our engineering team got going on building our actual web application and then we got going on building what we can do to actually test the model. It was amazing. In the first few months, we started building product within, I don't know, weeks or so, we learned that what we had already built needed to be deleted. What if we had built that for a year? We would be done. We would

07:40have already missed the boat. So think about that, how can you go faster? If you're the perfectionist CTO which I know you are because most of you are the same, like think about ways to get to the essential part of how your product creates value for distro. It was helping somebody meet somebody worth hiring, somebody who is good enough and how to get them paid globally. So distro issues payments to people in over 200 countries, and

Finding First Customers Through Direct Outreach

Chad Ingram

08:11so we had to figure that out as quickly as possible. So that's what we did and going back to that revenue graph within a matter of a few months, we figured out a way to add value and get to market fast, which would help us get it where we needed to go.

08:26So a couple other examples, these are some of the the applications that we piece together to test this. It sounds really simple, sounds really rudimentary, but yes, there are no code options for some of you like, you know, non programming and and engineering founders that like you can integrate these things very, very easily in an afternoon to be able to at least test some things. Do you really need to build out a full scale MongoDB or

08:52could you just throw that data into Google Sheets to just test it or could you automate some of these functions out of a CRM? The answer is yes, you can. Now there's some arguments against product led growth models that may be a little bit more challenging depending on what the product is, but for a lot of SaaS platforms this is possible.

09:15Okay, then the last thing on this section, it's really simple. There's a lot of founders that struggle with how to get to market, very simple. Create a list of people you know and you don't know, make it 10, but get in touch with at least five of them and I can with a lot of confidence, over 90% confidence tell you that if you ask these people a few simple questions, you know, they would answer you in

09:46a way that surprise you. So you ask them, hey, here's a problem I'm trying to solve and I could use your help. Do you have this problem too or have you experienced it? And you're gonna say yes or no, right? You already have a hunch that they do. If they say they need help, you tell them, look, I could not, will you buy this from me? Will you help me and give me feedback on it? I

10:07could really use the help and more often than not, they will say yes.

Financing a Startup: Debt, Equity, and Burn Management

Chad Ingram

10:15Okay, looking at looking at financing of startup, this is really interesting. When I started my last business, we we hit the ground running and I had put money in from the sale of my first company and I immediately started to out to fundraise and learned really quickly that there's many ways to do it and somebody else taught me that I could explore debt and as a plug for Founderpath, right? So there's a lot of options out

10:44there in fundraising that aren't just your traditional methods and I think at least having a plan of how to do that is important and sticking to some sort of ratio or plan. Then of course managing burn is very important, there's a way I'll show you about that and then financing through sales. Okay, going back to the first section, product. If your product is not in market and doesn't drive value on the essential problem you're trying to

11:08solve, you can't sell. Go back to that problem, get to market as fast as possible, like as fast as possible. There's always gonna be excuses to delay that, so finance your sales. This is just an example, of of from my last business a couple of term sheets. The one on the left is debt term sheet. I think that was for 1.5 or 3,000,000 or became 3,000,000 and then this other one here was for our Series A

11:44which at the time it was I think it was 5.5 total is what we had raised, but these are real, these do happen and just for reference, anybody here have raised equity or debt? Okay, cool.

12:02Okay, so one ratio that I like to look at, this is independently, so this isn't from any particular firm that pushes this agenda, but I like to look at it like a

12:16one third on debt and two thirds on equity. Okay, a lot of times we think about equity and we think that equity means that like, alright, if I raise debt I have to raise traditional equity like we think about it, but that's not the case. You can raise equity from investors or you can be profitable.

12:36You can hoard cash, okay. The more equity you have on your balance sheet, the more cash you have on your balance sheet, the healthier you are to then get debt, okay. So that's very, very important. So for us today, this is about how, we're running today at distro. We're a little bit about fiftyfifty and if we needed to put a little bit more equity and we could and at distro we are running profitably currently. So looking

Distro's Current Profitability and Burn Strategy

Chad Ingram

13:03here managing burn, it is so easy going back to this like Silicon Valley method, it is so easy to just let it slide and let it slip and just let it keep burning, all raise more money. Well, guess what? Welcome to this Silicon Valley Bank debacle and freaking 2023 because it's totally changed. Okay? You're not gonna raise equity easily. So think about what it is that you're going to either burn or be profitable, and so for

13:33us we've generally been pretty steady. We had a section of time in the very first few months when we sold some of these people we asked to to let us, you know, give us feedback on the product and buy the product. A couple of them weren't very good and so we churn them out in that that kind of dip that you see there, which is totally fine. Finding, you know, the right customers, helps us grow and,

13:55you know, we added a few people in that October 2022 phase, but you can see we're holding steady and paralleling our growth, sales and burn. Okay,

Headcount Strategy: Hire to Sales, Not to Ambition

Chad Ingram

14:10alright,

14:12so we'll look at this last section on headcount. Headcount matters so much, it's the for our industry is the single largest line item on the profit and loss statement. It matters, don't screw it up. One of Silicon Valley methods I keep kind of harping on is to just hire, hire, hire, right? So five years ago when I was running my last company, it was like your bragging rights were, how much did you raise and what's your

14:45headcount? I don't give a shit about that anymore, right? We want to be profitable

14:52intentionally and we want to have the right headcount. So it's not just about hiring to hire and so think about that. Constantly push yourself to be doing more with less. I promise you, your people can do more than they're doing right now and you don't have to slave drive them, know,

15:09you can get them to do more and there's so many other tactics you can figure out how to do that, but I promise you the people that are doing whatever they're doing for you now, they can do more. You don't need to hire a person to tweet.

15:22So again, going back to sticking to what is essential, one other thing that's important is focusing on your strategy and the right things. If you find yourself as a company trying to do too many things too quick, you're gonna find yourself that become less priority or less prioritized. And so if you hone in on the things that matter the most, you're gonna need less people. Just think about that for a second.

Growth-Based Hiring in Practice

Chad Ingram

15:48And then of course, growth based hiring. So let's go ahead and sorry, I keep hitting the wrong button. Okay, so this is our revenue match with our headcount line. Okay, so the way you want to think about this strategy is and it sounds simple, it is simple but we all break it. We find ourselves like, oh, we need to grow, we need to hire more people. Stick to building a product then have the sales necessary for

16:15it and then once those sales are in, you can justify you know what to bring on and who to hire and so for us, I'll show you a couple of

16:27slides. This is a headcount model up here on the screen and then next to that we have our head count model to match our sales model and so they go hand in hand and so as we're building sales, we invariably look at what is our head count and, anyway, you want, I'll have my email at the end, you can email me and we can talk more about this, but it has to work. Your sales are variable

Matching Headcount to Net Sales

Chad Ingram

16:52and so should your headcount be. Be smart about it, okay? This will help you manage your burn. If you do $20,000 in net sales a month and you need to hire somebody who's going to cost you $12,000, go for it. If you did 8,000 and you know you have somebody who's going to cost you 12, you need to wait another month or sell some more.

17:15Okay, in the last twenty minutes we went over some really important things on product, finance and people in some creative ways. I know that some of these things will help you get to where you want to go, there's no one way to build a company. You can be very creative about what it is that you're building and in many different ways, follow your gut and we'd be happy to talk to you guys about distro as far

Closing Remarks and Distro's Offer

Chad Ingram

17:45as you growing your team. Feel free to come talk to me about it, it's helping a lot of startups grow their teams very creatively. Thank you.

Nathan Latka

17:59Thanks very much, Chad.