Startups are going remote + fractional

Hey,

I'm Sergio Pereira, and this is the Remote Work newsletter 👋

Last week I told you about the different lifestyles that remote work allows, including nomading around the world while working a full time remote job.

Today, let me tell you some observations from my work with startups. TL;DR: It's not a novelty that most startups are being founded as a remote culture. What's quite a recent trend is that they rely on fractional contractors for longer than ever before. It's an interesting new world, and there a a few reasons driving that.

1/ Founders are already remote themselves

These days, many startup Founders are people who have worked remote for a few years. As they create their own company culture from scratch, they decide to double down on remote work.

As a Fractional CTO, I've actually been meeting more and more startup founding teams where Founders live in different countries from each other. Deciding for an office culture would come a very high personal cost for them, as they'd need to move to a common city just to start their new company.

2/ More startups are now bootstrapped (VS VC-funded)

This is a recent trend, and in the early days it means that most Founders need to have some existing income stream to fund the new startups, meaning they are fractional by default in that new venture, at least until it drives enough revenue to sustain them + the costs.

It also means that Founders are way more cost sensitive than in traditional VC-funded startups. Bootstrapped founders won't hire full time employees, if a Fractional CTO and a few part-time freelancers get the job done on a fraction of the commitment. More focus on short term cashflow, and less focus on long term scalability.

3/ Hire skilled employees at affordable rates

In the early days, budget is very tight and there's a bigger focus on profitability than on tradictional VC-funded startups. Founders know they can hire in a low cost of living (LCOL) country like India, Romania, Nigeria, Argentina, etc. at a fraction of the cost. There are trade offs, of course, especially managing team members across time zones.

But bottom line is that for the same cost of a senior software engineer in San Francisco or New York, a Founder is able to hire a team of 3-5 senior software engineers abroad. If managed properly, this small team can take an early stage startup a long way, and build the product you need to get to product-market-fit.

4/ Escape age-old regulatory constraints

Startup Founders hate overhead costs that make their runway shorter. That's why an office-based culture at an early stage comes at a very high cost. It's way beyond the cost of the office space itself. When hiring full time employees locally, there are several regulatory requirements to respect, such as opening a local entity that can hire employees on a contract abiding by local labor laws, and several other compliance requirements.

Hiring fractional team members internationally is usually done via contractor agreements. This detaches the startup from the labor laws and regulatory requirements of the countries where their team members live. Unlike startups a decade ago, this overhead concerns can come into play much later in a Startup life, if ever.

5/ Scalable and adaptive team setup (and budget)

A remote company will have hundreds of applicants for each open job position, and massively reduce the time to hire. This is for full timers, but also for fractional contractors alike. Thousands of people are keen on working for a foreign startup for higher rates than their local market can pay. 

Hiring globally also means that a company can gauge their hiring budget, from hiring in LCOL locations to hiring in expensive metro cities. A company is not tied to either option, it can hire across geographies and even change the approach as it grows and budget increases.

6/ It's a new level of freedom for Founders

I an office culture, most meetings used to be in-person with people who live in that city. It involves commuting for meetings and traveling to cities where important people and events are located. Those constraints have historically tied startup Founders to expensive and hectic metro cities.

In a remote culture, this isn't the case anymore. Meetings are usually virtual via Zoom or Google Meet, and even industry events are increasingly remote. Also, having a team spread across the globe means all internal communications happen remotely too.

This means Founders can move to wherever they want, including places that lower their cost of living and extend their personal runway. I've recently met startup Founders who moved to such places in time zones that increase the overlap with their teams. That's smart!

In case you're actively looking for a remote job, have a look at the Jobs Copilot. 300+ customers are using it to access the best jobs available online, including the majority of them which aren't published in job boards. Check this recent testimonial from Fernando, on my private Remote Work Community.

Thanks for reading this newsletter until the end. You can read all past editions here. Make sure to share it with your friends and colleagues so they can read it too.

If you're interested in sponsoring this newsletter, send me an email or DM.

Cheers,

Sergio Pereira, 
Startup CTO & Remote Work Lover