“Can you tell me your current revenue and burn?”
“We’re at $4,000 MRR and we’re profitable.”
“Uhh, excuse me?”
The founder probably saw my jaw drop on Zoom. I’d never seen such an early stage company make a profit.
A Clever Move
How did they do it? By building their startup in a new way: default-international.
Ivan and his co-founder Masha* had lived in New York City for years. But when they started their company, they went home to Romania.
They built an awesome product and quickly got a few paying customers. In Romania, that money went a long way.
$4,000 in revenue was enough for them to pay their rent and living expenses, along with server costs. They even had a little left over.
I’m not in the habit of investing in Europe. But I had to admit, it was a clever move.
The customers were all in the US. The founders spoke superb English. The company was registered in Delaware, exactly as it should be.
In every respect, this looked like an American company. But they had taken out 90% of the cost structure.
Going Remote
For companies that talk about “changing the world,” startups before 2020 looked pretty conventional. Most were in San Francisco and all their engineers sat in an office together.
They couldn’t hire anyone in Romania. They couldn’t even hire in Nebraska!
So startups were stuck chasing scarce Silicon Valley engineers and paying them six figure salaries. For most companies, that meant burning huge sums of cash.
COVID forced startups to change. We all got on Zoom and learned to collaborate without being in the same room.
Without the need to commute, people left the pricey Bay Area and moved to places like Austin or Nashville. Eventually, people moved around so much you didn’t know where they were.
Finding Lower Costs — and Incredible Talent
When everyone was just a little box on Zoom, you couldn’t tell if they were in Berkeley or Bangalore. And it didn’t really matter.
Then in 2022, markets ground to a halt and startups had to reduce costs. Most startups only have 1 line item that really matters: salaries.
An engineer in India might cost $2,000 a month versus $10,000 in the US. When money is tight, that deal is too good to pass up.
Soon, I began to see seed stage companies with teams of 15 people that only cost $50,000 a month — total. New startups like Micro1, a company I invested in last year, made it easier to hire internationally than ever before.
Hiring internationally didn’t just lower costs. Startups also gained access to incredibly talented people.
Turns out not every great engineer lives in San Francisco.
A New Generation of Startups
Most startups I see today have at least some of their people overseas.
For some companies, it’s just a few engineers. For others, it’s the entire team.
These companies were founded in a brutal downmarket. They’ve hired internationally since day 1.
They’re lean, and they’re hungry. And they’re going to make some incredible investments.
Are you seeing more startups with teams overseas? Leave a comment and let us know!
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Photo: “Earth” by Kevin M. Gill is licensed under CC BY 2.0.
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