Distributed Teams and Startup Dreams: Insights from Arcanys' Co-Founder

[00:00:01] Welcome to the Startup Builders and Backers Show, a podcast which is part of the Tech Talks Network. I'm Neil C. Hughes and you may know me from the Tech Talks Daily Podcast, which covers a completely different topic every day around how technology is ultimately impacting our life, our work and even world.

[00:00:22] But the Tech Talks Network is a series of unique podcasts that drill down on unique subjects and showcase the voices right at the heart of tech startups. And in this series, I want to shine a spotlight on the energetic world of startups where bold entrepreneurs and visionary investors come together and create the world-beating solutions of tomorrow.

[00:00:47] So the conversations you can expect to hear on this show will dive right into the journeys of those building innovative companies and also the strategic insights of those who support them. Balancing the excitement of breakthrough ideas with the more pragmatic challenges of scaling a business. So if you're a startup founder, you get to learn from other founders some of the mistakes they learned and also some of the opportunities that they unlocked along the way.

[00:01:14] So I invite you to join us as we unpack the risks, the rewards and the realities of turning those groundbreaking concepts into successful enterprises. But now it's time to get on with the show and invite today's guest on. So buckle up and hold on tight as I beam your ears all the way to the Philippines where Frederick is waiting to join us today. So a massive warm welcome to the show. Can you tell everyone listening a little about who you are and what you do?

[00:01:44] Yes, sure. Thank you for having me on the show. So I'm Frederick Joy. I am 45 years old. I'm born in Switzerland. I currently live in the Philippines where now I'm the co-founder of Arcanis, which is a software development company.

[00:02:05] I'm also a partner at Arcanis Ventures, which is our investment arm where we specialize in funding software development teams for these startups that are raising funds in a, I would say, series, I mean, seed to pre-series A round. So we come in while they're raising funds with other investors.

[00:02:32] So that's my core focus at the moment. On the side, I'd just say that I'm really passionate about sports in general, CrossFit in particular, and trying to get most of our employees to also join the club to get healthier. Love it. And it seems like you've been on quite a journey there. There's so much to unpack and everything you just said.

[00:02:59] Obviously, you were raised in Switzerland and now you're in the Philippines and Arcanis is a software development outsourcing company based in the Philippines. But is there a back story there on what took you from Switzerland to the Philippines? Yeah. Yeah. So, yeah, there is a bit of a funny back story. So I've been, you know, a bit exemplary Swiss, Swiss good son, I would say, until I was 30.

[00:03:26] So I worked in insurance and the banking industries, which made my mom very happy. But I found it also pretty boring. And when in 2008, I paid a visit to a longtime friend of mine, Alan, who's today my business partner, while he was living in Hong Kong and setting up his second company.

[00:03:51] He's been a lifelong entrepreneur and started in Spain, then moved his business to Hong Kong, where he was still based when I visited him. And during that trip in 2008, at some point he asked me if I wanted to help him out on his new venture, which was an e-commerce website in the gaming industry.

[00:04:16] And seeing this as the opportunity to leave boring Switzerland for me, I didn't even ask what I was going to help him with. I said, yes, I'm interested in, you know, joining an entrepreneurial adventure. So about three months later, I packed everything I had in Switzerland, sold most of the stuff and then landed in Hong Kong in January 2009.

[00:04:43] And we worked on that e-commerce venture for a good year in Hong Kong. And in late 2009, we had an opportunity to buy a small side business in the Philippines. So neither of us had ever really been to the Philippines and we didn't really know much about it.

[00:05:04] But we looked into that business and I guess a few months later, we pulled the trigger and bought that small side business. And when we visited the Philippines, we realized that actually what we were doing in Hong Kong, which was mostly software development and customer service for our e-commerce website, we could do it a lot better and also cheaper from the Philippines.

[00:05:29] So a couple of months later, we decided we would move all the operations from Hong Kong to the Philippines. And that's kind of where we started being in the Philippines. That business, though, didn't survive. So at some point we decided that we had to find another thing to do.

[00:05:53] And because we had hired really good software engineers in the Philippines for our business, and we had some friends that were asking us to help them out with more software developers. Then we decided that we would focus on that business from now on. And so that's what we've been working on for the last 14 years.

[00:06:17] We have now around 350 employees that are working for companies all across the globe, and most of them are software developers from the Philippines. And a question I've got to ask, of course, Switzerland is famed for snow-capped Alps, picturesque lakes, well-preserved medieval towns where the Philippines is all about exotic beaches, expansive forests, the abundance of volcanoes. Is there anything that you miss about Switzerland at all?

[00:06:47] It seems like you've got the best of all worlds here. Yeah, so I do miss indeed the mountains and the skiing and I guess the seasons as well, and my friends and family obviously. But living in the Philippines is also very, very nice because of the beautiful weather that we have all around and the heat.

[00:07:14] And what is also absolutely extraordinary is the people. And so interacting with Filipinos that are extremely friendly, extremely warm, kind and welcoming makes your day every day. Even if you have a bad day and you meet someone that's smiling to you on the street, just changes everything. So I miss Switzerland, but I'm also very happy to be in the Philippines.

[00:07:43] Absolutely love that. And as this is a tech podcast, on behalf of any startup founders that might be listening, I'd love to tap into your extensive experience in tech startup investments. I'm curious, what key factors do you look for in a startup that indicate maybe its potential for success? Anything that stands out to you? Yeah, so I think the, so we've got around 20 investments that we've done with our small fund.

[00:08:09] And from the ones that work the best, it's really the team that makes a difference. So we're looking at an experienced team, not just a solo founder. We always see these stories about this incredible solo founder that build the whole business, but it's never really true. It's more like a team that's behind a business.

[00:08:32] And so we're really looking for that expertise in a specific industry with people who've been working in industry for quite some time and now want to do something on their own. And so we're looking for that. The second part for us, because we invest in seed to pre-series A companies, we look at a startup that has some proven traction.

[00:08:56] So it means that there is a product that they have been able to get some traction for. So some sales in most cases, not always. And so these two are really a good foundation. After that, we're looking at a good financial management in the first few rounds of investment that these companies have had.

[00:09:23] So we're looking at what did they do with the money they had and what have they been able to kind of achieve with the limited funds that they had. And so that's when we can really look at how efficient they've been in realizing their vision with the limited means they had.

[00:09:50] And the last part, because what we do is invest the software engineers time in these startups to help them go to the next level. We are looking also at a decently built initial product. So which means that we understand that they know what they're doing and that we can help them go much faster. So that's kind of like the way we look at it.

[00:10:20] And you're also someone that's had more than 20 years navigating the world of software development. I think it's 14 years since Mark Anderson said software is eating the world. We've all seen what happened since then. And I'm curious, what major changes have you observed in the industry and how have these changes impacted startups and established businesses alike? I suspect you've seen a lot of different things evolve over the years.

[00:10:43] Yeah. So what really helped companies like ours start, you know, around 14 years ago was all the technology around enabling remote work and distributed team. And it's been accelerated even more so during COVID. So that's the first thing.

[00:11:04] And then I think all the methodologies around how building software have changed and become a lot more performance, if you want, or efficient have helped our industry. And because software has become building software has become so much more complex, all the methodologies around that have to have evolved with it.

[00:11:34] And what we see as well now is all the trends with the AI and machine learning that are again, kind of changing the way software developers are working. So this is opening again, new possibilities for, I mean, the products themselves, but also how people work, work around that.

[00:12:00] So those are really like the major changes that we've seen are the methodologies, the enablement to remote work and distributed teams. And now the AI and machine learning. And of course we can see also, I would say in a different form, like all the focus on cybersecurity. And now coming with all the regulatory environment.

[00:12:30] So we're looking at what's happening in the US, for example, with, you know, like data protection and all that stuff that has imposed really new challenges on how to work with all that data. Even more so in countries like, for example, the Philippines, where we have to navigate that a bit differently.

[00:12:51] And before you came on the podcast, I was doing a little research on you and I was reading how you emphasize that investing, not just financial capital, but also technical expertise and time is more important too. So can you elaborate on, on how this almost smart money approach makes you different in your investment strategy from others in the industry? Right. So what we've, well, first it's what we know how to do best, right?

[00:13:17] So if we want to, um, uh, mitigate the risk of our investments is to actually have an active part in the success of the, of the, of the company. Because the way we, we work with these companies, if you want, is, is a hundred percent risk, uh, uh, um, yeah. Uh, uh, uh, uh, uh, uh, in reward kind of thing. We don't get paid if the company fails.

[00:13:41] So, uh, we, uh, we want to make sure that, uh, we, we have some level of control of how the, the, um, the software development works. But more importantly, I think a lot of the startup entrepreneurs are not just looking at people who put in some cash and just kind of wait for things to happen and, and don't provide additional value.

[00:14:04] Um, and so that's also how we, we look at our investments is we know that we can really make a difference with these, um, uh, founders because we bring in so much more expertise in what they want to, uh, to build.

[00:14:22] So, because most of the startups we are, um, uh, uh, helping are either SaaS or hardware, but tech enabled companies, um, they don't always have that expertise in scaling teams, scaling software. Um, and, uh, we simply reinforce, uh, their business, not just with, uh, a reduced cash burn if you want, uh, due to also the fact that we're outsourced, but also of all the previous experience that we have.

[00:14:52] And with building other businesses. And how's the evolution of software development outsourcing, especially with it remote and distributed teams? Have you seen that alter the landscape for startups, startups and investors? Because again, so many big changes around this world, isn't there? Right. Yeah. So, um, the, the changes that we've mentioned, uh, prior, um, um, have, uh, um, helped all these distributed teams to,

[00:15:21] to, to, to work more efficiently. And so becoming easier, it means that startups have more access to global talent. Um, it's easier for them to, to go to other countries and, and, and find the talents they can't find in their own countries or can't pay because we know that startups have also a limited, um, uh, limited resources. So, uh, global access talent, cost efficiency.

[00:15:49] Um, also I think with companies like ours, it helps them a lot with the scalability and flexibility, uh, because we can have them provide. And, um, uh, the, uh, uh, people, uh, people that have been vetted that we know, um, it's cutting down the time to hire from, I don't know, uh, maybe three to six months in, in some countries to just a few days.

[00:16:15] Um, when they, when they need more, more people, um, which then means, uh, uh, so better cost efficiency, but then faster time to market. right because um if you can hire people faster not necessarily having a much bigger team but if you cut down time to hire and get the right people um from the on the first goal then you can also go

[00:16:41] much faster to market so this is really a really strong competitive advantage and because you become a lot more i think efficient with the use of capital as well um in subsequent investment rounds i think it's also more attractive for investors they're looking at what have they done with the money they got in the first few rounds and looking at how much they've achieved right can can make it

[00:17:05] more attractive for for investors uh but one last thing i would say um there's many but i'll just focus on that last one is i think it also helps a lot through um with innovation through collaboration because we um as a team have so much um knowledge about the the process of of developing software

[00:17:31] we can actually bring all that knowledge to to the startups and and brainstorm with them on how to to reach their goals in in more innovative ways and another big topic right now is a trend towards distributed software teams i know this is a topic very close to your heart and if there are any businesses looking at exploring distributed software teams right now what are the the challenges and opportunities that come with this particularly in the context of i don't know a global pandemic or

[00:18:00] anything really what opportunities and challenges have you seen so the challenge is um i think the first one that a lot of people underestimate are the communication barriers due to you know time zones or cultural backgrounds and uh you can overcome these pretty easily by choosing um friendly time zones for

[00:18:24] example or um being very um aware of all the i mean the the cultural differences so there are a lot of trainings you can do around that and it's easy to overcome if you're aware of that um we've also talked a lot i think about maybe isolation or team cohesion or lack of of team cohesion with um um a remote setup

[00:18:51] there also of course tools to overcome that and i think um uh it's very important to to to keep on working on that every day um and uh of course the last part that's i think less of a problem now is the technical infrastructure right so companies who are looking at outsourcing they have to make sure that

[00:19:15] the the the team members that they have all across the the world have really reliable access to to all the tools that uh uh they need i mean and and and more importantly more importantly the internet and this is also being uh slowly addressed by companies like uh spacex um that um uh that are distributing the

[00:19:38] internet much easier now the opportunities that we i i would see and i talked about that earlier is really this global town pool and and we've seen that it has enabled so many companies to do a lot more um uh and a lot more efficiently um the remote setup i think also offers a lot more flexibility

[00:20:05] for the people to manage their own kind of work-life balance if that's still a word that we're using um and um so we really we i mean we've seen it with with with our counties where people can really um adjust their their lives around uh work or work around their lives which increases a lot of the job

[00:20:28] satisfaction and life satisfaction in general and um and the last part that i would mention is i think um additional resilience and adaptability and simply because uh you have distributed teams sometimes across many time zones uh many different cultures so uh it can simply add a lot of uh you

[00:20:54] know diversity and a lot of uh resilience in in in the teams and again for startup founders and business leaders listening if you look back at your journey with our canis how have you been able to balance the need for rapid software development while also ensuring high quality outputs for your clients because again it's very often a tricky balance i'd love to hear more about how you achieve this

[00:21:17] so i guess it's the hardest um and um in our case we are coming in when the product has already been kind of conceptualized and there has been an mvp that has been released so um there is already something that's working so sometimes we just carry on keep on building that product and sometimes we have to start from scratch again and it's also true that in the world of startups

[00:21:47] the speed is absolutely key and that we aim to i mean really go fast but um the quality when you're at that stage um is always the most important uh thing to to look at well of course the speed but the quantity has to be there so um i think it's really about optimizing um what needs

[00:22:13] to be done versus what is completely unnecessary at this stage so it's building something really solid um and removing uh scope creep so and that is happens when you have a really really well organized team um which then helps with the speed and the quality so it's really about having really super efficient

[00:22:38] processes in place and people who are slashing features that are unnecessary um uh at the early stages um it's really the focus on on what needs to be done for the product and for any ceos or cto's of tech enabled businesses and b2b sas companies that might be listening any advice that you would offer around how to navigate the current tech landscape effectively

[00:23:07] because again it feels like such a moment of huge transitional change right across the world especially with ai machine learning coming in but any advice around them yeah so you mentioned uh the change so i guess uh you have to embrace uh whatever uh changes are coming your way so embracing agility um we have to be prepared to uh pivot our strategies pivot what we

[00:23:33] offer as products so it's for services um uh on the trends right and um to do that i guess it's really the focus on on the success of the customers so what is the market what does the market need how can we um foresee these changes and how can we adapt uh faster than than the competition and i think

[00:23:58] this comes with investing in talent uh investing in people who are curious people who are um learning uh learning consistently um and offering uh continuous growth opportunities to to people in in in the teams and um and we can do this if we cultivate really a strong culture right we because we have all these

[00:24:24] challenges we have remote work uh and if we want to keep people i guess engaged and and and uh motivated is really cultivating this strong company culture uh with you know open communication continuous learning as i mentioned and regardless of where people are are located um and i think the last thing that i

[00:24:48] kind of see for the companies we work with um is this idea of sustainable growth so um it's not just this extremely rapid growth uh that we had in the past but um what we do is focus on on sustainable and scalable growth uh strategies that are really embedded in the long term although things change

[00:25:15] uh all the time we have to keep looking at okay what is the value we can deliver um on the long term and and to bring stability at the end of the day love that and finally before that you go if i was to ask you to look at my virtual crystal ball looking into the future are there any emerging trends in software development and tech investment that you think might continue to shake the industry over the next few

[00:25:42] years well look i don't have uh uh with crystal ball either but what we see is i mean uh you know they could start with everything ai right uh i think this is everybody's pushing so hard in that direction uh so uh of course the ai we see a lot of uh um growth in the low-code no-code platforms that are

[00:26:06] becoming a lot more powerful so uh and and popular because it enables people to do you know rapid development of of like mobile web apps with minimal coding so that's really good for younger um startups to go fast and after that then it's probably time to invest in something more robust uh what we can um uh talk about also is of course cyber security which is like an absolutely fundamental priority

[00:26:36] uh with the threats that we have at the moment um and um then the last the next one which is not the last but i'll step after that um i think it's this all this extended reality uh integration that's that's also coming right it started a few years ago it's it's it's slowed down um when the ai arrived

[00:27:01] but i think this is also going to uh to keep on increasing and we see a lot of the startups are investing in that space because it can enable so many things that we have absolutely no idea about the moment um in in i don't mean health care in uh in um in there i mean in so many actually so many industries so those are the ones that i can see we love that and we started the podcast today talking

[00:27:28] about your origin story that took you from switzerland to the philippines but if we look back at your career now of course same for anybody listening at none of us are able to achieve any degree of success without a little help along the way so is there a particular person that you're grateful towards maybe they saw something in you invested a little time in you that maybe helped you get you where you are today that we can give a little shout out to yeah so it's my business partner

[00:27:54] alan i mean uh i think if he didn't have taken this kind of leap of faith to ask me if i wanted to help him out my life would probably be very very different today um and so i'm still working a lot with him but it's also allowed me uh to build my own entrepreneurial journey uh in some other businesses that i'm that i'm running so um that's the the big shout out that i would like to give yeah

[00:28:24] beautiful it's a great moment to end on but before i do let you go for anyone listening wanting to find out more information about you about or canis contact your team explore anything we've talked about today in more detail where would you like to point everyone listening yeah so i guess the easiest is my linkedin uh so frederick joy um and uh and yeah people can contact me there it's the it's the easiest one well we covered a lot today from the intricate

[00:28:52] nuances of managing distributed software teams to the pioneering world of tech startup investments that not to mention uh the snow-capped mountains of the alps picturesque lakes to the uh expansive forests and volcanoes and beaches of the philippines all wrapped up with a great tech story and a bit of gratitude to your uh your business partner there but more than anything just thank you so much for taking the time to sit down with me today and share your story yeah thank you neil it's been really a

[00:29:20] pleasure and i love your description about the journey thank you so much so a huge thank you to frederick co-founder of orcanis and a pioneer in that tech investment sphere for joining us and sharing his story today and and also the story from the evolution of software development outsourcing to the strategic value of smart money frederick has given us a bit of a master class in navigating the tech

[00:29:43] ecosystem with his insight innovation and intention and to each of you listening out there i hope today's episode has maybe sparked a few ideas and inspired you to think differently about your tech ventures what strategies will you adopt to help you navigate the ever-changing tech landscape how will it help you and your business please join the discussion and share your thoughts with us and can do that by

[00:30:08] simply emailing me techblogwriteroutlook.com twitter linkedin instagram just at neil c hughes but that's it for today you