How She Scaled Howdy From $400 Left to $50M in Recurring Revenue | Entrepreneurship | How We Profit | E11

Young and Profiting (YAP) with Hala Taha: Entrepreneurship and Self-Improvement Podcast

Jacqueline Samira discusses her journey building Howdy, a company that connects U.S. tech companies with software development teams in Latin

Key takeaways

• Howdy operates on a transparent 15% margin model for all services provided.
• The recruitment process utilizes trained psychologists to ensure personality matches between developers and U.S. clients.

Main topics

• Global talent sourcing
• Venture capital and Y Combinator

Notable quotes

Nail it before you scale it.

Conclusion

The episode serves as a masterclass in scaling a service-based busines

Transcript preview

Speaker 1 (0:00) People were just like leapfrogging from like job to job to job to job. And Speaker 2 (0:03) I was like, this is so insane. Like this is such like a dumb problem for startups to have. I mean, imagine you raise $2 million and you can't hire people. How is that possible? So I was like, this is a dumb problem to have. There's smart people all over the world. Why isn't there a solution? And there was, there was tons of solutions, but it was overseas. Speaker 1 (0:22) Jacqueline Samira is the founder of Howdy, a company helping U.S. businesses build teams across Latin America. Today, we're breaking down how Howdy actually makes money, what global talent really costs. We have a 15 % margin on everything we do. How much money did you end up raising in total? We Speaker 2 (0:38) raised $21 million. Looking Speaker 1 (0:40) back, do you feel like you raised too much Speaker 2 (0:42) money? I would say if you have the ability to not Speaker 1 (0:45) fundraise, it's always better because... One of the things that I see you do is billboards, which is really unique. The billboards are like $1,000 a month. Oh, wow. For one. Really? Speaker 2 (0:57) That expensive? We were thinking if we could create this like unique algorithm, this company is going to have this type of like grading based on the type of employees that they want. And then people are going to have this grading based on like the type of employee they are. And we both realized we're like, well, you're not an ML expert and I'm not like a psychologist. So our very first recruiter we hired was actually a psychologist. Because especially when you go through the vetting process, you are... clearly smart. You clearly know what you're talking about. So failure only happens when there's a Speaker 1 (1:28) Jacqueline, welcome to How We Profit. Hi, Speaker 2 (1:30) thank you so much for having me. I'm excited to be here. Speaker 1 (1:33) Me too. I was seriously looking forward to this conversation. So we're actually friends. We're in an entrepreneurship peer group. You're somebody who I really look up to. You're one of the smartest women that I know. And when I started this series, I told you about it right away because I was like, you need to be on How We Profit because Yap Bam, she is such a badass. She has grown a company to $30 million in annual rent, probably more now. $50 million in ARR? Like, oh my God, like that is absolutely incredible. And so the company is called Howdy. You're like kind of famous in Austin. Everybody knows you in Austin. But for those of us all around the world tuning in, what is Howdy exactly? So Speaker 2 (2:14) we are a company that builds software development teams in Latin America. So we have 11 offices throughout Latin America, from Mexico all the way down to Argentina. And we like to think of them as co-working spaces where we build teams for U.S. tech companies. Speaker 1 (2:29) Really cool. So an enterprise company contacts you because they want like more IT folks on their team. You stand up like a literal team for them in Latin America. Yes. So we stand up. It can be Speaker 2 (2:44) as small as a small startup saying, I need one person. to a big enterprise company that's like, I need a team of 50 or I need a team of 100. And we can service them in any of the locations that we're at, or we can even open up a new location depending on the size and volume. Very cool. Speaker 1 (3:00) So would you consider your company like a recruitment company or a workforce management company? Like, what do you consider it? I Speaker 2 (3:07) consider us full stack. We do everything. So to some people, we are recruiting, we're office space, we're logistics, we're HR. We do it all. end to end. A lot of times, though, when people come to us, they have a problem with one of the things. So they have a problem. Maybe they set up an office in Columbia, but they can't find the talent that they thought that they could get. Or maybe they just don't even know where to start. So we are a one-stop shop for everyone. And how we help people, it just depends on usually what their pain point is. Speaker 1 (3:36) Okay. So... I know you're so smart. So you're probably like, you've got different product offerings in your business. So like walk us through that in the easiest, in the simplest way Speaker 2 (3:47) that you can. Like what are the different offers Speaker 1 (3:49) that Speaker 2 (3:50) you have? Actually, funny enough, we don't have different offerings. We have one main offering. Okay. And we designed it so people can hire one person all the way up to thousands of people. And so the way that we have built it is we make it so that every one person has like a built-in cost. So think about it like you come to me and you say, I want to build a social media team or I want to build a software development team because I've got this idea for this great app. And so we would sit and work with you and say, okay, so probably need this type of person, this type of person, this type of person. And then when we present you a person, we'll show you their all-in cost. Okay. So... I'm just going to do round numbers here for it. Let's just say it's $100,000. Now, the amount of money that that person gets is usually roughly around 60%. Yeah. Speaker 1 (4:38) And Speaker 2 (4:39) then about 25 % of the $100,000, so let's just say $25,000, goes to supporting the individual. And then $15,000 goes to Howdy, like specifically. Got it. And then that scales up and it scales down. So if you only need one person. We'll put them in a co-working space. And part of that co-working space is they get a desk, they get equipment. If you want a big office build out, well, it's like, okay, we'll front load the costs ourselves. But we are anticipating making a certain amount of money over a certain period of time. Got it. So that's it. And that's like the all in, everybody gets the same type of thing. So whether it's Speaker 1 (5:11) one employee or like a full scale team. That's really cool. And so you were just kind of talking about the way that you make money on the deal. Go deep on that. Like, how do you actually make money at Howdy? So my background, Speaker 2 (5:25) taking it a couple steps back, has always been in sales. Speaker 1 (5:28) And Speaker 2 (5:28) for me, one thing that I always felt I didn't align with companies on was if they did these like long-term contracts with companies. And so the sale would be very aggressive and it would basically to get them to the point. where you're handcuffed into an agreement. There's big enterprise companies that people sign up with all the time. I'm thinking of Salesforce, like off the top of my head. And it's like, you're locked into a two-year agreement or a three-year agreement. And it's like, you get six months into it or 12 months into it. If it's not working for you, you're stuck and that sucks. And like, there's no onus on the company to make sure that they're still delivering exceptionally well. So what I wanted to do was make it so it was easy in, easy out. If they wanted, there was no front load, like there was no. cost to start recruiting. There was no cost to sourcing. There was no cost for you if you were hiring with me. But my goal was whoever you hire, you're going to love them. And then we are going to support you in the background so much so that you never say, you know what, Jacqueline, we love this person that you found for me, but we no longer want to work with you anymore. Like we need to be able to provide so much value to you that you think of us. Don't cut you out. Yeah. They don't want to Speaker 1 (6:37) cut us out. And so I Speaker 2 (6:37) designed it like that. And we started very small with the idea that like we had to earn your business every single day. Yes. And continue to earn your money every single day. So how we actually make money is, yes, like if you look at the scale of things, we always tell people up front, it's 15 % to us. Yeah. Like we have a 15 % margin on everything we do. And if you are not happy with the value we provide in everything else, then like you don't have to work with us. Now. Of course, there's other things we do in the background. So 25 % goes towards the individual. And of course, there's economy of scales. If we build out a big office, maybe there's health insurance discounts we can get once we hit 100 people. Or there's equipment perks or laptop perks, like buying brand new MacBook Pros in South America. is 50 % more expensive than in the United States because of all the import taxes. Speaker 1 (7:32) But Speaker 2 (7:33) there are some vendors that will cut us a deal and they'll help pay us for some of those import taxes. Like they'll carry the burden if we have a certain volume with them. Nice. And so our business ends up making, if we do it right and if we scale. at an appropriate size. But that's, you know, some of the levers we're looking on in the background, too. Oh, my Speaker 1 (7:51) gosh. There's so much to dig into. There's so much. Okay. So let's talk about how much money you're making. Break down how much money you're making a month and how much revenue is actually going to pay all the workers that you source for companies and, like, what that means logistically. Yeah. Do you pay them first? Do you get paid first? Like, how does that all work cash flow-wise? So cashflow wise, Speaker 2 (8:17) we... We charge people, we charge our customers every Friday for the work done in arrears for that week. So it's Speaker 1 (8:26) a Speaker 2 (8:26) weekly payment that they pay us. And we did that in the beginning to help with cash flow. So the idea is like if we get paid on Friday, hopefully it enters our bank account Tuesday. And depending on the country, most people in Latin America get paid on the first of the month Speaker 1 (8:41) of Speaker 2 (8:41) every month. So it's just once a month payment. It's cultural down there. We explored in the early days. do you want to do bi-monthly? Do you want to do weekly? Do you even want to do daily? Because there were some payroll providers here in the United States that had this concept of, hey, earn your paycheck every day. Speaker 1 (8:58) And Speaker 2 (8:58) so I thought that might be a unique differentiator for us down there in the market is to do some sort of different things with payroll. But it turns out in a lot of places we operate, people like to get all of their money on the first, pay their rent, pay their bills, and then everything left is what they would consider their spending money. And so that's how it works for them. As far as like the money that we get from customers, usually we're in a place where our working capital swing is something where we raised a lot of venture capital. So we have enough in the bank to always pay people. And we're just constantly making sure that our accounts receivables is paid on time. Luckily, we have a payment by credit card option. And even though we take a 3 % hit by doing that. it's okay. Like we would rather take the 3 % hit, but make sure we get guaranteed payment than doing any kind of net terms. The only time we agree to net terms is if it is a publicly traded company and it is just one of their like, hey, if you're working with us, you have to agree to this. And in those scenarios, they'll be more flexible by putting down a deposit. So if they ever miss it, then we can pull from the deposit. Speaker 1 (10:05) Got it. And net terms for those who don't know is basically saying like they have 30 days to pay you once you send an invoice or something like that. And Speaker 2 (10:12) so in those scenarios too, we might even pre-bill them for the like on the first of the month so that we get paid by the 30th. Yes, that makes a lot of sense. Speaker 1 (10:22) Okay, very interesting stuff. Let's go back to actually how this all started. So you started the company in 2018. You had a really great sales background. Did you have IT experience? Like, why did you start with IT team? Speaker 2 (10:38) That's a great question. So, no, I wouldn't say I have direct tech experience whatsoever. My mom's a computer engineer, though, and my uncle owned a computer store. So I would say that I had a strong affinity for technology and I knew a lot about it. And I was raised with it. I was very comfortable with computers, but I just didn't. ever have the passion. I was going to go into investment banking. I graduated university in 2008. And so that all imploded. And I decided to just get a job in sales while the markets were recovering. And then I was going to go back into banking. And I ended up really liking sales because I realized, especially enterprise level sales, they have these complex problems. And selling was really just providing a solution for them based on what you had. And so it felt like it was a puzzle that I had to put together. It felt like fun game theory. If I do this and they do this and they do this. And so I ended up staying in that. And I ended up in Austin, Texas. And in Austin, this was 2011, there was this emerging tech scene happening. And I thought, I was like, you know what? That's cool. I can like marry my experience with sales with my affinity and... relationship with technology and start leading sales at tech companies in Austin. So a couple years later, I joined a midsize tech company and I was leading their sales team. And when I was in it, I went from that company to another smaller startup. I started to notice a trend. And that trend was that the teams were really bifurcated in this like people that were super grateful for the job, super grateful for the perks, and then people that like they could just leapfrog to new opportunities because so much capital was coming to the city, so much money was coming to the city, and there was just like infinite demand for senior software developers. And especially like the dedicated senior software developers on the team, like you would have some that all of the work would fall on their plate because other people were like, oh. I'm going to leave at three or I'm going to go and find another job or you know what, like I didn't get a big enough raise this year, so I'm just going to go take this other opportunity. And so it's like it was hard for startups to keep long-term technical talent because of how much money was coming in and how many opportunities were coming in. People were just like leapfrogging from like job to job to job to job. Speaker 1 (13:03) And I was like, this is so insane. Like, this Speaker 2 (13:04) is such like a dumb problem for startups to have. I mean, imagine you raise $2 million and you can't hire people. Like, so ridiculous. How is that possible? Yeah. So I was like, this is a dumb problem to have. There's smart people all over the world. Like, why isn't there a solution? And there was, there was tons of solutions, but it was overseas. It was in India. It was in Asia. It was in the Middle East. It was in... Eastern Europe. I mean, it was literally everywhere, but in our time zone at the time, this was 2017, 2018. So Speaker 1 (13:33) Latin America, international hires, although it's like pretty popular now, back then it wasn't very popular. Speaker 2 (13:39) No, back then it was not very popular. And if it was popular, it was more on like the freelancer marketplace. It was like, oh, I've got a guy that I found on Upwork or I got a guy that I found on TopTal, but tech companies needed teams and they needed... dedicated members of their product team that wanted to not be like a mercenary. Freelancers had this more like mercenary, like, I'll come in, I'll do this thing and I'll leave or I'll keep doing it for you. But like, I'm my own person. And so I was like, surely there's got to be like a whole there. This is like a missed opportunity Speaker 1 (14:11) that Speaker 2 (14:12) we're not we're not looking into. So that's when I jumped into it. And. and just started. It's Speaker 1 (14:21) amazing because that sales background gave you the ability to like understand how to create offers, I'm