How to Grow a Virtual Company #drupalcon

5 minute read
Rikki Endsley avatar

Drupalcon 2012 Sponsored By
At DrupalCon in Denver, Lullabot President and cofounder Matt Westgate shared lessons in running and growing a successful, sustainable virtual company.


In 2006, Matt Westgate and Jeff Robbins, Lullabot's CEO and cofounder, sent an email to Drupal founder Dries Buytaert announcing the launch of Lullabot. “Really we just wanted to hire our friends in the community and keep doing kick ass Drupal work,” Westgate explained in his Tuesday afternoon DrupalCon talk, "Growing a Virtual Company & Maintaining Team Moxie." Westgate admits that he didn't have a management background, so he learned as the company grew.

“Drupal is a social network,” Westgate says. He says distributed companies are also like social networks, andyou have to create a lot of things that a physical company has, such as a water cooler-type of environment.

In his talk, Westgate addressed what he calls the Top 5 Virtual Company Myths:

  • Not a real company
  • Communication is inefficient
  • No teamwork
  • Lonely job
  • There's no way it's sustainable

Look at Amazon versus Border Books, or Netflix versus Blockbuster, he says. “Never before has geographic location mattered less for the type of work that we do,” he adds. In fact, he expects to see a lot more virtual companies start popping up.

Lullabot Philosophy

At Lullabot, the philosophy is that a physical company with virtual employees tends to be a physical company with alienated employees. “I don't like the phrase virtual,” Westgate says. “I don't like the phrase virtual company. I don't like the phrase virtual workers. And I wish they would go away,” he adds.

Westgate prefers the term distributed company with distributed employees. "These are real people; these are real companies," he explains. He says that Automattic, the company behind Wordpress, first coined the distributed company phrase. Automattic has 150 distributed employees, according to Westgate.

What to Expect

In a distributed company, expenses are the same, but different. Westgate says that the startup costs are smaller, but there are more travel expenses, for example. He compares it to choosing open source software over proprietary -- you might save on the software, but then you'll spend on building the team to develop and support it. With a distributed company, you can spend more on talent than on a brick and mortar location.

In addition to planning on travel expenses for team meetups or retreats, Westgate says your company needs an “HR super hero.” In fact, he says that a good human resources person or team is one of the most important management tools a distributed organization can have. HR can handle employment laws between states and countries, and benefits, such as health insurance, for a distributed team.

And don't plan on micromanaging. Plan on openness and trust within a distributed team, and plan to foster communication. For example, Lullabot uses Yammer to communicate internally.

Recruitment and Retention

Who thrives in a distributed company? Westgate says that people from the world of open source tend to adapt well to distributed teams. Also, social media chops and strong written and verbal communication skills are important, particularly because employees can't count on reading body language remotely. Look for candidates with other passions, such as hobbies, sports and family activities away from the desktop, which help sustain a work/life balance.

Learning Opportunities

In the past seven years, Lullabot has only seen five employees out of 35 leave the company, and Westgate thinks that the distributed work model helps retain talent. “It's nice to be able to take your job with you when you move,” he says.


What about your clients? Westgate recommends that all projects kick off on-site, and loop your clients into the distributed work process by adding them to your social network, in a dedicated IRC, for example.

As for team communication, plan to be open, proactive, deliberate and emotional, at least in the sense of allowing employees to vent. After all, it's better to vent to the team than to the client. Consider creating a handbook or other tool that outlines what expectations your company has for communications.

At Lullabot, team members participate in a Monday morning call to outline plans for the week, and a Friday call to recap the week's events. Although the team calls end up costing a lot of money, Westgate says the rewards, such as fostering team communication and improved efficiency, are worth it. Managers at Lullabot also turn in weekly written management reports.

Communication Tools

"The secret advantage of an entirely distributed company is that everyone uses the same tools to communicate. Everyone,” Westgate says.

Lullabot uses an arsenal of tools, such as IRC, which Westgate compares to the traditional no frills, ambient conversations that happen around office water coolers. The company also uses Dropbox to share files, Trip It for travel planning, Drupalize.Me for training, Freckle for hourly reporting for billing, Lockify for secure file transfers, and TurboBridge for conference calls. And then there's face time. “Sometimes we just get together to get together,” he says.

So is a distributed business model like Lullabot's sustainable? Westgate points to a quote from Eric Ries, author of The Lean Startup, who said, “Values are the foot you leave on the floor when you pivot.” Westgate says that when it comes to Lullabot, they'll know their business model is no longer working when they can't leave a foot on the floor.


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