My New Series on Startups: Profit 101

I’ve moved a lot of my posts over to my new company’s site, at hirefraction.com/blog – and I’ve also started a new series there which I think bears summarizing here, called Profit 101. In it I distill the lessons I’ve learned building startups going all the way back to 1999. I’ve had some successes and some failures, but luckily more of the former than the latter! Through four major attempts (and a few minor ones), a couple of consistent themes have emerged: 1) I’m a bootstrapper by personality (I’ve never raised a dime), and 2) this causes me to have a relentless focus on profitability.

The Profit 101 series distills my experience running HiddenLevers, which I built over a decade prior to selling to Orion in 2021. I was proud that the startup produced enough cash flow to be immediately accretive to Orion’s profitability – that’s a rare thing to say about a high growth tech startup! Here’s a summary of the series so far, which I’ll update as I continue to add posts. I focus on starting up, with one eye on revenue and profitability at all times:

Profit 101 #1: Intro
Startup founders, and tech founders in particular, hear a constant drumbeat that they must follow the Silicon Valley VC playbook when starting a company. But while that approach has created many great companies, it’s not true for many companies, including one everyone has heard of: Microsoft! Microsoft was cash flow positive in every year of its existence. In Profit 101 #1, I kick off with a high level map of how to start similarly.

Profit 101 #2: How to Start
I think most founders should start fractionally, and I’ve done the same with all of my startups. With traction, there will come a decision point on when to go all in – but you’ve got to get there first.

Profit 101 #3: Year 1
Walking through the first year running my last startup, HiddenLevers, reminded me of just how much effort we put into the #1 goal in that first year – finding customers!

Profit 101 #4: Minimum Viable Revenue
Every undertaking requires goals – and a great foundational goal for a startup is to achieve Minimum Viable Revenue. Once you get there, you really have options.

Profit 101 #5: Fail Fast
Venture Capitalists are the target of much ridicule in the founder community. But there’s one VC innovation for which they deserve a lot of credit: the concept of failing fast.

Profit 101 #6: Let’s Talk About TAM
Is your target market big enough to support a scalable business? Is it so big that you’ll find it impossible to get any traction with customers? Sizing up TAM (Total Addressable Market) wasn’t just a box-checking exercise at HiddenLevers – it actually drove our decision making. I have some thoughts on how to use TAM effectively.

Profit 101 #7: Pricing and Unit Economics
Interacting with startups over the past year, I’ve been amazed at the wide range in how founders price their product – everything from free to wildly overpriced. But how do you set prices for a new product?

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All Startups need Capital – but what’s most Cost Effective?

Startup founders need capital – to pay salaries, to pay for marketing, to pay for everything that goes into building a business from the ground up. Bootstrappers may differ and say “I don’t need capital, I’m not raising” – but here (and I’m a 4x bootstrapper) I beg to differ. You are always using capital in a business – it just comes from different sources. There are tons of lists of capital sources out there, but here’s my attempt to provide some guidance on the pros and cons of different capital sources, along with ways to think about the cost of capital:

Customer Capital – I love this term. Customer Capital, aka revenue, is both the cheapest and highest impact form of capital. Since it’s coming from your customers, getting more of this capital is directly aligned with growing your business – success in sales begets more growth and cash flow which can be reinvested in the business.

Cost: This is the cheapest form of capital – from a “fundraising” perspective the cost of capital is actually negative, since free cash flow parked on your balance sheet can earn non-zero interest these days!

Pros/Cons: Not much to say here… there’s no better way to finance your company than through reinvesting sales! Bootstrappers beware – if you run a profitable firm, you’ll have to decide how much to reinvest versus how much to take home. I regret not reinvesting more in the past – when you’re paid many times revenue at acquisition, it’s more profitable to raise growth than to take excessive short term profits.

Sweat Equity – this is what bootstrappers think of when they say they don’t need to raise, but there’s an opportunity cost to your time dependent on your highest alternative salary. In my own case, I took a look at the years invested in HiddenLevers with a below opportunity-cost salary, and calculated that my sweat equity investment had actually been around 500k!

Cost: Calculate your after tax salary at the best job you could get right now, and compare that to your current startup salary. That delta is a simple approximation of the amount of capital cost you are borrowing from yourself via sweat equity. But what is the cost of that capital, the effective interest rate that you are paying? Well, since the alternative investment for this capital is likely other public market investments, we can pencil in around 10% here, since that’s what the S&P 500 has achieved over long timeframes since its inception.

Pros/Cons: Don’t be frightened by opportunity cost, as it’s still cheaper than outside investment – but use it as a yardstick to measure what a successful exit needs to be. Sweat equity may also be inadequate to start certain firms, and usually lead to a longer journey.

Revenue Based Financing + Venture Debt: Historically debt financing was not available to startups, as most are asset-light, meaning they don’t have anything to repossess if business goes south. And many a founder is familiar with using credit cards, home equity loans, and duct tape to hold their startup together. But newer sources have emerged, with revenue + invoice-based financing, working capital financing, and traditional debt becoming more common.

Cost: From an interest rate perspective, most of these will have a treasury spread of 500-1000bp – sorry for the finance gobbledygook – the rate will be 5-10% higher than the equivalent length US Treasury rate. That means a rate of 10-15% will be normal in this market!

Pros/Cons: A rate of 12 or 15% interest sounds crazy right? Well, if you’re growing your business at a fast rate like 40% per year, it might be totally acceptable, and cheaper than equity finance (because selling stock would be selling that 40%/yr growth to someone else). A major caveat – lenders will want to see some tenure (ie you’ve been around more than a few months) and positive unit economics, as per unit losses indicate that they may never get their money back! But that’s good discipline, we are no longer in a free money world, and all startups should be aiming for positive unit economics.

Friends + Family: The age-old equity investment!

Cost: Many founders now use standardized SAFEs or convertible notes for these rounds, but you may have more control over valuation cap and other terms, and generally won’t need to give up a board seat or other control. In terms of cost, see the VC section below, it’s higher than it seems at first glance!

Pros/Cons: Don’t mix work + family if you can avoid it! Think of it as diversification – if you tie work and family together with your startup, you’re putting it all on the line in one big bet. And this isn’t a source available to founders without some degree of affluence in their circles.

Angel Investors / Venture Capital / Private Equity: Ahh, the professional investors. I empathize with them, it’s not an easy job, particularly for early stage investors who are really investing in founders (as people) more than anything else. Many startups no longer need substantial capital to get started, but those attempting to conquer b2c or large-scale b2b verticals have substantial marketing needs.

Cost: Equity-based may be necessary for many founders, but it’s something of a necessary evil. If you fail, it’s all worthless anyway, so we don’t need to worry about that case. But if you succeed, and you get to the exit, you’ll realize just how much you paid for those first capital investments. If your startup manages a CAGR of 60%, that means that the cost of equity financing was at 60% interest, compounding annually!

Pros/Cons: I’ll say it again – there’s no more expensive source of capital than early stage professional investors. They are taking tremendous risks, and will ask tremendous compensation in return. But for the successful founder looking back, it may feel as if they’ve been eaten by a loan shark. What’s the old Kanye line? “Win the Super Bowl, drive off in a Hyundai…” For those playing in narrower markets (which are a great place to start), using any other capital source may be a good place to start. By maintaining a focus on unit economics, founders may be able to get to positive free cash flow, thereby unlocking Customer Capital on the road to success.

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Successful Exits: Real, Fake, and How to tell the Difference

For those of us in the startup world, the term exit has a specific meaning. It’s the endpoint of a founder’s involvement with a startup. A successful exit means that the founder made a bunch of money right? The old adage on startup exits used to be that exits were measured this way:

Small: You made enough to change you car
Medium: You made enough to change your house
Large: You made enough to change your life

In public, we see exits measured by total deal value, and we celebrate the unicorns, and the 9-figure exits – but how often are we able to see what really happened from a founder perspective? Actual founder outcomes are important to understand for those in this business – and it’s important to understand opportunity cost and how to calculate Return on Investment for a founder. Here’s a rundown on “fake” exits, secretly unsuccessful exits, and a take on how to measure a founder’s actual ROI in an exit.

Fake Exits

1. Private Equity majority ownership stakes: You see the press release, the shining coverage – xyz startup sells for $300 million, or $1.2 billion! Dig deeper, and it turns out that a PE firm has purchased majority ownership from the VCs backing a startup. While founders may receive some cash liquidity, they have to stay on to deliver the next phase of growth. Founders “exiting” in this way in 2021 may find that their stake is now worth much less than the announcement price tag, as late-stage startup valuations have shrunk dramatically.

2. Stock acquisition by a larger private company: everyone gets stock in the rocket ship right? I founded a company in 1999 that was acquired by a pre-IPO Intralinks for $1.2M on paper in 2000 – my shares were worth $350 after the crash (I was 22 and it was a great education). This kind of exit could go really well too – but it’s not technically an exit, as you are just trading one illiquid asset for another, and you must keep up the fight until a future exit event.

3. Down Exit (below VC preference): When VCs and other early investors invest in your company, they often buy preferred shares, which come with a liquidation preference. If the company is acquired for less than this valuation, then the investors receive everything. Companies that raised at extremely high valuations in 2021 may find themselves in this situation. Consider a company that raises $300M on a 1.2B valuation in 2021, and then falls 80% in value in 2022 (in line with its public saas peers). If the company is forced to exit at the lower valuation, founders could end up with nothing despite having built a one-time unicorn!

This has happened before.

How to Calculate Founder ROI

Let’s say you get past all the traps, and you’re on your way to a successful exit. What was the return on investment of all the blood, sweat, and tears in the end?

Consider my situation. I was saving $150k per year (working FT + fractionally) prior to starting HiddenLevers. It took 3.5 years for my income from the business to equal this opportunity cost. It took almost a decade to build HL and sell from there, a time in which the S&P 500 roughly tripled in value. If I had kept working corporate jobs, I would have invested 525k, and that might have tripled to around $1.6M by the time of the HL exit. So I can compare that amount against my exit as one reference point – if I hadn’t exceeded that amount, I would have been better off keeping my day job! [1]

You can calculate your rate of return by dividing total exit by the initial sweat equity investment amount (in this case 525k), and then annualizing the result. If it’s greater than 10% you beat the long term performance of the equity markets.

It’s also worth noting that had I kept my day job, I’m sure that my career would have advanced, further increasing my opportunity cost. Now, none of this matters if you weren’t saving a dime to begin with, or if your quality of life doesn’t suffer as a result of starting a company. But most founders have other options, so it’s worth making the comparison to understand whether the numbers add up. And of course, this also provides insight into another thing – just how much you value being able to leave the grind and build something for yourself!

[1] We use net savings and not top line income, because we need to know how much capital you would have been able to invest in the alternate case, where you never left your day job. Net savings is a reasonable approximation of that – but if you’re the sort of person whose lifestyle expands to absorb additional income, then a comparison of after-tax salaries in both cases might be more relevant.

[2] To really calculate this accurately, you could create a spreadsheet that calculates opportunity cost year by year, but here I’ve just used rough averages to illustrate the point.

P.S. If you got this far – one way I got to my exit was by running super efficiently, and I’m proud of HiddenLevers’ 53% EBITDA margin at exit. Fractional developers helped me to get to that level of profitability – see how I can help you do the same via fraction.work.

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I, For One, Welcome our New Admissions Overlords

*To paraphrase Kent Brockman

Once upon a time, there was a yellow brick road that led to college. You would submit your SAT scores, your GPA, your activities, you would write your essay – and you would submit all of this on paper! And all was good and just in the land, and all of the right students gained admission.

Utter nonsense of course! The college admissions process was a mess then, it’s more of a mess now, and it’s about to get hit by one neutron bomb everyone’s talking about (SCOTUS case which likely ends affirmative action), and another that may be even bigger.

But first, a blast from the past – I was among the last classes of students to apply on paper (Dec 1994) – perhaps one good thing about that era was that students applied to fewer colleges, since they couldn’t shotgun their application to 20 schools via the Common App or the internet. I applied to 6 schools, and had the good fortune to get into all but one. My safety school at the time even had programmatic admissions – if you had a GPA above X and an SAT above Y, you were essentially guaranteed admission, not just to the university but to the honors program!

Admissions have gotten harder since then, although the numbers are a bit of a lie, as elite schools try to lower their acceptance rates as part of the college rankings game – they use the ease of the internet to lure unsuspecting students to submit applications that have no chance of success. Admissions have also become less structured, as more and more schools have eliminated or de-emphasized testing requirements – with the occasional retrench, as my alma mater reinstated the SAT as a requirement (going to great lengths to explain that it IS actually correlated to success at an engineering school). But all of these changes pale in comparison to 2023…

College admissions will be impacted by the end of affirmative action. But they will also be deeply impacted by the rise of generative AI! I’m willing to bet that numerous high school students used ChatGPT to help write their essays this past December. And even with the new paywall, ChatGPT and its competitors are far cheaper than the pricey consultants that wealthy families use for essay ghostwriting (let’s just acknowledge that this happens). While colleges will attempt to deploy tools to stop the practice, students aren’t that dumb – they’ll add their own touch to the essays, making it hard to tell where the robot dropped the pen and where the student picked it up. So what happens to college admissions in an environment where affirmative action is dead, standardized testing is diminished, and essays are written by ML bots?

In the spirit of my days at HiddenLevers, here are a few potential scenario outcomes:

Back to Basics: Schools (in collaboration with SAT/ACT) will reemphasize controlled measures like standardized tests, GPA, class rank, and similar, since they can’t trust much else. This will dismay some and delight others, but it’s easy ground to tread since this was the norm not so long ago.

Human Interviews: Zoom eliminates a lot of the costs of the traditional college interview – but instead of using it as a “positive” tool, schools may begin to use it as employers do – as a primary filter mechanism. This approach will lead to a wide variance in outcomes just as it does with corporations (some are good at using interview-based recruitment to acquire talent, and some simply suck at it).

Welcome Robot Overlords? Here’s a guess for a post-affirmative action AI-enhanced world: admissions decisions will themselves will be handed over to machine learning. By placing a black-box trained algorithm as an intermediary between themselves and admissions decisions, colleges will achieve several goals:

1) Algorithms will likely achieve a higher fit toward whatever class composition the administration wants than human admissions officers. Simply feed in past classes or “idealized” classes and let the algorithm build such a class from the applicants. Colleges will take this approach because…

2) This decreases perceptions of bias by offloading human biases into the algorithm’s training (which leaves a lot more plausible deniability, regardless of the goals!)

3) The overall cost of running admissions, even with human oversight, will be substantially lower. And since we all know elite universities are just hedge funds with educational arms anyway…!

It’s an unsettled time for colleges and prospective students, and this post hasn’t even touched on issues like falling birth rates or the rise of alternative career pathways! But post-secondary institutions are going to have to wrestle with the impacts of ML just like the rest of us. In some situations there are clear right or wrong answers, but that’s not the case here. Would it hurt to put a robot in charge?

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Embodied Time

The New Year makes many of us think about time. I got to thinking today about embodied time, human time encapsulated into physical form. What is embodied time?

We call it money. We use money to buy things that we don’t have the time (or ability) to produce ourselves. Given infinite time, even I could learn how to grow cotton, harvest it, gin it, and weave it into shorts – the shorts I needed for a run today because I forgot to pack them!

If I had endless time, perhaps I too would follow the Gandhian tradition of making my own clothes. But I don’t, and I chose to use embodied time, aka money, to buy those shorts from someone else – in this case a large corporation. At the end of the day that corporation applied human time and effort to the creation of those shorts.

We apply modern technology to amplify human productivity, and the linkage between money, time, and the economy can be seen in the concept of Productivity. In economics it’s measured as $ of GDP per hour of labor – it quite literally expresses to us that money is embodied time! Perhaps AI and robots will free us from this linkage, but recent advances show us just how far we still have to go.

The economy today is constrained by a lack of time. Not enough humans are able or interested in investing their time in production, and this is the chief obstacle in bringing inflation to heel [1]. If the economy is constrained by time, that’s because we as humans feel constrained ourselves. Retirees cannot and do not want to spend their remaining years working, and core population growth has gone negative across the developed world – there just aren’t enough new kids on the block.

What’s to be done? We need to find more human time, more work hours. It turns out that capacity is right under our noses! An increasing percentage of working-age folks aren’t working, but it’s not at all uniform. A substantial percentage of full-time workers want MORE work – these are the workaholics that want 60 hours a week long term. Hey that’s me too, and I recognize them because I’m part of that crew. I’ve averaged 60 hours a week for most of my career, and many startup founders and employees are quite familiar with these sorts of hours. And medical residents would scoff at how easy a schedule that is!

When I started fraction, it was based on a core hypothesis: that 10% of the US professional work force both WANTS and is able to work 60 hours per week. This hypothesis has proven out – about 40% of developers, designers, and product managers that we’ve spoken to (a thousand and counting) are interested in taking on extra work, and roughly one-fourth of those have the capacity and ability to do so. 10% of the 80M US workers able to work remotely is 8M part-time workers, or 4M FTEs. When I validated this, I felt like a gold miner sitting atop a massive gold seam – in an economy desperate for workers’ time, we’ve got labor time enough to close the entire US labor shortage!

I’d like to take those workers’ time and embody it, turning it into money (and economic benefit) for US workers and companies alike. A lot of folks I know wonder why, after a successful saas software exit, why on Earth would I get into a services-oriented business? My answer: I feel I’m on a quest to supply the resource the country needs most today – skilled labor. More knowledge work getting done means more solutions to every problem today, from climate change to health care to Americans’ top current priority, inflation. I’ll plow all of 2023 into that, and hopefully in the process help a lot more people embody a lot more time.


[1] I’m generally optimistic on inflation given the trends seen in the energy, food, home, and goods sectors – the Fed’s moves are working. But they seem determined to keep the heat on to corral wage inflation as well, I wouldn’t be surprised if we see some negative prints in the coming year.

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Abuses of US Non-Profit Status

The holiday season is typically when US charities collect the majority of their donations. Let me start by noting that the US non-profit sector is vibrant, generating positive outcomes across many aspects of society. But there’s an unfortunate dark side, and a degree of abuse of the system that is appalling. When organizations with CEOs making $10M+ per year spend little on charitable services and pretend to be non-profits, that’s appalling. When organizations that are blatantly political in nature raise limitless funds and pay no taxes, that’s appalling. When some of the largest hedge funds in the land pretend to be “universities” while raking in billions, that’s appalling – and the list goes on.

I have given to charities for many years, but with the start of our family foundation, I’m now formally involved in the sector, making choices about grantees. The process of grant-making has enabled me to refine my thinking on the kinds of impacts we’d like to see, and on how to measure and quantify our impact. But seeing a range of pitches and organizations also helps me to see and understand what I don’t support – this rant could run a mile, but here are the quick hits, the sorts of organizations that I believe fundamentally abuse the tax code:

Non-Profit US Hospitals: The majority of US hospitals are organized as non-profits, and yet non-profit hospitals spend only 2.3% on charity care, which is actually less than for-profit hospitals! Non-profit hospital chain CEOs have compensation similar to Fortune 500 CEOs, and don’t do much charity work, so why don’t we end the sham and strip their status? Senator Chuck Grassley has been a lonely voice of reason on this issue for years. Ask yourself – why is it that doctors, pharmacies, medical labs, pharma companies all pay taxes – so why do hospitals get a special free pass?

And what’s more evil than pretending to be a non-profit while bankrupting patients by the thousands? Doing it while using sick kids as a way to tug at heart strings. Unfortunately most children’s hospitals also provide very little charitable care, and also pursue patients into bankruptcy just like any for-profit company.

501 (c) (4) organizations: These organizations were original meant to be “social welfare” organizations, but have now devolved into another form of super-pac which lobby and influence politics via donated funds! But why aren’t they taxed on “profits” like any other corporation? Both parties have used and abused these structures to the max now – pray for us poor souls in Georgia who have been pummeled non-stop by Walker and Warnock ads for months. Here’s an idea: instead of spending $500M on ads, you are raising enough money to actually impact the issues you claim to care about? You could literally buy school supplies for every teacher in Georgia, or pay for police officer training or equipment – whatever your issue, you could impact it with that kind of money, and prove your ideas to voters!

University Endowments: Elite universities have fallen into the same trap as hospitals, in that they no longer spend significant sums toward the public good, but hide behind non-profit status as their endowments grow ever larger. Harvard, Yale, Stanford and other universities with massive endowments spend less than 4.5% of their endowment annually, while generating investment returns of over 8.5% annually over the last decade. They grow the cash pile further by soliciting donations that they have no plans to spend! Is the primary purpose of a university to be a brand for endowment fund-raising?

Honorable Mention: Donor Advised Funds enable individuals to “donate” money to a “charity” and gain a tax deduction, but do not require that the funds ever be distributed! As a result, $142 Billion in donations sat in DAFs as of mid-2021, generating fees for investment managers while not being used for any further societal purpose.

What’s the solution here? Has the American non-profit system become so bloated that it needs to be torn down? A simple starting step might be to raise and enforce requirements around actual charitable work – if private foundations are required to distribute 5% to charities annually, surely operating charities can be required to spend 5% of their revenue on bonafide charity work annually?

P.S. I think there are a great many causes worth supporting out there in this giving season. GiveWell and the Copenhagen Consensus do a good job researching both charities and areas where donations can provide maximum benefit. And you can see my family foundation’s grantees here.

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Where Have All the Workers Gone?

The October employment report was released last Friday, and it told a familiar story: the US economy is still suffering from labor supply issues, even with the pandemic (mostly) in the rear-view mirror and the Fed trying to apply the brakes via rapid rate hikes. As I noted in a fraction blog post last week, the professional workforce of the future is actually shrinking, hit by declines in college enrollment and legal immigration. Let’s dive a little deeper into the present situation – how many workers should we expect the US workforce to have right now, where are the missing workers, and what’s to be done about it?

The BLS October 2022 data showed a labor force participation rate still 1.2% below February 2020 levels. Population growth since that time implies a labor force that should be at least 3.2M workers larger than it is today – so what happened?

Early Retirements – Departure of the Boomers: -2.4M workers

The St. Louis Federal Reserve estimated that 2.4M additional workers retired early from the start of the pandemic through Q2 2021. Subsequent analysis by the Washington Post indicates that retirees are returning to work – but only at levels found in 2019, so this doesn’t make up for the pandemic era losses.

COVID Deaths and Long COVID: -2M Workers

Per Statista, just over a quarter million working age Americans have died of COVID since the start of the pandemic, further reducing the workforce.

COVID’s larger impact is through the impacts of long COVID – the Minneapolis Fed and Brookings estimate that 1.8M FTEs worth of work have been lost due to long COVID job loss and work hours reductions.

Lack of Immigration – Trump + COVID: -1M workers

This Census chart tells the story – changes in federal immigration policy and the closing of borders during the pandemic led to a huge loss in immigration. 1.5M less immigrants, with a 65% labor force participation rate, equates to a loss of roughly 1M workers due to changes in immigration flows.

The US added 1.5M less immigrants over the five year period from 2017-2021 than it over the previous five years (2012-2016)

Summing It All Up: 5.4M Workers Missing

The latest JOLTs report shows 10.7M job openings – 5.4M more available workers, when added to current unemployed (6.1M) would make for more available workers than jobs. That’s the opposite of the current 2:1 ratio of jobs to workers!

Alas, we can’t wave a wand and undo the damage of the pandemic, and many early retirees are happy with their new lives. Immigration is beginning to rebound, and will make a long term difference.

Short-term, we’ve got to make do with the workers we have – and that’s why I believe that fractional work is the future. Fully utilizing the surplus capacity of the existing professional workforce in America would add 4M FTEs to the labor market, almost fully replacing the 5.4M lost. In the coming weeks I’ll delve deeper into the fractional workforce and how it can help.

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The Future of Work is Here!

I’m excited to announce the launch of fraction.work on ProductHunt – upvote fraction.work there to help us gain exposure and change the future of work!

Readers of this blog know that I like to focus on big macro trends. The macro trend here is incontrovertible – working age populations are flat or dropping in every developed country on Earth. We keep hearing that the robots are coming, and that automation will take all the jobs – meanwhile US unemployment is back near all-time lows, despite a Federal Reserve moving rapidly to force a recession.

There’s only one solution: expand the labor supply. And the fastest way to do that is to tap into the millions of American workers willing to work more, or to keep working part-time.

At fraction.work it’s early days, as we are focused for the moment on fractional software developers. But in the software field alone, I estimate that there are 500,000 additional workers available on a fractional basis. McKinsey’s research shows that over half of all jobs can be done in a remote or hybrid fashion – fractional work opens the door to millions more employees filling open positions we can’t otherwise seem to fill.

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To: Old-fashioned CTOs who think software development can’t be done part time

As I work to build my new startup fraction.work, I’ve come across the Availability Objection more than once. In essence, it’s some variation of “there’s no way a part-time developer could EVER be effective on MY team!”

In my latest post on the company blog, I outline how availability is a silly objection to fractional work for modern software development organizations. Of course if you’re still insisting all of your employees go into the office 5 days per week, perhaps you’re not modern enough to try this just yet…

Long story short, any CTO or VP of Engineering with a clue knows that half of a senior software developer’s time is worth many times that of most full-time junior developers (whose productivity is actually negative when they first start). So why wouldn’t you consider hiring fractional senior developers to help build your team out?

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My experience as a fractional software developer

I started fraction.work earlier this summer, based on my experiences as a fractional software developer earlier in my career, and my experience hiring fractional developers while running HiddenLevers.

Those experiences guide me to believe that there’s a huge market for long-term, part-time software development work (that’s how I define “fractional” software development). We’ve seen fractional CFOs, CMOs, and GCs, but the adoption of this approach has been much slower at the individual contributor level and in particular in technology roles.

This is ironic because software development is more amenable to remote work than any other role – witness the explosive wave of offshore and nearshore development since the pandemic normalized remote work! Employers oddly feel more comfortable working with someone who half a world away and who may not grasp nuances of cultural difference, than working with someone in the US who is available 30 hours a week?

I know this isn’t really true – but many companies have a mental block when it comes to part-time work. As part of normalizing how effective it can be, I detailed the experience on the fraction.work blog – I hope you’ll follow the story there!

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