This March, I was planning to give a speech at SaaStr US, about how our company, Flywheel, built something big, right in the middle of Omaha, Nebraska. This week is my last week at Flywheel, and while the pandemic prevented me from giving this speech on stage, I’m publishing it here, as a thank you note to the company of extraordinary creatives and founders Tony Noecker, Rick Knudtson, and Dusty Davidson who welcomed me onto this rocketship in 2016. Here we go.
I grew up in Nebraska with one single belief: that if I wanted to do something big, I needed to go somewhere big. I left town the moment I graduated and headed off for bigger cities on the coasts, building experience in places of great abundance.
And then on the very same day in October in 2012, two things happened that changed my mindset: I moved home to Nebraska because after fifteen years of chasing big opportunities in big cities, I wanted to build a life back home near my parents. Coincidentally, on that very same day, three guys I hadn’t met yet, working from their dining room, launched Flywheel, a company that set out to change the way creatives manage their websites.
We wouldn’t meet until three years later, when Flywheel, which by then had taken off and was in hyper growth mode, closed their Series A funding round, and their investors told them they really ought to have a budget. So they hired me.
Until then, I didn’t really think that a fast growth company in Omaha, Nebraska was possible. See, building a company in the middle of Nebraska is a lesson in scarcity. By nature, being somewhere small is about things being “scarce” — there’s just less of everything.
Building a Company in Corn Country: A Lesson in Scarcity
If you’re building a company in San Francisco, Boston or Austin, there is an abundance of everything — people, companies, investor dollars, peers. Building a company in these places is competitive, sure, but the resources you need to do it are abundant. Building a company in Nebraska is a different story.
Specifically for technology startups, the story is even more challenging. Let’s understand the reality of building a technology company in the middle of Nebraska.
First, there’s no money. Ok, let’s say there is a scarcity of investment dollars. To put it in relative terms: In Nebraska in 2018, 18 companies raised $27 million dollars. By comparison, In California in 2018, 2,869 companies raised $78 billion.
Ok, now, California’s a big place with a lot of people and Nebraska is… less so. But even so, California deployed $1,972 per capita. Nebraska? Just $14. Access to capital is really challenging and probably also the most cited reason for startup failure in our region.
But wait. Isn’t there a LOT of wealth in Nebraska? Warren Buffett and all that? Yes. Omaha is a top location for the number of billionaires and number of Fortune 100 companies per capita. The money and the “industry” is there. But the startups aren’t.
So what’s going on here? Why is a place so rich in resources so scarce in high-growth companies?
First, it’s about a scarcity of knowledge and mentors. Midwestern startups often lack the mentors and peers that might push them to think bigger, toward a hyper-growth business instead of a lifestyle business. It’s hard to find a peer or mentor that has blazed the trail before, knows the pitfalls, and asks the bigger questions.
Second, it’s about a scarcity of resources. The result of that lack of mentors and peers is the investment profile I described above. It’s a bit chicken and egg — Without entrepreneurs who learn from fast growing companies that are winning, the ideas aren’t big enough. Our angel investors see little that excites them and say “not a lot of good ideas here in Nebraska.” Meanwhile, our entrepreneurs will say “there’s no money in Omaha. The funding community here doesn’t get it.”
Finally, it’s about a scarcity of deep startup experience. To be clear, we have a LOT of incredibly talented people in Nebraska. But most of us do not have deep experience in starting or scaling technology companies. That’s not surprising, when you look at that number of companies raising money in any year.
Startups are hard, and they have a different set of rules. Hard work isn’t the problem — Nebraskans are no strangers to hard work. The problem is that the risk is different. Startup employees are asked to work a lot more hours for often a lot less money, but with equity as an upside if the company is successful.
In Silicon Valley, that startup risk profile is not just accepted — it’s celebrated. People know what they’re getting into, but they also know the upside: there’s equity, there’s huge career experience in a short timeframe, and there’s the career equity associated with being with a winning company. That’s ingrained in the culture in San Francisco, in Austin, but it’s not in Omaha.
Right! So who wants to build a company in Omaha?!
Look, I know how it sounds. If building a company here sounds really hard, it’s because it is. If it sounds lonely sometimes, it’s because it is. But… if it also sounds like an opportunity to future-proof your business, create a system for growing extraordinary talent, and learn how to connect to real customers very early on…it’s because it is.
That scarcity can be the very thing that creates abundance, opportunity, and market differentiation. We saw it happen at Flywheel, and I think we’re going to see a lot more of this in smaller markets in the future.
What Makes Flywheel Different
I believe that at Flywheel, we are winning not in spite of this lack of resources, mentors, and experience that exists here, but because of that scarcity. I believe that scarcity makes us make different choices out of necessity, and makes us turn challenges into opportunities. I think we are doing it in three big ways:
1. We make our customers our mentors.
2. We take bets on the potential of people.
3. We aren’t afraid to build it ourselves.
Let’s talk about each of them in turn.
- We Make Our Customers Our Mentors
Let’s start at the beginning, when Flywheel was building out our platform for the first time. Our founders built the platform that they wish existed when they were designers and developers, freelancing and building websites for their customers. But it wasn’t as simple as that, because there was almost no one to ask about how to build a platform-as-a-service company here in Omaha.
There were no mentors, no beta testing groups, no one to really pitch the idea to just to see what resonated. And there was no budget for marketing either — so A/B testing wasn’t a thing. And there was really no time to lose, because there wasn’t a lot of runway to keep the company afloat.
A lot of founders would give up here — when you’re trying to build a product that doesn’t exist yet for a niche market, and no one to validate or challenge the idea, you’ve got a major uphill battle ahead.
The scarcity of both customers and capital here meant that these guys had to either create a product in a vacuum, or find mentors in unconventional places. So they did what they knew: they hustled.
They built and shipped product quickly. And then they got on the phone with any customer who would talk to them.
Our customers became our greatest mentors, quickly validating the features they loved, and calling b.s. on the stuff that didn’t help them run their business. We got clearer and clearer about our core customer persona, and built messaging that spoke directly to that customer. We knew who our customer was, not because of any market study or any analyst’s report, but because we talked to them every single day.
What resulted was something every podcast or business book today encourages for any founder: a maniacal focus on the customer. We didn’t develop it through a companywide “customer first!” campaign. We created a maniacal focus on the customer because literally the only people we had to ask for advice back in 2012 were people that wanted what we were selling enough to talk to us.
This is a scarcity of peers and mentors that Flywheel turned into an abundance of true customer insight, and it stands today as our differentiator in the market. The reason our customers build their creative agencies with Flywheel is because our product speaks directly and clearly to a market of small agencies and freelancers, and they in turn help us understand exactly what our product needs, and what to leave behind.
2. We Took Bets on the Potential of People
Growing that core of customer-mentors… well, it worked. The company started to take off, and suddenly, we needed more people to build software and people to manage onboarding and people to support our platform and people to sell it. We were faced with… the talent shortage. Still, today, every time Flywheel leaders speak at an event, the first hand up in the Q&A is the question “How are you dealing with the TALENT SHORTAGE?!”
It’s a popular topic. But really, it’s a popular excuse for failure. As I mentioned, many companies will blame their failure on a talent shortage. The mentality is that talent is scarce — everywhere — and that the only place to find the “best of the best” is in the technology hubs. And then, IF you find it, it will cost you dearly.
It’s the reason so many modern offices are filled with dogs and beer fridges. We’ve made talented, experienced people mythical, and the extraordinary amenities and perks have become so commonplace that it is nearly impossible to stay competitive. (Except that Nebraska can promise you a one bedroom apartment for $500 a month and that’s hard to beat in Silicon Valley.)
This constant ratcheting up of expectations of “employee experience” means that for a young company just getting started, especially in Omaha, Nebraska, it might feel pretty impossible to attract and retain extraordinary, experienced leaders.
The scarcity here is about not having access to world class experience. It’s no commentary on how talented or extraordinary Nebraskans are — they simply haven’t had the opportunity to build experience at the world’s best technology companies, most of the time. We’re not a prime “relocation destination” for former technology super stars, you see.
At Flywheel, we took an unorthodox approach to this scarcity. We did not distract ourselves with raising enough money to pay for perfect pedigrees, nor did we settle for team members that we didn’t believe could take us to the moon.
Instead, we invested in the potential of people, rather than on their value today. We bet the farm that the interns we hired today would be the leaders of our future, and then we backed up that bet with investments in training, employee experience, and culture.
Our CEO often says,
“It’s easy to hire 12 software developers next month in Omaha. You just have to start two years ago.”
This philosophy — that taking bets on the potential of people will pay larger dividends than paying for industry experience — has ruled our talent strategy since the beginning.
I’d love to tell you that it was a noble and intentional strategy, but in fact it was born of nothing but scarcity. When we got started, we had neither the money to pay extraordinary talent, nor the experience here in Omaha that we would have wanted to pay top dollar for.
So what did that look like for us?
We invested really, really early in having a full time recruiting, employee experience, and training staff, compared to most companies of our size. We hired a full time trainer when we were about 50 people, and some of our advisors found that to be excessive or unnecessary. We did it because we believed that training would create alignment in the onboarding experience for everyone, and that we could take bets on people with potential but not experience and leverage their time here to build them up.
Because of that investment in training, we could hire a LOT of people really early in their careers. We hired dozens of people with extraordinary potential right out of local code schools. They often started in customer support roles, found the mentors and training they needed, and now they’ve built careers here. They build our product, manage our platform, and teach our teams. Their success stories are a huge motivator for those just exploring careers in technology, and we attract amazing people because of it.
Also, we were able to develop leaders from unconventional backgrounds. An engineering manager in Omaha is generally considered one of the toughest roles to fill, and hoping for that role to be filled by a woman or person of color is considered nearly impossible. At Flywheel, two of our star engineering managers are women who started as interns and individual contributors and found the training, mentoring, and encouragement they needed to build careers as engineering managers here.
This is a scarcity of experience that Flywheel turned into an abundant potential to GROW talent, and it stands today as the differentiator in Flywheel’s culture. Our employee retention is the highest of any of our peer companies, and our investments in training, professional development, and career growth are the largest reasons people stay with us. They see a future with Flywheel, not because of the beer fridge and scooters, or even the stock options, but because of the potential each team member has here to achieve what they didn’t think was possible in their careers. Our teams don’t use Flywheel as a “stepping stone” to another company or role — they see Flywheel as a long term home for their career.
3. We aren’t afraid to build it ourselves.
Even with teams you’re growing yourself, and customers who become your mentors, there is the reality of scarcity of resources. Without much money, it’s hard to test out new technologies to build your products. It’s hard to decide whether to hire a sales leader or a developer. And it’s hard to have the data or analytics you need to understand what’s happening in the business. Sometimes, it’s easy to get paralyzed by this, and assume that without the resources to invest heavily in these things, your business simply has suffer from the scarcity.
At Flywheel, we have a simple solution to this scarcity. We just aren’t afraid to build things ourselves.
From the very beginning, we followed Paul Graham’s advice to “do things that don’t scale.” The idea of course is to do things to attract talent, delight customers, and launch product when you have 1,000 users that you might never be able to do if you had a million users. When you do that, you get to market faster and you fail faster. And if you’re a hosting company trying to appeal to designers in the middle of Nebraska, you might just carve out a way to stand out, even without very many resources.
You might, for instance, engage your entire team in a 1980s photo shoot, shot in-house, and pay a few hundred bucks to sponsor an after party at big design conference. Neither expensive nor conventional, but focused on differentiating ourselves in the market.
In Nebraska, we’re used to this. It’s part of a very midwestern work ethic that tells us to “use it up, wear it out, make it do, or do without.” The resources available to us often have to come from our own ingenuity and grit, not an expensive, complete system.
At Flywheel, we do the jobs that we can’t afford to hire and even today, and we build the tools we can’t afford to buy or are not ready to invest in. Even now in the company, when resources are more available, we see this as a huge part of what makes us successful and what makes us stand out.
Last year, we saw an uptick in customers who were leaving Flywheel, without very much explanation. We reviewed the data, we talked to our account managers, and we looked at the “reasons for leaving” in those customers, but still couldn’t find anything that might point to why so many customers were cancelling this particular product.
But, true to form, we didn’t hire a consultant or a full time retention specialist — we needed to quickly find the problem and solve it, so we did what we’ve always done — we just did the work ourselves.
At Flywheel, we call this “spreadsheet hustle.” We exported the list of customers who left us, and armed with a handful of Starbucks gift cards, we just called them and asked for 15 minutes of honest feedback about why they cancelled.
Their feedback was gold. We ended up really glad we didn’t spend a lot of cycles trying to change the product, because what we found was that we weren’t selling a bad product, we were selling a great product that our customers weren’t sure how to use. GOT IT. We changed the onboarding strategy and improved churn on that product considerably.
This is a scarcity of resources that Flywheel turned into an abundance of expertise. It made us more clear about the value we provide to our customers, and the challenges of our own company.
Grateful for the Scarcity, Motivated by the Hardship
I don’t want to paint a picture of a company so intentional and virtuous that we wouldn’t have taken an easier way if it was offered.
Trust me. If we’d had more money for marketing, we may have focused more on leads and less on customers. If Omaha was teeming with SaaS leaders, we may have skipped the mentorship and training and just tried to pay for that experience. But in true midwestern form, we are grateful for the scarcity, and motivated by the hardship.
Because we had to rely completely on customers to build our product, we’ve developed muscle memory for involving customers at every decision.
Because we couldn’t afford to hire the best experience, we built the capabilities for developing and growing talent that we can now do over and over again.
This conditioning serves as future-proofing. The work we did when we had to set us up for competitive advantage in the future. When our competitors spin their wheels developing product features that customers don’t need, we find a lot of efficiency in the communication and alignment that comes of being in constant communication with our customers. When other companies are freaking out about talent shortages, we know we have an endless well of extraordinary talent just waiting to be developed. It doesn’t make us immune to competition, but it does make us less reliant on outside forces and more capable of building something extraordinary from within, no matter our location.
I tell this story because every company, regardless of location or age or product or industry, encounters scarcity. Everyone who is building a company believes that something crucial to their business is scarce. The goal is not to remove the scarcity, but rather, to make it work in your favor. Being in a place without peers or precedent in your business is tough — it’s lonely and it’s scary; but it’s also creative and untethered, filled with building and growing. Being in a place without deep experience in your industry or product means you’ll have to learn to do the job yourself, and then you’ll have to teach someone else to do it. But it also means that you can grow the leadership you dream of hiring.
When you can see today’s interns as tomorrow’s VPs, you’ve turned scarcity into abundance. When you can turn an angry customer into your favorite product expert, you’ve turned scarcity into abundance.
If I’d given this speech at SaaStr, I would’ve said all that to the entrepreneurs and investors and geniuses at this conference. I would’ve told them the lesson I learned when I moved home and when I joined Flywheel: that when you take a chance on some place small, some place with not as much, and you think about it in a different light, big things can happen.
In Nebraska, this is what we’ve always done. Since we showed up here, we’ve turned empty fields into food for our tables.
Scarcity isn’t an unfair disadvantage. Scarcity, held in the right perspective, is abundance waiting to happen.
All photos are courtesy of Flywheel and are included with permission.