‘Software, At Your Service’ CEO Interview Series: Dan Teran, Managed By Q

Happy New Year folks! For the next edition of the ‘Software, At Your Service’ CEO interview series, I reached out to Dan Teran, one of the most interesting founders I’ve gotten to know over the last year. Dan is the founder and CEO of Managed By Q, a rapidly growing NYC startup that is bringing to bear the power of software and a marketplace approach to rethink the office management services space. Dan and his co-founder Saman are hugely ambitious, have no shortage of hustle, and have been very thoughtful about every small detail around their business. I have touched upon the thesis of on-demand services for the enterprise earlier too, and I think Q exemplifies that thesis.

I hope you enjoy the chat below as much as I have enjoyed getting to know Dan and his vision for Q:

DanTeranManaged by Q is a pretty unique business. How did you stumble upon this idea, and what about the idea compelled you enough to start this company?

We actually started working on the business looking at a similar problem for a different customer. My co-founder, Saman Rahmanian, was the person in his building responsible for choosing a maintenance company and was blown away with how bad the options were. I had recently moved into a co-op in South Williamsburg and was also having persistent issues with the building maintenance. Saman designed the original iPad concept and kicked things off by retaining a residential property manager to help us learn about the market, and we ultimately decided that condo and co-op boards were terrible customers, and turned our attention to office managers.

For me personally, I got obsessed with the idea of creating an operating system that could run physical space with the reliability of software. The more we talked about it and socialized the idea everyone agreed that this was something that had to exist. So we went to work building it. That core idea hasn’t changed.

Q is an operationally heavy service business. How do you ensure service quality remains consistent as the company grows? Are there specific strategic decisions or measures you’ve taken to ensure high customer satisfaction?

This is definitely the single greatest challenge in our business, and something that we put a lot of energy into solving.  We’ve seen numerous businesses in the consumer space really struggle with this exact thing and put a lot of thought into building our business in a way that optimizes for the best quality of service.

Probably the most obvious strategic decision we’ve made is to put a big emphasis on being the best employer to all of our employees. The first decision was to employ people properly as W-2 employees, the second was to figure out what would make this a really great job and attract great people, and the third was building shared prosperity into our business model. As a result we’ve built an amazing, diverse workforce that is all aligned behind a the single vision of making it easy for our clients to run an office, and everyone shares in the company’s success.

You’ve managed to do a great job of layering on additional revenue streams on top of your core office cleaning services business. How do you think about what products/services you can add to your existing businesses?

The core value proposition to our customers is that we make it easy to run an office, all of the opportunities adjacent to cleaning have spiraled out from there. We don’t think about how we can make more money, we think about how we can make it easier for our clients to run their offices and the money tends to follow. We’ve been able to leverage our access to the physical space and our field operators to deliver a uniquely high level of service, this is part of why it is so important that our field operators are incentivized to go above and beyond the call of duty.

A couple of weekends ago, a Q Operator was cleaning a client’s office and noticed a leak from the upstairs neighbor, we were able to get a handyman on site within hours to coordinate all of the repairs without any involvement from the office. If they hadn’t been using Q it would have been a miserable weekend for the company. The building owner is actually now recommending us to all of their tenants because we were able to save the day. This wouldn’t have been possible without the technology we’ve built, the amazing Q operators, and a robust enough service offering to solve all of the client’s problems.

Beyond saving the day in these types of situations, the fact that we’re in the space every single day puts us in the optimal position to do things like replenish and re-order supplies, which is a huge hassle for office managers.

What does Q look like at scale, 5 years from now?

This is a big question. I’ll start by trying to make it simple. If we’re successful, I think 5 years from now Q will be in every interesting office in the US.

In the past 18 months we’ve been very successful in scaling our core services, which has allowed us to aggressively expand into a lot of offices, but our ambitions are much bigger. We’ve had great success expanding our service offering beyond core services by working with Q Partners in our marketplace, and anticipate massive growth on that side of the business. We’ve had the opportunity to really get to know our customers in the past year, and are building some amazing product to support the needs of office managers – right now all of our customers use the cleaning service but that will not be the case forever, we are building products that adapt to support the unique needs of every office manager rather than prescribing a one size fits all solution tied to our services.

I think I’ve revealed too much… the best is yet to come.

In a lot of ways, you are an atypical tech entrepreneur with an atypical business. Q is very operationally heavy for a B2B business, you and your co-founder weren’t coming out of Google or Facebook or an Uber. Did that impact your fund raising strategy? Was it tough to raise capital in the beginning?

We’ve always been able to find investors that are aligned with our vision for the company. We definitely started raising capital at the height of the on-demand economy frenzy and had a lot of investors that wanted us to pursue a 1099 model, but it never made any sense for our business. The right investors got that immediately. I don’t have any data to back this up, but I’m guessing more people have lost money betting on companies that had “Uber-for-X” in the pitch than have made money (unless they are in Uber).

With regards to our backgrounds,  I definitely think there was some hesitation around our operating chops early on, but we were able to raise a small angel round from some really incredible investors which gave us enough fuel to prove ourselves and the business case. We’ve also put a big focus on hiring into our weaknesses and hired a phenomenal VP of Ops who had been at Quidsi and Amazon very early on, and a SVP of Finance + Admin who had run finance and admin at the Huffington Post and Exhale Spa.

Talk about the difference between your experiences raising your seed round vs. Series A? Any learnings in there that you could share with other founders?

I get asked about fundraising a lot, but having only raised three rounds of financing in my life I’m far from an expert.

I think one thing that I’ve learned is that it is a totally different job at each stage of the company, so you really need to lean on people who have seen a lot (usually investors) to coach you through what that means. Very few skills transfer between stages, you need to be able to tell a good story at every stage, but the later stages require a much deeper understanding of your understanding of the business, industry, and even the US and global economy. One oversimplified way to think about it is that with each subsequent financing you are one step closer to being a public company CEO, assuming you don’t get fired, and public company CEOs need to know this stuff.

My best advice is probably to read everything, ask for help, and don’t assume you know anything.

What were some of the mistakes you made early on as a first time founder, that in retrospect you could have avoided and would advise other first time entrepreneurs on?

This is also a question I get a lot that is kind of tricky, it is very hard to separate things in the past that were stupid mistakes, and things that were lessons that I needed to learn in order to get better and smarter. Probably the biggest mistake to avoid hiring poorly. Even if you spend all your time on hiring, spend more time on hiring. The longer I’m in this business the more I see how amazing great hires are and how devastating bad hires are. Businesses are complex organisms, and the wrong people can do a disproportionate amount of damage, even if they are well intentioned.  Always, always, check references. If you think people don’t lie on their resume, it is because you are not a sociopath!

Where are the greenfield opportunities in SaaS?

SaaS is no longer a new business model. One look at any of the market maps for marketing tech, sales productivity apps, HR tech or other functional areas within enterprises would tell you how crowded these traditional enterprise software landscapes have become… Is there another billion dollar company to be built in some of these areas? Sure, and I’m actively looking for those. But where are the large greenfield spaces? What are the areas that haven’t seen a modern piece of software in years? I believe most of the greenfield opportunities in SaaS today are beyond the traditional horizontal/vertical enterprise software areas. As new distribution and pricing models emerge, and a younger workforce looks for modern software tools even in the most old school industries, some of the hitherto untapped areas are becoming ripe for SaaS to penetrate. Here are a few areas I am beginning to see some interesting startups emerge in:

  • Government software: I think the combination of the recent hires the Obama administration has made + the stark difference in the quality of software government officials use in their work vs. personal lives has gotten to a point where we are going to see huge SaaS opportunities open up across a spectrum of government functions – better software to manage elections, create/manage/store documents and forms, communicate with citizens, allocate city and state level resources, finance management, budgeting etc. Traditionally, selling to governments has been associated with long sales cycles and conservative buyers. But I think that’s beginning to change. Am increasingly coming across early stage startups seeing great traction selling to states and municipalities, in some cases while deploying an inside sales model, which would have been unthinkable even 3-4 years ago.
  • On-demand services for the enterprise: The on-demand economy has had a great run over the last few years. The model that Uber and Airbnb pioneered is now being deployed to all forms of consumer goods and services – food, groceries, car valet, laundry, spas etc. But surprisingly, to me, one area where on-demand startups haven’t focused enough is the enterprise segment. Workplaces have similar needs as households and individuals – food, office supplies, cleaning, maintenance/repair services, transportation, legal and accounting services etc. My view is that we will start seeing some interesting startups come up that offer similar on-demand services with an exclusive focus on enterprise needs. ManagedbyQ is a great example of a company that’s leveraging this opportunity.
  • SaaS for the hourly worker ecosystem: Historically, most of the big enterprise software companies have been built around addressing the needs of knowledge workers. Salesforce, Workday, Zendesk, ServiceNow, Veeva, Marketo, Tableau are all examples of software that address the needs of knowledge workers. This is largely driven by two factors: (1) Knowledge workers tend to spend a lot of time in front of a computer screen and the software workflows they use are mission critical to their daily output and (2) Knowledge workers tend to have more budget to spend on software. However, with everyone owning a smartphone now and freemium distribution models having proven out, almost everyone now stands to benefit from the power of software. Uber, Lyft and Instacart are the most obvious examples of startups that have leveraged the penetration of smartphones and built massive franchises with 1099 workers on one end of their marketplaces.
  • Heavy industry software: Heavy industries like construction, mining, oil and gas etc. are still primarily using legacy on-premise solutions in various aspects of their business. From project management to cost/budget management to big data applied towards machine optimization, there is a ton of greenfield opportunity in these industries. With smartphones and tablets everywhere, field workers in these industries now have the opportunity to use software to make better decisions on the go… Why wouldn’t these industries leverage modern software to drive higher efficiency gains than they’ve ever had the opportunity to?

What other areas are ripe for SaaSification, according to you?