5 Lessons from Tandem on Raising a $7.5 Million Seed Round and Rising to the Occasion in Uncertain Times

"Our hope as we transition to a world where people are more remote, is that it doesn't become asynchronous.” Tandem is the first virtual office built for human connection.

"Every company is remote"
"Every company is remote"
Tandem presenting at Demo Day by Brianne Kimmel

In August last year, Rajiv Ayyangar and his team at Tandem were graduating from Y Combinator’s summer batch, preparing for their Demo Day presentation, and pitching investors on their thesis that “every company is remote”. Their vision resonated: they raised a $7.5 million in seed funding at a valuation over $30 million in a round led by Andreessen Horowitz. (Note: Worklife is an investor in Tandem).

Tandem is a new type of communication tool — a virtual office for remote teams — that takes a decidedly different approach to other remote work apps on the market. It’s synchronous-first and replicates the feeling of a real office. That includes social features like a water cooler and rapid video chats and screen sharing that simulate shoulder-taps.

The founding team at Tandem, which includes Bernat Fortet and Tim Su, was a pivot from a cryptocurrency startup the team was originally working on. Ayyangar describes their pivot as “collaboration first, and idea second”, citing his desire to work with the most talented people he knew as driving the inception of Tandem. This “collaboration-first” mentality has been central to everything they do including assembling their team, building the product, and surrounding themselves with a strong advisory board.

In the lead-up to Y Combinator’s first virtual Demo Day and seven months after pitching his own startup on the big stage, I spoke with Ayyangar about Tandem’s trajectory since Demo Day. He provides 5 key lessons for founders who are on the cusp of graduating from Y Combinator and wondering about life beyond the accelerator:

  1. Build your product with a specific vision of the future
  2. Approach fundraising with a problem-first mindset
  3. Hire owners and people who have worked on hard problems
  4. Build an advisory board that’s additive not duplicative
  5. Adapt and rise to the occasion, even in uncertain times

Build your product with a specific vision of the future

“The future of work is remote” has been a buzzy catch phrase for years, however recently it has gained momentum as early stage founders seek to access a global pool of technical talent in more efficient and affordable ways. Ayyangar and the team at Tandem are building their product towards a more specific vision of how remote teams will communicate in the coming decade and beyond: synchronous-first.

Table showing a new vision for remote team communication

This is diametrically opposed to how incumbent remote company builders have described their approach to team communication. Jason Fried, the CEO and Founder of Basecamp (and arguably, one of the founding fathers of modern remote work), has taken an asynchronous stance: “We eschew status, we reject presence, we avoid abstraction”. Ayyangar and his team are making a different bet:

“Our hope as we transition to a world where people are more remote, is that it doesn't become asynchronous. I think that’s in contrast to the companies that went remote three to five years ago; they've had to develop an asynchronous culture. You lose a lot of human connection. You lose a lot of the excitement that comes when you're brainstorming on an idea spontaneously. We want to recover that and give people those same modes as they have in person.”

Rather than taking cues from legacy companies, Ayyangar and his team opted to build Tandem by reevaluating assumptions about remote work from the ground up:

“Your first instinct when you transition to remote work is to look for the same thing you had in the office. You look for lunchtime conversations. You look for white boarding sessions. You look for being able to just have quick conversations and spontaneous conversations about things that occur to you or ideas.”

By deeply considering the key elements of a productive, communicative, and collaborative office environment, Tandem has set out to bring those elements to a virtual workspace:

“It's very difficult to find a direct transcription of those actions into digital work. The way we've approached it and the way we've built our technology stack is a translation, not a transcription...we thought from first principles and from experimentation about the function of each of these things in a physical office and how do we get that same function remote.”

Tandem is tightly integrated with fan favorite work tools like Notion, GitHub, Google Docs, Figma, Asana, Trello, and dozens more. Hanging out in Tandem means you can see what apps your colleagues are currently using, providing you with a sense of what they’re working on and whether they’re heads-down coding or free for a video coffee chat. Ayyangar underscores the importance of “presence” in building a high-trust remote environment that resembles the dynamic and high-connectivity relationships we see in person, but for the digital workspace.

Tandem is finding inspiration in an unusual place for a workplace tool: teenagers playing video games.

“One of the things that gives me a lot of optimism is the younger generation. They're making friends with people they've never met before. Playing multiplayer games online, talking on Discord, listening to music together, and they're building those kinds of connections.”

Real workplaces balance work and play; Tandem does too. One of their newest features is a Spotify integration that lets you see what your colleagues are listening to, tap, and hear the same song or playlist. Features like this aren't random or a nice-to-have. Instead, they serve Ayyangar’s specific vision of future digital workplaces where there’s a feeling of “being around the same table”.

Key Takeaways

Make no assumptions about your product space; work from first principles.Have a specific vision of the future that your product serves.Consider every feature you add (and don’t add) in the context of that vision.

Approach fundraising with a problem-first mindset

While going through Y Combinator in 2019, Ayyangar and his team repeatedly got the same advice from Y Combinator partners about fundraising: “focus on the user, focus on the problem, focus on the company”.

During their three months of Y Combinator, rather than heavy networking or creating a strong investor funnel, Tandem placed their concentration on the problem they were solving. Ayyangar counts “focus”, as the reason Tandem attracted investor attention.

Rather than splitting their attention and spending three months of Y Combinator courting investment and simultaneously building the product, they chose not to multitask. Instead they carved out a small window, as their time with Y Combinator was coming to a close, to build relationships with investors.

Chart showing Tandem spent time mostly on product in the beginning than switching to fundraising at the endn

Tandem was in product-mode for most of Y Combinator, polishing features, defining their ideal user, and building deep empathy for the space their product would serve. While this meant less face-to-face time with investors, it also meant a better product and a stronger pitch when the time did come to build relationships with angels and venture capitalists. Ayyangar advises founders embarking on fundraising to trust the process and themselves:

“We had to learn very quickly when we flipped into fundraising mode...Trust that you'll rise to the occasion. That's what the fundraising experience was like for us.”

Their approach was validated. They were one of the most sought-after companies coming out of their Y Combinator batch and raised a $7.5 million dollar seed round at a valuation north of $30 million, led by Andreessen Horowitz. TechCrunch coverage of the fundraise.

“I wouldn't necessarily say we're great at fundraising. I think we hit resonance with our product and spent energy and pretty much all our time during YC working on the product.”

Their problem first-approach hasn’t only earned them funding, it’s also helped them land customers. Tandem is used by teams at companies Spotify, Dropbox, Airbnb, Instacart, and more. By considering a problem and crafting the solution, they’ve won over investors and users who share their vision of a virtual office for remote teams.

Key Takeaways

Spend most of your time during Y Combinator focused on the user, problem, and company.Focusing on the problem that your product solves is the best investment strategy.Limit the time you spend fundraising and trust you’ll rise to the occasion.

Hire owners and people who have worked on hard problems

With fresh capital to spend, some startups might opt for a hiring frenzy in the hopes of scaling fast. Instead, Ayyangar and his team are taking a more intentional approach to adding talent.

This includes building an in-person team in San Francisco, not a remote one. Despite building Tandem for remote teams, Tandem has a broader definition of what that means:

“Now with salespeople, with distributed offices, with multiple campuses, with globally distributed companies, every company is to some degree remote and many teams are to some degree to be remote. Even if they aren't working from home.”

Ayyangar suggests that building an in-person team helps Tandem empathize more deeply with customers and iterate and experiment more quickly:

“We're thinking about the future of all work. Most companies are hybrid, not fully-remote. Having an office helps us understand their pain points.”

Structure aside, Tandem is thoughtful about who is joining their team in the early-stages of the company. With a bottom-up SaaS approach and virality resembling consumer products, Ayyangar is building a smaller team where each member is given “a lot of scope” and the freedom to be “extremely collaborative”:

“Most people will work up and down each feature or will own entire features themselves. We definitely select for people who are amazing builders, amazing engineers, but also have good product sense and a lot of empathy for users.”

One part of the product is how it looks and feels. The other is the technicality required when your product centers around audio snippets, screen sharing, and video clips:

“A super core [part of our business] is the audio video stack and making a great audio video experience that's reliable, that's always there, that's quick, and performant.”

In solving these tough problems, Tandem has been intentional about seeking out people who have faced down these problems before. They’ve wasted no time on making senior hires and have brought on impressive and well-known operators as a seed-stage company:

“Doing audio video communications even now, is hard. The internet is bad. It's a complex problem that goes through many layers of networking. That's where we've really reached out to some of the people who have built the big technologies of the previous generation. Team members with experience at say FaceTime and Discord. That's where I think really experienced candidates are a huge asset.”

Despite being particular about the new hires and senior executives they bring on, at the core of their hiring efforts is authenticity:

“[We] see if there was a mutual fit. Not approaching it as just straight sales, but seeing if we can run an efficient process but also build authentic connections.”

Key Takeaways

Hire owners that can take on full product features or problems end-to-end.Seek out senior operators early on who have experience with the hard problems you’re facing.Prioritize hires who are a mutual fit and demonstrate an authentic connection.

Build an advisory board that’s additive not duplicative

It’s increasingly common for tech founders to assemble advisory boards, a selection of fellow founders, operators, and angels, that can provide advice on a number of different areas. Ayyangar has approached assembling his own advisory board the same way he’s approached working with co-founders or employees. He asks himself the following questions and recommends others founders do the same:

  • Am I coming up with new ideas when I’m thinking with this person?
  • Do we have a high bandwidth connection?
  • Do I like the way this person thinks?
  • Is there trust and respect?

Aside from connection, it’s key to know your team’s strengths and weaknesses to avoid duplicating yourselves and instead bring additive value to your team.

“We tried to look for people who had expertise that we didn't have…We're fundamentally a consumer product team...We didn't prioritize people who were really focused on product because it's too many cooks in the kitchen.”

Ayyangar dug into Tandem’s blind spots and recognized the value in non-product additions to his advisory board:

“What we did find really helpful, and what we've continued to find helpful, are people...who specialize in the go-to-market like yourself [Brianne] and have visibility on the later stages of the enterprise sales motion that we don't have this visibility on and know we'll need to ramp up on. That's where we found just a ton of value in those relationships.”

Key Takeaways

Think carefully about connection when adding members to your advisory board.Know your team’s strengths and avoid duplicating yourselves.Fill your blind spots with people who have an entirely different area of expertise that you need.

Adapt and rise to the occasion, even in uncertain times

The COVID-19 global pandemic has meant social and economic challenges that spell a changing landscape for startups.

Sequoia Capital released their “Coronavirus: The Black Swan of 2020”, a memo to its startups and founders to brace themselves for what’s to come, including specific guidance on areas like marketing, headcount, and capital spending. A 2011 Ben Horowitz blog post, Peacetime CEO/Wartime CEO, has also resurfaced as startups consider next steps. Y Combinator has moved their demo day online, marking the first virtual edition of the event.

For communication and workplace collaboration tools like Zoom, Tandem, and others, the uptake in usage is a daily test of their teams, technology, and commitment to users.

Zoom announced on Friday it would offer its video conferencing software to K-12 schools for free. “They told me they’d connect with my team, and I said, ‘no, I’ll do that for you,’” said Yuan, reached by Zoom at the San Jose, California-area home that is now his office for the foreseeable future. “I did it manually myself.”

Tandem is offering full access to its suite of remote features for free for the next few months.

Meanwhile investors and founders who built companies in 2008 and 2009, during the last recession, are jumping in to share their lessons and coach founders on what to expect as we enter a new economic environment that impacts fundraising, hiring, and ability to sell software to other startups and companies.

Initialized Capital founder Garry Tan shared on Twitter, “I did YC in the Summer of 2008. Lehman died the day we closed our Posterous seed round. Nobody else raised money. As a result, we were the least valuable YC batch on record. 73% of those companies died immediately.”

Image from Garry Tan's tweet

Mixpanel founder Suhail Doshi shared on Twitter, “I had to quickly learn mid-2009 during Y Combinator, I was 20, and had just raised $500K. The ordeal would last ~18 months...If you’re only selling to primarily startups, a cash crunch will increase the rate of startups dying from “natural causes.” So, if you’re able, now is the time to diversify. If not, work on annuals to shift out the risk. You will still be able to sell to startups, just fewer.”

In a recent interview with TechCrunch, I shared the ecosystem is taking the right precautions but we aren’t slowing down. Investors are working their way through the Y Combinator batch even more efficiently over Zoom.

Other investors have reported similar activity: Ryan Hoover’s Weekend Fund has continued committing to investments while Peter Pham’s Science Ventures recently offered two term sheets. Investors are finding efficiency by moving to Zoom and meeting founders there.

As the situation continues to evolve, it’s likely too early to say what the future holds for early-stage startups. However, Ayyangar suggests that founders embrace remote fundraising:

“To some extent raising over Zoom is not new. There are some of our investors that I've never met in person. I was just talking with Ryan Hoover and he hasn't met most of his portfolio companies in person. He's been definitely ahead of the curve when it comes to remote work. You can still build the same kind of trust and relationship and high bandwidth communication as in person. I think we're going to see a shift towards that and the ecosystem isn't unfamiliar with that mode of fundraising.”

Key Takeaways

Adapt and rise to the occasion in the face of uncertainty.Use different modes of fundraising like meeting investors virtually.Trust and high-bandwidth communication with investors can be cultivated online.

Ayyangar’s journey from 2019 Demo Day to today proves a lot can happen in the span of seven months. Since graduating from their batch, they’ve approached fundraising, product-building, and team formation with intention. The result is they’ve carved a prominent space for themselves in the crowded market of workplace tools: Tandem has been top of mind as companies make the sudden move to working from home.

This year’s Demo Day marks the end of one journey and the start of another for many startups. I’m looking forward to following (and investing) in the next set of ambitious founders who are undeterred by uncertainty. Watch my full video interview with Ayyangar for extra insights on why hiring is like fundraising and what the academic study “Being there versus seeing there: Trust via video says about the future of work.

As always, I’d love to hear your questions, thoughts, and comments on Twitter. 👋

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