Madewithlove is a company based in Belgium that helps companies – mostly start-ups and scale-ups – to build digital products. They handle software engineering, product management, technical consulting, they manage technical teams and they conduct technical audits. Andreas Creten, co-founder of Madewithlove, has built a team of engineers/founders who have all been part of start-ups. Recently they have added a service to their portfolio: they help corporates with entrepreneurship and corporate venturing. Not only VC’s are on the lookout for interesting investment options, but large corporates are also starting to learn how they can collaborate with start-ups to accelerate growth.

Hello Andreas, can you tell us a bit more about Madewithlove? 

Of course. At Madewithlove, we are mostly engineers and we all have first-hand experience in scaling start-ups. We focus mainly on building digital products for our customers. The only people in our team who aren’t engineers are the product managers. We started offering this service as we noticed that a lot of people have good ideas, but they don’t know how to productize these ideas. So you could say, it almost organically became part of our offering. This combination of product managers and software engineers is key to building the perfect product for our customers. We don’t exclusively work on so-called Greenfield projects (completely new projects not following prior work), but quite often an investor will turn to us to analyze a company he is interested in investing in. So, on one hand we do technical screenings of the as-is situation of a start-up/scale-up, where we look for the skeletons in the closet. In a lot of cases this leads to follow-up projects as – once the problems have been defined – we need to look for the best way to put the skeletons in the ground and lay them to rest. On the other hand investors have started asking us to perform due diligence when looking at an M&A opportunity.

You do projects for VC’s where you screen start-ups specifically in terms of Digital and Technology. Why do these VC’s turn to you?  

We mainly worked for on start-ups and scale-ups and this is how we got in touch with VC’s. VC’s saw we were doing a good job with the companies they were investing in, so they turned to us when they needed screenings of other companies in their portfolio. Technical due diligence is a fairly blue ocean, with not many capable players in the market. In The Netherlands there are a couple of freelancers, in Belgium you have a couple of companies, but it’s a service offered by either large corporates, or individuals. For example, something that happens quite often today is that a company will ask another company’s CTO to perform due diligence. This makes for a process that is not very structured. For any due diligence project, we have a dedicated team of 3-4 and it takes us about a week, sometimes less. Investments is a high-pace market with high turnaround times. It happens that a customer calls us to perform a due diligence on Monday and by Friday he needs the results to be able to make a final decision. That means we have to do the job in 2 or 3 days.

We work with a checklist of around 25 questions, dealing with security, product management, human resources, the application itself and scalability.

How do you handle these requests? Do you have a predetermined process?

Of course it depends on the client’s demands. We can perform a very technical due diligence, which involves a full screening of your code, after which we offer advise on how the code is built and where improvements can be made. These requests often originate from the start-ups themselves. On the other hand, there’s the VC’s who ask us to perform due diligence and this involves a high-level analysis of a start-up and trying to determine whether the company is ready to scale. We use a checklist of approximately 25 questions, dealing with security, product management, human resources, the technical application itself and scalability. For instance, one of the most important parameters for me personally – and I find VC’s agree with me on this – is the time you need when you hire developers today to get them to a level where they are fully operational. At Madewithlove this is one day, but for some of the companies we’re dealing with this can be as much as 6 months. Considering the average retention rate of developers today is at 12 to 18 months, this leaves your company with 6 to 12 months of 100% productivity. Shortening this timespan and making these people operational a lot faster, means your company will be able to scale a lot faster. Another important factor is how many job openings a company has and how long it takes for these positions to be filled.

So the HR checkbox is a very important one. Can you name some other parameters that feature prominently on your list? 

The VC audits are done exclusively through interviewing, so this does not involve us looking into the code. We interview as many technical profiles as possible, as well as management. First, we ask for a sales pitch, delivered by different profiles. So you hear the ideas of the different departments and you’re already able to discern differences in how a technical profile perceives the product and how a sales person sells it. We have a chat with the lead architect to see how he or she thinks the product is built. Then we talk to the developers who tell us how the product is actually built. Then we talk to product managers and, more often than not, there are huge differences in these stories. At the end of the day, we get together with management and we use our findings to challenge them.
When we put the different answers next to each other there are always unexpected issues. For instance, security obviously is a very important criterion. The interviews have led us to uncover quite a few worrying situations which might have caused insurmountable problems for a start-up/scale-up further down the road. Based on the interviews we are able to provide valuable insights. For example, in a lot of cases we can tell the founder(s) who  of the team is most likely to leave the company. We’ve been proven right most of the time and often the founder(s) didn’t even see it coming.

A clear roadmap is important for investors as they need to know what kind of future they are investing in.

HR, Security… any other important checks?

Product management. How does the company handle feature requests, how do they deal with questions by customers, are they responsive or not, is the company’s roadmap clear? This last one is very important for investors, because they need to know what kind of future they are investing in. How do you plan on scaling your team? Is there a plan? How much custom work is involved in the deliverables, is an important consideration in SaaS-companies. If a starting SaaS-company provides a lot of custom jobs for specific companies, this will cause frustration with the engineering teams who have to keep these modules up-to-date for only one customer and this can possible become a hurdle. How are decisions regarding the product management made and are we talking about well-considered choices or gut instinct? How do you gather metrics and what are your KPI’s.

If a VC is interested in investing in an ecommerce platform, do you consider the framework being used?

The audit does also cover the technical aspect, but we will only look into the code in case of doubt. But if the lead engineer and the architect are clear on how the technical framework is built. Again, it depends on the demand by the VC. The most elaborate audits for VC’s do involve us going over the code and looking into it.

A major recurring problem in the start-ups and scale-ups we’ve screened is company culture and people management.

Looking back at the audits you’ve performed so far, can you point out a major recurring problem in the start-ups and scale-ups you’ve screened? 

Without a doubt company culture and people management. In 95% of the audits we perform, the company culture is an issue. A lot of people have no idea about the company values of the company they are working for. Without a clear mission and clearly determined values everyone can rally around, the hiring processbecomes a lot more difficult because – as a company – you don’t know what you are looking for. It becomes extremely difficult to manage a boat when people are constantly rowing at different speeds, when their individual expectations diverge a lot and there is no company framework to bring them together. Another aspect of this is the target audience in our field. With all due respect, developers are not always the easiest group of people to manage and we often notice a huge disconnect between management and developers. If the management and the tech team of a company speak completely different languages, growth becomes impossible.

Trying to bridge this gap is one of the things we’re trying to accomplish with Madewithlove. From a management point of view the product that the developers churn out, is often a black box. This is one of the reasons that, when we do an audit for a VC, we focus on processes, more than on technical insight. The information we gather is not shared with the management team and the tech team, is then shared with the investor, and not with the people we interviewed to avoid finding ourselves caught between a rock and a hard place. During our interviews with developers, the topic of code will come up and it’s important that – as engineers – we are able to understand what they are saying. But we get a lot more information, based on our questions about processes and the way things are running.

Respect the autonomy of the daughter-company, look for synergies and don’t try to force a square peg into a round hole. 

Are there differences between a corporate’s point of view and a VC’s point of view? Do they have different expectations?

There’s a difference between wanting a company in your portfolio and wanting to integrate a company within your structure. When you are looking to integrate, you need to assess whether the start-up is compatible in terms of code, but also in terms of people. A corporate looking to acquire and integrate a start-up doesn’t want an empty box. So if the developers all decide to leave after the acquisition, the corporate has a problem. If the corporate looks at it purely as an investment, then I think the process is comparable to that of a VC. A corporate should be very careful with the level of involvement on an operational level of the start-up, as this is the fastest way to lose the entrepreneurial spirit that got the start-up to where it is. Suddenly processes are slowing down as management levels are added and the once lean and agile decision-making process becomes very cumbersome. Corporates tend to impose certain tools and ways of working, that might work very well for them but are of no added value to the start-up. Obviously, there’s a huge difference between working in a team of 4-8 people and scaling to an operation of 50 – 100 persons and you will automatically lose people who do not thrive in this kind of environment. Still, a corporate should always look for compatibility and do everything they can to not kill the start-up spirit. Respect the autonomy of the daughter-company, look for synergies and don’t try to force a square peg into a round hole.

Any start-up needs a strong founder to push the company forward. Once you lose that driving force, all sense of direction or purpose is lost.

Does Madewithlove help corporates in this process today? 

I think for Due Diligence, corporates today often still go looking for in-house solutions. I’m not saying that it’s impossible to do yourself, but as it’s a fairly new territory, in a lot of cases the people within corporates lack experience in this field and their focus is elsewhere. Moreover, when keeping the process in-house, this means there is always the risk of a biased decision. For instance, if the decision on the acquisition of a start-up means that a certain department within a corporate can get more funding, then other things come into play than purely saying whether this deal will add value to the corporate as a whole in the end. We are completely independent and have nothing to win or lose when we give our recommendations and this is one of our great strengths. An example we experienced recently is a corporate that acquired two companies and wanted to merge them. They created a new business unit to contain both companies but after 2 years, they realize it is not working at all. They call on Madewithlove for an audit and we find that in two years’ time, nothing has changed for either of these two companies. Both of them are still operating independently without any technical synergies whatsoever. So the corporate bought two start-ups, decided to make them into one company, but did not do anything to make it happen. Any start-up needs a strong founder to push the company forward. Once you lose that driving force, all sense of direction or purpose is lost. It’s always possible that this is a corporate’s strategy. One example is Microsoft, who acquired Sunrise (calendar application launched in 2013 by designers Pierre Valade and Jeremy Le Van) in 2015. They guaranteed the founders that they could continue developing sunrise, but discontinued the program in 2015 and incorporated them in the Outlook Team. They left shortly after that, although probably their vested shares sugared the pill for them.

We spoke earlier about the expansion of teams and scaling start-ups. As from what moment does a start-up require a CTO? 

What happens is that his role will evolve along with the expansion of the company. There are three kinds of programmers:

• ‘script kiddies’, who can work with WordPress to build a website, but do not write their own code
• ‘developers’, who can write code within a certain framework and modify code. For instance, they can use Laravel, but they can’t create frameworks within it.
• ‘software engineers’, who can develop a framework from scratch

Let’s say at the start of your company there’s the CEO, a CTO and a person dedicated to sales. In this set-up the CTO will often be either a developer or a script kiddy. Why? Because at the start, your need to achieve results fast and at this point it can be quick and dirty. It makes sense. The company grows and more engineers are added to the team. The role of our CTO is evolving more and more to a product management-role and he suddenly also needs people management skills. This is a first big hurdle for many of them. A good CTO is able to decide for himself when he is no longer capable of doing what is expected from him or her and a new CTO with a different skill set is required for the company. In the beginning you need good developers or software engineers. One day a week should suffice for the CTO, as all he needs to do is create a strategic vision. He doesn’t need to perform any programming work. If your CTO is also programming, then you’re on the wrong track. A good CTO will be way too expensive to use for programming. A CTO comes into play once you need to follow up things like budgets and scalability issues, etc. Once you reach a certain level, you need a CTO to determine the technical strategic vision and a VP of Engineering, or a Process Manager, who will oversee all processes.

Madewithlove has people all over the world working remotely and our first-hand experience is that there definitely needs to be a one-team approach

Is there an ideal ratio for developers and other staffing in a start-up? What’s your take on offshoring and keeping certain processes in-house? I mean, some companies outsource development completely. 

That’s impossible to say as it depends on a lot of factors. If your product sells easily, you need less people in Sales and you can maybe invest more in other departments. It also depends on how technical the product is. Regarding the outsourcing of development, I’m radically opposed to outsourcing the full development. When we start working on a Greenfield project with a customer, one of our demands is that they have to have people on payroll who can  subsequently be trained by us before even starting the project. There’s many reasons for this, but one of the main ones is the operational cost, which would be considerably higher if we were to do this alone. It’s also important for investors to see there are people on the payroll to assess the amount of knowledge and skills available within a company. I’m radically opposed to outsourcing, unless it’s done right. There’s start-ups out there who have a development team in Belgium and one in Romania, but there is 0 communication between those 2 teams and that’s absurd. It’s a recipe for disaster. As soon as you get an us versus them mentality, you’re in a dead-end street. Madewithlove has people all over the world working remotely and our first-hand experience with this issue is that there definitely needs to be a one-team approach. We don’t go in-house with our customers, but we always work remotely. We are not an agency. The customer is always in the lead and we provide them with engineering hours. We don’t work with fixed fees to develop features, nor do we provide estimates of the time needed to finish a certain request. Quite often customers who opt for complete outsourcing of development, turn to us afterwards because they’re not 100% satisfied with the outcome. In the end this turns out to be more expensive than if we’d been involved from the start. Our services go beyond coding, but we think along with the start-up and we think beyond the purely programming part of the assignment. Often during our audits we are confronted with badly documented code written within a bespoke framework, which means that the customer is dependent on their service provider. Working with freelancers is a possibility, but there is always a somewhat bigger risk that this person will want to work on another project in a year and simply goes away. Non-technical founders cannot rely on freelancers 100% as there is no way of controlling the quality of what they are developing for you.

So would it not be advisable to always have someone on the Board who has a more technical background?

Such profiles are spread thin. It’s almost impossible to find people like this. I know people from VC’s who want to launch a start-up in Belgium and who are looking for a technical partner to realize their plans with, and they are unable to find anyone willing to take on the job. Programmers are risk-averse, so getting them to the level of an engineer or a technical co-founder, is almost impossible. They have a huge workload as is, so there’s no need to take chances and to go work for a start-up with little or no return in the beginning.

Thanks, Andreas! 

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