Diversify, Differentiate, and Engage a CFO: An MBA Candidate Interviews Tim Winkler

By: Michelle Germani

 

I had the pleasure of interviewing Tim Winkler, the founder and CEO of hatch IT, a DC based startup that connects software engineers with tech startups and reinvents the way early-stage and high-growth startups scale.  I met Tim five years ago as my brother in law’s fraternity brother, who I knew to be a fun-loving, traveling, sports enthusiast— always up for a good time with friends.  My brother-in-law talked about Tim admirably for his drive and passion as a successful entrepreneur who built his business from the ground up.  It wasn’t until I interviewed Tim for this paper that I truly understood how he relentlessly developed his company and went through growing pains of successes and setbacks, only to come out on top as a thriving entrepreneurial leader.

 

Early Life

Tim grew up in the DC area and lived most of his life there; he attended a local college, George Mason University, where he focused on hospitality and tourism events management.  Inching closer to graduation, Tim realized he wasn’t very passionate about this field and wasn’t sure what he truly wanted to pursue.  He had built a strong network through his fraternity at George Mason and one of his brothers offered to help get him involved in the world of recruiting because he thought Tim had potential in that field.  Tim was open to the opportunity and started recruiting folks for customer service positions, which he understood well from working in the restaurant industry for seven years.  Tim then was pulled into a staffing agency, Aerotek, upon graduation in 2006. Aerotek was a great agency to start at because it not only provided an environment that built out the fundamental skills and processes needed in this space, but it also made Tim realize he enjoyed the work and was good at it.  He sought out mentorship in the company early on and shadowed another employee that soon became a business partner.  Shortly thereafter, both Tim and his colleague got recruited by a small startup, ESC, that helped companies recruit for a variety of jobs.  This new venture was a fundamental piece of Tim’s story because ESC opened his eyes to a whole new way of recruiting called recruitment process outsourcing (RPO).  Tim later built his business around this concept of RPO, which in short, acts as an extension to a company’s internal recruiting team.  While working at ESC, Tim recruited virtually for Accenture and IBM from Reston, VA.  After about a year, he and his friend (that had experience recruiting nurses from south east Asia for placement in the U.S. and had ties to Indonesia) brainstormed a unique business idea: they could form an offshore company in Indonesia and subcontract with ESC.  Tim was 23 at the time, jumping into his first entrepreneurial experience when ESC bought their pitch and contracted with them.

 

Venturing Out

Out of a stone carving village in Bali, Tim and his partner, Chad, formed Global SRVCS, an offshore recruiting company where they recruited and trained 10 employees from different parts of Indonesia.  For two years, they operated Global SRVCS from across the globe, working through the night in a call center capacity that had a recruiting operations focus.  At this two-year mark, ESC lost their contract from IBM as their prime contractor, forcing ESC to cut ties with Tim and Chad.  This event, combined with feeling undeniably burnt out, caused Tim to exit that venture and transition to the corporate world with a large government contractor L-3 Communications; where he operated as a contributor verses an owner.  This was an important point in Tim’s career because he realized he didn’t enjoy this type of environment and decided to do some reflecting before jumping into something new again; he quit his job and went backpacking around the world for six months.  During this time, he came to two conclusions: he was highly skilled at recruiting and he was passionate enough to build a business state-side around it.  That break really allowed Tim to consider what he wanted- which was to be an entrepreneur/owner again.  He was ready to go all in with this venture and take a risk because he really had no distractions or attachments at the time.

 

Founding TRW

In 2011 Tim founded TRW Consulting Services where he recruited talent for 8(a) small businesses throughout the DC area.  Tim hustled and consulted for companies, similarly to what he had done in previous roles.  In two years, he acquired enough business where it justified hiring another employee.  He secured a house in Leesburg, VA and outfitted his garage to an office space, where he and additional staff members worked for three years.   A major obstacle Tim faced around this time was realizing he wanted to create a company much more specialized than TRW Consulting.  There were so many recruiting companies doing the same thing and he was forced to differentiate to survive.

In 2015, the business had been operating for four years.  The DC market was evolving greatly; a once traditional government service hub started to shift to a dynamic product startup environment.  Tim realized he could cater to this trend by focusing on this transition and inserting his company as a pivotal solution for startups in search of the right software engineer(s) to scale their own ventures.  He wanted to completely transform his consulting firm to service this rapidly emerging market that had little resources to dedicate to recruiting amenities.  He developed a custom model that focused on being a solution for scaling a software startup.  Instead of being open to taking ad-hoc recruiting needs, he created a long-term retainer type of a program where his company worked closely with startups and focused on a long period of company growth verses just filling one position.  Although Tim made this necessary decision in 2015, it was anything but an easy transition.

 

Hard Decisions

2016 was a difficult year for Tim; a year in which he learned a lot about how he would run and grow his business in the future.  He had to downsize for the first time from six employees to two.  His business model initially revolved solely around making commission verses an annual reoccurring revenue and he went through Q1 2016 without making a dime.  Tim funded this business 100% on his own, meaning his bank account quickly dropped when revenue from the business took a hit.  One of the hardest lessons learned was what it meant to go into business with an intimate family member when the combination of a decline in revenue and an overwhelming cost in overhead came to a head.  Tim made a smart business decision, but a painful personal choice to part ways professionally with his brother, the COO of the business at that time.  They’ve since mended their relationship, but at the time it was tough on both.

Tim was stressed out, but made a conscious decision to retain one employee, Kevin, and keep the business going.  He thoughtfully planned to move forward as a lean firm with little overhead.  If he wanted to succeed as a business, he knew he had to be more strategic.  Tim identified a clear opportunity to rebrand TRW Consulting for a few reasons: this name wasn’t approachable, it didn’t quickly describe their services, and lastly TRW was not memorable in a sea of “lettered consulting companies”.  TRW Consulting more simply stated sounded like a law firm and didn’t resonate with their core audience; software engineers & tech startups.  He created a new brand identity, with a new name, logo, mission and vision, to provide a competitive advantage- this was the moment when “hatch IT” was born.  Tim coupled his newly branded company with strategic custom programs compared to those of traditional recruiting techniques.  Hatch IT acted as an extension to a startup’s internal team and was compensated on a fixed retainer fee.  This allowed hatch IT to offer cheaper pricing because they were a partner for 12-month periods compared to only sporadic, intermittent engagements that were commission based.  With this strategy, Tim could now focus on annual reoccurring revenue goals instead of project to project wins, which evolved his company capabilities and allowed him to forecast.  Now, he gave hatch IT a runway of six months to cover costs, should he see another quarter like Q1 2016.

 

Hatching a Plan

Tim saw that funding and recruiting were the two hardest endeavors for the market he targeted; he realized he could diversify his business by being the solution to these key issues.  Tim understood that hatch IT could establish not only a presence in this hyper local area of DMV (DC, Maryland, Virginia), but also thoughtfully facilitate the forming of a community to make their recruiting efforts easier.  This strategy allowed Tim to create and brand their image— that hatch IT is a community driven firm and a constant in this evolving industry.  Tim is building awareness in a niche market and injecting his company front and center to gain credibility and recognition so that new clients can easily trust hatch IT as leaders in this field.  When these startups then ask for funding to scale, they can talk about their plans to secure top engineering talent through partnering with hatch IT.

Tim’s strategy is supported by tactics he began implementing recently or is planning to put in place in 2020.  One of these tactics includes hosting and setting up tech events in the local area that focuses on programming technologies that coincide with what his clients use to build their software.  hatch IT now hosts about four language specific tech events every month.  His idea to bring together clients and engineers in a physical manner led to many wins for hatch IT: it builds client’s reputation in the local community, serves as a creative platform to recruit, and gives Tim a reason to reach out to engineers and senior level executives and reinforce their mission about bringing engineers and startups together.  He is also in the process of going beyond physical events to leading similar connections in the digital realm.  Tim is currently working on a “hatchpad” a hyperlocal community site connecting engineers and tech startups across events, careers, projects and thought leadership, all centered around the DMV area.  In addition to searching for tech events, interested parties can filter job searches by technology, compensation and remote work options; Tim identified these categories as the most important items to engineers.  The site will also feature a podcast element where hatch IT will post interviews with VPs and CEOs in the engineering field where they’ll speak about topics such as their passions and experiences. Engineers can also submit projects they’re working on to share knowledge with like minded individuals and collaborate to start projects of their own.  This community, like the tech events, was another way to start conversations with high level execs (potential clients), as well as qualified engineers interested in startup company opportunities.  This type of community was proven successful in other hyper locales, but the DMV market had not yet been penetrated specifically for the engineering audience.

 

Milestones

Tim at one point had to downsize from six to two employees but is now growing slowly and running lean.  Tim’s three milestones include moving into his first office space 6 months ago (and committing to a three-year lease), hitting $1MM in revenue, and hiring his tenth employee.  hatch IT relates to their clients because they’re a flat organization built from the ground up, just like them.  They can have authentic conversations with engineers interested in working at a startup because they can transparently talk about the culture, skills and drive needed to not only get hired by one but thrive in their environment as well.

With the new site underway and several tech events under his belt, Tim sought to continue the momentum and looked for other opportunities to expand hatch IT.  He did a lot of research to determine what territory showed similar opportunities as the DMV area.  After looking at several emerging tech startup hotspots like Nashville, Atlanta, Pittsburgh and Richmond, he landed his target on Raleigh, NC.  He selected this locale due to the lower cost of living combined with the great university network of entrepreneurs graduating from UNC Chapel Hill, NC State University, and Duke University.  Tim plans to get hatch IT up and running in this emerging market while entrusting Kevin to continue managing the DMV operation.

Tim believes his success blossomed due to his ability to diversify and differentiate hatch IT from all other recruiting firms.  He developed new business models aimed at stable, long term growth in a new and exploding market that mitigated risk for both his company and his startup customers.  He’s deploying creative solutions through establishing leadership in a hyper local market by being specialized and developing a strong network of engineers already curated and engaged.  Being front and center in the startup engineering community in this budding marketplace requires less continued effort because hatch IT can recycle through relationships already built with prospects for upcoming positions.

 

Leading a Company

Tim bootstrapped his business since day one.  He saw the market norm was for many start-ups around him taking in too much money from investors and he internalized that as equaling less pressure to be profitable.  Tim’s goal was to be profitable since his company’s inception, partly because he was running his business out of his own pocket.  This persistence and drive allowed Tim to push through his set back when he could have thrown in the towel and reverted to a corporate role.  Instead, he recognized the opportunity in the market and learned that a strategy that initially worked in the beginning was not that same strategy that will sustain his business and foster growth opportunities.  When asked what he would have done differently when starting his venture, Tim answered that he would have engaged with a CFO earlier in the span of the business.  When he was operating a budget and had expenses totaling about $70,000 per month without a forecast and plan in place, he realized how quickly his business could slip through the cracks.  He doesn’t take this learning lightly after having to let go of some of his first employees.  In addition to a CFO mentor, Tim described the value of an advisory board and coaches.  The expense of ~$200 per hour is well worth it; Tim recently engaged with an advisory board and they provide him the comfort of validating his strategies while offering invaluable advice.  His board is made up of former founders and c-suite individuals that have gone through similar struggles and can offer support in areas where Tim may have blind spots or where he may want to simply gut check scenarios he’s considering pursuing.  “Sometimes you’re just going aimlessly, and you think you’ve got it made and all figured out,” Tim said, describing the light ignorance he had early on in his pursuit.  Knowing what he knows today, he can better guide himself and his employees towards a mitigated risk path forward.  He learned about hustle and taking risk from his first venture in Bali, and now he is learning how to alleviate risks and be more strategic and focused on the best ways to sustain and grow hatch IT.

Tim is currently working on improving his leadership skills so that he can continue to develop his team and keep them engaged, satisfied and challenged at hatch IT.  Beyond having conversations to serve hatch IT community platforms, he’s constantly listening to podcasts and downloading audibles to learn from other leaders and founders that have failed and turned businesses around.  Tim’s growth mindset allows him to be open to learning from others and then applying it to his own company.

 

Lessons

In class we discussed a variety of entrepreneurship cases and what made these entrepreneurs successful or in some cases unsuccessful.  When applying these examples to Tim’s business, I can see why hatch IT is steadily growing today.  Tim bootstrapped his venture, using his own capital instead of taking money from investors; he has less financial fuel to increase his company’s value, but he is able to continue running the company himself.  He already had the skills and contacts needed to build his business and it wasn’t a requirement to gain large amounts of capital to get hatch IT off the ground and flying.  Tim wanted to start this venture early on in his career when he had complete freedom to dedicate all his time and efforts towards building it so later, he can focus on building something else: a family.  It’s hard to determine whether Tim is motivated by wealth or power based on his decisions to date— choosing not to raise capital or offer stake in his company to scale faster.  I predict he will take more of a back seat once his priorities shift a bit to a more family forward life and wealth will be his main motivation.  Like Bob in the TV Guide case, Tim was able to mitigate risk by running a lean, focused organization with little overhead.  He saw a trend happening in the market and moved quickly to capitalize on it; his research allowed him to be smart with his business decisions and his drive forced him to act on those opportunities he identified.  Also, Tim’s recruiting idea isn’t necessarily innovative – it’s a “me too” idea that works well because he was able to find his competitive advantage and differentiate himself from the other recruiting agencies.  He also took the idea of RPO and applied it directly to his business model because it still wasn’t prevalently used at other agencies or targeted towards startup communities.  Additionally, we learned in the PSS case that for companies to scale, they may need to change their strategy.  Tim did exactly this when he shifted from a generalized recruiting consulting agency to a focus on hyper local startups in need of software engineers.  These startups had little resources to spend on recruiting services, so Tim adapted his programs to be more affordable, but also lock in retainer fees that hatch IT could include in annual revenue planning exercises.  Like many of the entrepreneurs we talked about in class, Tim is passionate, persistent and a hard worker; he has a clear vision for his company and a pulse on the evolving market in which hatch IT operates.  I appreciate his desire to focus not only on the growth of hatch IT, but on his personal growth and development as a leader.  I think a lot of entrepreneurs easily lose sight on the importance of trusting employees to be as passionate and hardworking as they were building the business.  I don’t see this with Tim and I am excited to see what hatch IT accomplishes in 2020 and beyond.