Staying mission-driven while caring about the bottom line with Mike Teng of Swing Education

Maren Kate
Welcome to from 5 to 50, the podcast dedicated to helping startups and founders survive and thrive through the early stages. I am your host, Maren Kate. And we are here with Mike Teng from Swing Education. Mike, welcome to the show.

Mike Teng
Hi. Thank you Maren for having me.

Maren Kate
Absolutely. First off, when did you found Swing?

Mike Teng
Yeah, we started the company in summer 2015. I had actually just left a job as Head of Technology at a charter school in order to co found Swing.

Maren Kate
Okay, so in 90 seconds or less tell the audience what was the why behind starting Swing Education?

Mike Teng
Sure, I started my career as a software engineer, ended up finding my education reform religion, as it were, getting inspired and wanting to go into nonprofits. And so I worked as Head of Technology at a charter school for five years. And one of the problems that the Director of Recruitment ended up asking me for help with was how can we use technology to kind of handle substitute teachers better at the school I was working at. Ended up kind of sharing the problem I was working on with a couple of high school friends. And we convinced ourselves that it was a big opportunity, which it has turned out to be. And it's been really great. We basically help schools find and schedule substitute teachers across seven states now.

Maren Kate
Awesome. So that leads to the next question with just like, what's the business model? How do you guys make money? Or are you a are you a B Corp? Are you a nonprofit? Are you a for profit?

Mike Teng
Yeah, we're a Delaware C Corp. We're venture backed. It's a forprofit, What we've managed to do is basically, either by luck or skill, I think, maybe more luck, I tend to describe it as we stumbled into this business model that allows us to align revenue with basically the interests of schools and substitute teachers as well. So the way it works is we go to districts, we sign up districts. Public school districts as a potential paying customer can be a little bit challenging to imagine, but they sign up, we asked them for what they would want the pay to the substitute teacher to be. Anytime we're successful in placing a substitute teacher, we essentially add a service fee of somewhere between 25 and 35%. And that's net revenue. But it's gone really well. So substitute teachers don't see any kind of dip in their pay. We just offer our services to them. We help them get paid regularly and quickly. We help them with any reimbursement costs to become a substitute teacher. We're one of the only free ways to gain classroom teaching experience in the state of California. So through things like that, I think we can be both mission driven, but also a benevolent middleman, if you will, in this industry. It's interesting,

Maren Kate
I'm obsessed with the idea of matching talent with opportunities and vice versa. Because I do think that everybody has their unique genius. I like what you said, the benevolent matching, that seems to work really well versus the Hey, I'm gonna take a cut out of your pay. So you said you’re venture backed? How much did you raise over what period of time? And then what was the pitch to investors? Because like, obviously, at the end of the day, they care more about the bottom line than the social mission?

Mike Teng
We definitely have tried to find investors that do care about both. I would say they care about both, but obviously have a fiduciary responsibility to the bottom line. We have raised about $23 million. I think our first was in 2016, we did an accelerator called Imagine K12, which is now merged with Y Combinator. And so we raised our seed round right after that, which was in early 2016, did a series a with Social Capital at the end of 2016, and then raised a series b with GV, Google Ventures, and Allos Ventures in 2018. And so we've been fortunate to have really great investors and the pitch is just we've been growing quickly selling to schools and districts, so don't let that scare you away. Our sales efficiency is really high and it's exciting. We're able to help people and grow the business. And the opportunity is really big. K 12, schools just in the US spend about $10 billion on substitute staffing each year. So we're working with about 2,000 schools now nationwide. And do over a half a million dollars each week in sales. And you know, that actually, there's 130,000 schools nationwide. So the opportunity is really kind of all in front of us.

Maren Kate
Are there competitors? In your same space? Are there people doing similar things? Or is it kind of a blue ocean?

Mike Teng
I think in all of these labor marketplaces, or skilled labor marketplaces in particular, there's categories of competitors that exists. Generally, there's software companies that provide a coordination layer for people who want to do it themselves, manage their own pool of workers, so districts that manage their own substitute teacher pools. That's the bulk of what happens across the US in school districts. There's also essentially staffing agencies, they look very much like traditional temp staffing agencies that their niche is substitute teachers. So those are the two main areas but you know, only about 10% of school districts, I would say, or maybe 15. And it's 10% of the spend end up working with these temp agencies.

Maren Kate
Wow. So so before you guys, what did they do?

Mike Teng
So most districts would do it themselves. The district I was working, the reason they asked me as the technologist to come in and see if there was something we could do was because what was current at that point, which was like 2014, was bring on the substitute teachers. So the director of the HR department was bringing on the substitute teachers, doing the vetting and screening. And then you would add them to a Google Sheets list. Then each school and there were 10 schools in San Jose, would actually go and call down that list. I mean, in some cases, maybe email or text message, and the office manager at each school was its own staffing agency. And it was a terrible experience for everyone. I mean, both schools and the substitute teachers who are getting multiple calls from what they perceive to be the same organization.

Maren Kate
When you guys were pitching investors, did you guys do the Uber of analogy or anything?

Mike Teng
It always comes up with investors in particular, I think they can't help themselves.

Maren Kate
But you're like, with more of a soul?

Mike Teng
I don't want to accuse anybody else of being soulless. I will say, I think the way I would tend to describe the fundamental difference is that we, as a business definitely win if substitute teachers are essentially paid more. Their earnings, and earning power, and our ability to help facilitate that for them in a way that school districts are happy to, because their experience is also better, really benefits us as a business. Whereas I think, in typical kind of ride sharing, and the biggest gig economy companies, those companies tend to win by driving those earnings down. And I think that is like a misalignment that we don't have in our business.

Maren Kate
It goes back to what you said, you said at the beginning, you said alignment. One of the core values I've kept through my companies, this company and the next one, is the one of alignment. And I realized that kind of the hard way that. I think sometimes we think there's this race to the bottom where we have this scarcity mindset, from the world we're in, versus understanding that there are ways to, from the foundational level, build a company that is aligned from worker, company, and then client or user.

Mike Teng
For sure. And there's so many stakeholders that our business has, including investors, which you alluded to earlier. And so again, the emphasis being like we want to make sure that those values are all aligned, that we care about the same things and understanding that everyone's core motivations might, by definition, be different because of what each person's job actually is. But that hopefully, at least from a value standpoint, it's aligned and that as much as possible, if we can actually make, the INS each individual's incentive actually work for each other, then I think it's really great.

Maren Kate
Yeah, absolutely. So you have co founders in the business. You guys raise money. How did you and your co founders find each other?

Mike Teng
We went to high school together, so I've known them for over 20 years. And one of them, when we graduated from college, we ended up actually working at a larger company, but on the same four person engineering team, so I've known them forever. Super high amount of trust. It's been such an incredible thing to be doing with such close friends.

Maren Kate
That's awesome. Okay, so moving on to another question a little bit different. How have you guys set up your your team culture, your environment? Are you guys in an office? You mentioned that today was work from home day?

Mike Teng
Yeah. So we, we are in an office. My previous work experience, I think pointed out to me that, and maybe the technology wasn't available at the time for it to go well, but it was always a struggle with people in different locations or offices. I mean, part of this when I worked at the schools, or this charter school was that we had 10 schools at the time, just in San Jose. And actually, I think about 17 schools across three or four states. And so people were just physically needed to be in different locations, but it made communication and things like that pretty difficult. And I think I just thought to myself, well, starting a business is probably going to be hard. Everything you read about it is that it's hard. And I didn't want to have any additional obstacles to it. As we got bigger, it turns out that it's really difficult to sell to school districts, or partner with school districts in other geographies unless you meet with them in person. And that totally makes sense. It's like a high trust industry.

Maren Kate
How do you sell for that? Do you open offices in each city or just have like remote salespeople?

Mike Teng
We just have remote salespeople. So they work from home, they travel a lot. And then we also have customer support, because East Coast schools need to talk to us on East Coast hours. And so we ended up hiring customer support people that also basically work from home.

Maren Kate
Okay, and with that distributed portion of the company, how do you successfully interface with them from the the office?

Mike Teng
Slack, for sure is a big thing for us a big component, video conferencing too, we actually use Blue Jeans, and everyone uses Zoom, but I don't know.

Maren Kate
Blue Jeans is snazzy, I remember going to a to a VCs office once to see it. This is amazing.

Mike Teng
Yeah. And then actually, there's this new camera that we bought in one of our conference rooms, and I think I'll probably roll it out in our other conference rooms, but it's called the Meeting Owl. And it's pretty amazing. It just provides this really amazing experience. It's pretty close to feeling like you're sitting at the table with the other people. And because we have most of our people in one office, it tends to be that our video conferences tend to be the majority of the people in a room together, and then some minority of the group calling in via video conference. And so I think we set that up pretty early, we made sure that the audio was as crisp as possible, so that people that were listening in, we try and do things where we're including them even like if we're giving out swag or something to the company, like our HR team is really good about sending those things out ahead of time. We do a monthly birthday celebration in the office where people whose birthdays were in October or whatever. And I know that team also will send out small care packages to people that are remote. And so it's really just as much as possible, trying to keep them connected with with the rest of the company.

Maren Kate
I love that, that makes a lot of sense. And it's kind of amazing how technology continues to evolve to allow this to happen. 5-10 years ago, it would be such a different story.

Mike Teng
Yeah, it's really opened my eyes so that I can go well. And frankly, the Bay Area is getting so expensive that, you know, it behooves any company that's getting past 50 employees to really think about potentially being distributed for some portion of employees or allowing employees to go distributed if their family needs it to be that way.

Maren Kate
And the thing is, at the end of the day, it like anything worth doing, you have to invest the work in though upfront. Like if you're going to have a distributed wing of Sales or CS or if you're going to let people that have classically been in office work remote, you can't just keep the culture and documentation completely in office, you have to put in the time and effort to make sure that everything's accessible. But once it's done, it can go really well. But you know, it takes time and effort.

Mike Teng
Definitely when I've talked to other leaders of companies that are fully distributed or have had a lot of remote offices. The one thing that sticks out is that you have to be intentional about everything. When it comes to culture that you don't get anything for free. Like I say that there's some traditions and things like that, that have developed at Swing Education over time amongst our employees that are super fun. But would only happen because we happen to be in the office together, I think having this mix, as we move forward, will probably be really interesting, where we can sort of export some of the things that we're getting organically. And then, obviously, we have our remote or distributed employees right now contribute a lot to our culture, too. And we encourage them to ask questions, make suggestions, etc.

Maren Kate
Awesome. And how many people are you guys?

Mike Teng
A little over 60 employees now.

Maren Kate
What is the main buckets that breaks into, like Engineering Ops, Sales, Client Services, etc?

Mike Teng
A lot of it is Sales and Marketing, because we have to do sales and marketing to these two very different groups, one of them school districts and school operators and the other substitute teachers. So those are pretty big teams and Customer Support. I mean, we're in a heavily offline business in the sense that while the matching takes place online, the actual service that's provided to the schools or that the schools are looking for is offline. And so making sure that everyone has a way to reach us and get their problems resolved, I think has been a pretty big deal to pretty big Customer Experience team.

Maren Kate
So there's two pain point questions I like to ask. First of all, what's your biggest pain point around hiring? In the five to 50 stage that's something people tend to struggle with a lot. Thinking through it, and then actually finding and acquiring and retaining the right people for their roles.

Mike Teng
What's been interesting is that as a high growth startup, you get some people that are interested in us for being a high growth startup, or having brand name investors and things like that. And that, for us, that can be a little bit of a red herring, and that we still want people to be interested in working at Swing largely for the mission that they're coming to work toward, which is making and improving schools and substitute teachers lives. It's just interesting to try and screen for those things. Culture in is such an important screen for us. And then doing that in a way that's fair, and that you're trying to cut out as much unconscious bias as possible. I think with hiring, that's definitely the biggest challenge. By and large, I have very high amount of faith that many people can learn many different things. And so it's a little bit less of like, oh, is this person smart?

Maren Kate
It's a culture and a motivation question?

Mike Teng
Yeah, for sure.

Maren Kate
The flip side of that coin is what's the biggest pain point you've dealt with in terms of the revenue and sales side?

Mike Teng
School districts, and I think this might be true with any kind of enterprise sales, but I think maybe there's a tendency to see it as specific to schools. Tthings like politics, or just like turnover within the school district or that they might just, as a school district, dealing with some pretty hairy stuff that then causes us to not be able to partner with them.

Maren Kate
How does sometimes cap the sales cycle?

Mike Teng
Sometimes it can feel a little irrational. I do think we've tried to take away many of the things that would cause the sales cycle to slow down as possible. And so, usually, one of the things I think that differentiates us, or two things, I think, differentiate us from other companies that are selling to school districts is one, we have a very long selling season. So we've stayed away from having to deal with annual budget cycles, because every school district already definitely has a budget for substitute teachers. It's not something that we're explaining to school districts like, Hey, have you thought about having substitute teachers, they all know that they need it. And so that has allowed us to kind of sell school districts any month of the calendar year. And the other is just having this paper success model where it's not a huge upfront commitment. And so we have pretty quick sales cycles. I think typically from a meeting to signed agreement, it's about three or four months.

Maren Kate
Especially for enterprise and considering you're dealing with school districts, that's amazing. Awesome. Okay, so my final three questions are, I love these, and I always learn something new, and usually I always take something away. I either subscribe to a new podcast or I get a new book on Goodreads. So first off, what is your favorite book or podcast from the last year? And it doesn't have to do with business. It's just whatever tickles your fancy.

Mike Teng
Yeah, I probably should stop listening to it, because it sometimes gives me anxiety. But I listened to The Pitch by Gimlet Media a lot. It's fun. It's just like CEOs, basically pitching to a room of investors. It's kind of like Shark Tank, but it's a podcast.

Maren Kate
Okay, I will listen to that. That probably will give me anxiety, too. I just started listening to the final season of Startup. And I was like, Oh, my gosh, I can't believe I've been listening to this since it started in 2014. I've always been a podcast junkie. Okay, what business tool could you guys not live without at Swing?

Mike Teng
Everything takes place on Slack. So I guess it would have to be that or like G Suites. I mean, Google Docs and Google Sheets to for the collaboration. I think it's pretty amazing.

Maren Kate
Absolutely. Google Stack. All right. So the last question is, for the founders listening who are somewhere between that five to 50 stage, they're starting to grow and scale. What is the best piece of advice you either received at that stage and Swing’s growth? Or that you can give?

Mike Teng
It's so much about hiring and getting those things right. And then meeting when you got it wrong as quickly or like trying to figure that out as quickly as possible, which really, is to say, if you need to fire somebody, or transition them out, do that as soon as possible too. And to do those things well, there is a way to do hiring well and onboard well, and retain employees well. And there's also a way to kind of exit employees in a good way too.

Maren Kate
What are the resources you found for that, how did you learn that?

Mike Teng
Ben Horowitz, his book, The Hard Thing About Hard Things, I think, has really good things about it. And then actually, there was this book that I ended up going on Amazon when we were starting the company and realized that I was going to be the CEO that I just kind of Googled, how to be a CEO, and ended up on this book, I think was Startup CEO, The Hot Seat. It's by a guy named Dan Shapiro who has started like four or five companies. And it was such a tactical book about really basic issues like hiring, it was like, if you're thinking about using something other than QuickBooks, just don't bother, because that's just the easiest thing to choose, even though it sounds silly to just do it. And things like that. It was like, are you thinking about office space? Great, here's how to think about it. And don't think too much about anything, really. And it was really nice. I think that is a lot of the resources. And then I think like everyone should, when you're not sure what to do, just default to honesty.

Maren Kate
So true. Oh my gosh, especially you think about like Silicon Valley, or even just like the culture of success. Same here in New York is, we tend to overcomplicate and bluster. And if you were just brutally honest, or I guess kindly, honest that really goes a long way.

Mike Teng
Yeah. And I think so often people know that, that's what makes those conversations hard is you should just be honest. And most situations, you're not quite sure, well, is this the like CEO thing to say? Or is this the, you know, high growth startup thing to do? And oftentimes, it's well, don't worry about it. For now, just be honest. And maybe you can reconcile those things later.

Maren Kate
I totally agree. Mike, this has been so much fun. Thank you so much for taking the time. I feel like I've learned a ton, which is always fun. And now I have a new podcast to listen to. So really quickly, how can people find you online? How can they find Swing Education? What are your URLs, Twitter handles, all that?

Mike Teng
I mean, anyone can reach me at Mike at swing education.com or on Twitter at edu Mike Tang. And you know, our company website swing education.com. Certainly, if anyone is out there wanting to be a substitute teacher or is a school district, looking for substitute teachers we can help.

Maren Kate
Seriously, awesome. Okay, have a great rest of your day and thanks so much.

Mike Teng
Thanks, Maren.