When I talk about the issues with Remote Year, there's a question that inevitably pops up:
"So what do you think will happen to them?"
Current and former participants have varying views on the matter. Some are staunchly convinced that RY will figure it out and get there eventually. They're ride or die participants, and they trust that everything will come together. We didn't sign up for easy!
Others give RY a year, max, before they go out of business. They've experienced the rampant issues firsthand and so they'll scoff, incredulous that RY has managed to stay afloat this long. They're completely incompetent!
I think both views are myopic. Getting out of your comfort zone doesn't need to mean handing your daily life over to a company that makes decisions averse to your wellbeing. Changing your reality and disassociating yourself with a company you don't respect and don't trust is a perfectly adult thing to do. At the same time, a company that screws up - a lot - still can do enough things well to keep going for a while.
I don't think Remote Year will figure it out, but I also don't think they'll crash and burn anytime soon.
I think they'll die a slow death.
Here's what will happen before they call it quits.
Remote Year will raise VC.
I've mentioned before that RY's actions show that they care about growth before all else. It's more important than creating a good program, and way more important than lowering attrition.
I think it's because they're trying to raise.
In Q2 of 2015, they had one active program. In Q3, they started recruitment for the second (mine). In Q4, before the second program had launched, they started recruitment for the third.
Today, in early Q4 of 2016, they have:
- One completed program
- Four active programs
- One program starting later this year
- Several slated for 2017.
Issues aside, that's impressive growth. And their revenue numbers aren't shabby, either. I put together a quick back-of-the-envelope to show where they make their money, and the approximate value:
This is a hugely mega rough guess and the revenue numbers are certainly off. Changing the assumed values, for which I took a wild guess (like number of applications who make it to the essay round, which requires a $50 fee, or average number of months that participants who don't complete the program stay on the program) changes the revenue numbers significantly.
Some important things to note:
- The initial deposit isn't a deposit, because you never get it back. It's actually a fee.
- Starting with RY4, the initial deposit changed to $5,000. The 12th month is included in the deposit. RY did this to account for their high attrition rate. If you leave halfway through the program, RY still gets a chunk of money from you. When I say that RY has accounted for their high attrition rate in their financials, this is the kind of decision that I'm referencing.
- RY used to have exit fees if you left the program early. They did away with exit fees because too many of us refused to pay and some threatened legal action. Now, they wrap the exit fee into the initial deposit, so you pay before you're pissed. Smart.
- I used RY-cited numbers when I could. E.g.: they've publicly said that RY1 got 25,000 applications. I have no idea if that number has gone up or down, so I kept it constant.
- The # participants to completion is a guess based on what I know about RY1 and what I'm seeing with RY2. Same with avg months on the program. These numbers are shaky, but not THAT shaky.
Even with high attrition, RY's revenue is pretty damn good. $9Mish from 2015-2016 will keep them going for a while, and is probably enough (paired with their quick growth) to attract VC.
Their overhead is very high, which I'm not going to even attempt to calculate, so I don't know how they're doing profit-wise. But if they want to prove to an investor that high revenue is happening? Done.
Another note: in general, customer acquisition is seen as "the hard part" when growing a business. RY is good at customer acquisition. They have no shortage of interested people and don't struggle to fill out their participant numbers.
If you're good at customer acquisition, and if you can prove market viability, traction, and scale, an investor will listen. RY checks all of those boxes, and they can gloss over the high attrition in a pitch deck. Oh, we can fix that with funding. Look how quickly we've grown! Give us money!
ONCE THEY RAISE, THEIR FAST GROWTH WILL CONTINUE.
They're in the start of the exciting section of the hockey stick. That growth will continue for a while. Their success will make it look like I'm completely wrong, because that graph will keep skyrocketing up, up, up... for now.
BUT GROWTH ISN'T EVERYTHING, AND THAT'S WHY THEY'LL DIE
If they successfully raise, it'll take even longer. They'll have more of a cushion and (probably) more pressure to focus on retention as well as acquisition.
Acquisition might be the darlingest of KPIs to investors, but high attrition isn't easy to fix.
I don't think RY will get to the point where retention is strong. Their growth philosophy is to keep running when things are broken, then scramble to patch the worst of the breaks.
They do not thoughtfully make the program as best as possible, then grow carefully and with intention. They're making the same mistakes, over and over again.
They get the same complaints every month from every program, about iffy wifi and insufficient accommodations. I can't do my job with iffy wifi, which is a deal breaker (obviously). Accommodations that wear on your every nerve (no heating with nights well below freezing, minimal hot water, even running water that stops working) cause participants to wonder where, exactly, their $2,000 / month is going. There are a lot of complicated answers to this, and I honestly see both sides. At the end of the day, poor accommodations means that nobody is happy and that participants start leaving. And there are often poor accommodations. The complaints are the same, and yet nothing changes.
They enacted a new visitor policy, without prior notice or consulting participants, wherein we were required to pay for every night a visitor stays in our RY-provided accommodation. It was clearly a cash grab and it did not go over well. While on RY, our accommodations are our homes. It's not a hotel room to us. It's where we live. And friends visit us - where we live. We own nothing except what's in our suitcases. We change places constantly. We crave stability, sometimes with desperation. But we still have a home, of sorts, in our accommodation for the month, which is where we make our own version of routine. Except that it's regulated by RY and we aren't allowed to treat our space like a home, which yanks away any sense of stability we might create for ourselves. They pulled back on the policy because there was too much uproar.
They did away with exit fees in a panic, because people like me wrote exposés and too many participants complained about feeling like a cog in a wheel. We don't (didn't) feel like important people with livelihoods to RY, we're customers who signed away control and must take whatever happens to us. Yeah, right, no thank you.
RY put on a desperate smile and said "there's no bad blood!" to all of the former participants glaring at them, frustrated from being treated like a bag of money and not a human.
The examples I cite above are byproducts of a bigger problem: the practice of sprinting toward growth when things are broken, ignoring cracks until they become crises.
If you're seeing attrition because your app has too many bugs, sure, hiring a new development team might help. But they're dealing with people, not software. They can't write new code and turn it around, because the issue is systemic.
WHAT COULD KEEP THEIR SLOW DEATH FROM HAPPENING
A couple of these-won't-happen-but-man-what-if's:
Fire the founders. If I were an investor, I'd attempt to make change in leadership a condition of funding, because I don't think RY will be able to fix their attrition problem. Greg and Sam won't let that happen, because RY is their baby, so this is purely theoretical. A change in leadership could mean a change in philosophy, moving away from the sprint even when things break mentality.
Massive change in philosophy. This also won't happen, because egos, but the leadership could realize that attrition will be their undoing. They could take a step back and focus on creating the best possible program.
I don't think either of those things will happen.
A newcomer to the market will do things better. If I'm wrong and RY stays in business, this will be why.
If Wifi Tribe or The Remote Experience or Terminal 3 or another competitor builds a better program and can present a threatening-enough alternative, RY might be forced to get on their level. They'll have to gain market share and offer an obviously superior program at a similar cost. If that happens, RY will have to pay attention and improve their product accordingly. Capitalism at its finest.
RY won't do it on their own. They'll do it because competition forces their hand. They'll do it because they achieved growth early on and have a financial cushion to iterate in the face of competition.
Not because they believe in creating a great program and caring for their participants, but because they'll have to in order to survive.
Just like Time Warner upgraded speeds and lowered prices in Durham, my home, when Google Fiber started rolling through. Time Warner doesn't care about giving you the best service that they can. That's hardly why they're improving.
Who knows, maybe RY will surprise me. Maybe they'll hang on for so long that they'll accidentally get it right.
I won't hold my breath.
These are my own predictions, based on my experience and nothing else. I was a participant on Remote Year and witnessed the issues firsthand.
On the professional side, I have several years of experience building growth models for startups and helping founders fill out their investment pitches with data. My forte is strategic analysis and I'm well-versed in growth modeling. That's where I'm coming from in this analysis and forecast.
Taylor Coil is a marketing manager who works remotely from around the world.