To launch their data science company, the founders of Toronto-based Rubikloud had to first figure out how to acquire talented scientists
Rubikloud is a data science company targeted at clients who need to convert online traffic to revenue. To do this, the Toronto-based startup has built technology that analyzes "big data" and, in particular, the enormous volume of real-time data generated by its customers' online users.
Analyzing big data involves specialized technological knowledge, and individuals possessing such expertise are rare and highly sought-after. Given the high demand for their skills, why would they work for a startup, when startups are known to be risky? Rubikloud's founders had to answer that question in order to acquire the talented scientists they needed even to launch their company, much less achieve their vision of rapid growth.
THE BACKGROUND
Rubikloud was founded in 2013 by Kerry Liu, Dan Theirl and Frank Thomas. Mr. Liu and Mr. Theirl had previously worked together helping online businesses increase the percentage of site visitors who were converted into paying customers. They quickly realized that many factors impact conversion rates, and conversion could be optimized if there was a technology to take all of the factors into account simultaneously.
"We realized that there was a huge amount of lost revenue hidden in a company's data. Companies look at data in silos. – for example, some people analyze web traffic, while others analyze pricing or product categories – and these groups don't talk together much. It is very difficult for company executives to get a complete analysis of an online user in real-time," said Mr. Liu.
They knew that providing such a complete analysis for online businesses would be a great opportunity. However, they also realized that analyzing such vast amounts together was a massive technological challenge, and so they talked computational expert Frank Thomas into co-founding the company with them.
In order to launch a product, the co-founders needed to build world-class technology. First, they needed software to integrate huge volumes of data from multiple sources in real time. Second, they needed to provide an analytical tool – a dashboard – so that companies can make decisions based on the data. For example, if the website of a company like Best Buy goes down, Rubikloud's technology needs to be able to tell managers – in seconds – what caused it to go down and the impact of the downtime on company revenue. Third, they needed to provide customized reports for customers telling managers things like customers living in Toronto care more about free shipping than customers living in New York City.
Providing this technology requires data scientists – experts in recognizing trends and patterns – and specialists in artificial intelligence and machine learning. Their customers don't have these skills in-house and Rubikloud's value lies in supplying them.
However, such skilled scientists are in scarce supply. Mr. Liu estimates that fewer than 300 people in Ontario obtain graduate degrees in the areas of machine learning, computational math, applied math, and other data science fields each year. With job possibilities in Silicon Valley, New York and London from well-known companies like Google and Linkedin, why would these experts sign on with a startup?
THE SOLUTION
The three founders take the acquisition and retention of employees seriously. Mr. Liu states, "We are competing for talent globally and we do not treat it as a commodity."
One element of the Rubikloud solution is compensation. The company offers employees a base salary and benefits that match or exceed what they can get elsewhere. This is possible because the founders received over $1-million in seed funding to build their technology, from Li Ka Shing, identified by Bloomberg Billionaires Index as the richest man in Asia. Employees also receive compensation in the form of meaningful equity incentives. But, while such compensation is necessary, it is not sufficient. Rubikloud would find it difficult to attract the necessary expertise without it, but it doesn't provide a competitive advantage because other companies can offer great compensation packages too.
A second element of the solution is giving smart people the chance to work on problems that haven't been solved before. "If you're a data scientist, we can give you what you want most," says Mr. Liu. "You get to work with new cutting edge technology and immense amounts of data." They encourage people to spend time with the founders and the team before signing on, so they really get what the company is doing. One of their early employees spent over a month moonlighting with the founders before fully committing to the company.
But Mr. Liu explains that a third element – and really the guts of their competitive advantage in the quest for talent – lies in the importance they attach to engaging employees in shaping the company culture. "We minimize management and reporting and make sure we understand what people want. The norm for companies like ours is to offer things like free food and free massages, but we've found they are secondary for our employees. As an example, we talked with employees about what they wanted to support them through a very intensive period of work in January. The answer came back loud and clear that they wanted to be free of distractions, and so we have rented a house for them for the month where they can focus exclusively on developing the next round of technology."
THE RESULT
Rubikloud has six beta customers and plans to launch an enterprise version of their technology in the first quarter of 2014. The company has been successful in bringing on board the talented people they need to do this.
Mr. Liu reports that since receiving the seed funding in Sept. 2013, the company has hired three gifted data scientists, an experienced visualization engineer, and highly skilled software engineers with a mix of graduate and undergraduate degrees.
"Every single early employee helps shape the culture and direction of Rubikloud. They help build and write the company handbook and are involved in critical decisions," said Mr. Liui. "We don't just want employees. We want people who are interested in helping us build a company. That means tremendous responsibility but an unbelievable experience."
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.
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