We often hear about the inception of companies secondhand, but in this episode, you have the opportunity to hear it straight from the mouth of a co-founder. Rahkeem Morris, the CEO and founder of HourWork, shares his experience of participating in a startup competition that led them to secure their seed round. He also talks about the challenges they faced during the pandemic and the changes they had to make to their strategy. Brace yourself for a rollercoaster of emotions; you may laugh or even shed a tear, but one thing is for sure - you won't want to miss the final episode. Enjoy the show!
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Intro: Voices, we hear them every day. Some voices like mine are smooth and comforting. While on the other hand, the Chad and Cheese podcast is like listening to a Nickelback album, you'd rather stab yourself in the ears with an ice pick. Anyway, you are now listening to Voices, a podcast series from Chad and Cheese that features the most important and influential voices within the recruitment industry. Try not to fuck it up, boys.
Joel: We hear so much about the birth of company secondhand, but this is your chance to get it straight from the co-founder's mouth. In this episode, Rahkeem Morris, CEO and founder at HourWork, talks about the startup competition that landed them their seed round, along with a pandemic pivot that forced them to rethink their entire strategy. You'll laugh, you might even cry, but you'll definitely want to hear the final episode after listening to this one. Enjoy. So you're so thoughtful in calculating in your moves.
Joel: You're looking at top 10 lists and things like that. Was it just serendipitous that Rob was in the same place at the same time and you guys both wanted to start this business? Did you have to sort of twist his arm, how the idea and how that came about talk about that.
Rahkeem: Yeah. I am a calculated person and I think that has a stigma sometimes, but I certainly plan. I am a calculating person, I'm proud of it, and I do like to create my own luck in life. And I was hanging around the Harvard Innovation Lab, because I knew that it was a good place to find founders, because often someone in incubation, their startup doesn't work and they still have that entrepreneurial vibe and spirit.
Rahkeem: And so I very intentionally hung around the Harvard Innovation Lab to find early employees and co-founders for my business. And I'll also say, with great success, because the first... My first team, which almost all of them are still here of three or four people, they worked for free for the company for a year. And then maybe, I can't say that, 'cause the IRS now, [laughter] but they quit their jobs and decided to do this full-time with me. Now I think about it, their stock actually more than enough makes up for it Now.
Joel: Good say.
Rahkeem: And so I can't say that. [laughter] they did an entire year, quit their jobs and worked on this company without any compensation, cash compensation that first year.
Chad: So was this company an idea in your head that had been long standing, or did it just pop in Harvard? When did it happen? And then how did you start to carry this through to fruition? To me it sounds you had an idea when you were seven, for God's sake.
Joel: He went out and bought the barons and saw the most, profitable businesses to start. How'd that come about?
Chad: So it was when you were 14 when mom had this issue, it's like you had this idea pop, and then you started creating the schematic to success. Hey, when did it happen? When did it hit you in the face?
Rahkeem: I'd say that it was, when I was thinking about starting a business, there was two things I had in mind. First, how terrible that experience was working at that temp agency.
Rahkeem: That day, the first day I went to this warehouse, [laughter], I didn't have a way to get there, so they told me to get in this car of someone who was... [laughter] And later found out has several felonies, and so I'm just going back and forth with this complete stranger into this place. And then I'm sweating at the end of the day, and they gave me 20 bucks at the end of the day.
Rahkeem: And so I had this experience working this temp agency. And then I also had the knowledge that for most of my wage-earning jobs that I had, again, I had 13 in total, over half of them, I had returned back to them at some point later after I initially left them. I was a boomerang employee, so Taco Bell, I just kept going, that was a revolving door for me. Yue Huang, the same thing. Pizza and Uno's the same thing.
Joel: You're making me hungry, man.
Chad: So did you keep your flare so that when you went back to Yue Huang, you said, "Hey, I've got all the flare, we're good to go"
Rahkeem: Wait. I wanna make sure you said that, I definitely kept my uniform. [laughter] It's almost anticipating that I would... And now I think about it, this happened. I totally forgot about the story. I had all those uniform tops, when I graduated Cornell, [chuckle] that was the first time I actually let them go. [chuckle] And I donated them. So I would keep my uniform, and so I was always able to walk back in. And I thought, "Alright, well, I worked all these jobs, I can always go back. I had this terrible experience with this temp agency. I had this prior training, why wouldn't I be able to do this at a place like a Taco Bell, returned back there, because I got this training from them that I still remember?"
Rahkeem: These jobs are all rote memorization. If you need to get that Taco at 2.9 ounces 50 times a day, and you do it for a whole year, you're not gonna forget what that weight is. That's like you're doing flashcards all the time at work. And so you don't forget those things. And so I have all this training, I knew I could just do that job again, if I were to walk back in. Why not create a platform and system that would enable exactly that?
Chad: When did you actually whiteboard this idea, 'cause I think that's when it comes to fruition. When you start to ideate and you get the ink out to whether it's on a pad or it's on a whiteboard. When did you do that the first time?
Rahkeem: Great question. So the first time I did that I was applying to these startup competitions. For a whole year, the only thing that I did was, yeah, like without building anything, was apply to startup competitions. And that is one of the most useful things, surprisingly. It was an... Well, the outcome of it was completely I couldn't have anticipated it. Since I was in school, I wasn't able to actually work on it as many hours as I wanted to. [chuckle] And so all I was able to do was apply to competitions. [chuckle] And so I would get all this feedback, from all the judges, and I would just iterate on it until I had something that was beginning to sell to the people. And that's exactly what happened.
Joel: Were you like Y Combinator, you must know every single incubator in the country?
Rahkeem: I literally, and this is without exaggeration, I'd applied to over 50 accelerators. And then I'd say over half of those have gotten to a certain step in the competition, where I'm getting very valuable feedback from people who are often founders themselves and entrepreneurs in their past lives.
Joel: And what was Rob's role in this? Did you guys sort of develop a relationship where your strengths were his weaknesses and vice versa? Talk about the evolution of your relationship.
Rahkeem: Yeah. Rob is a really great writer. He's a really great writer. Initially, I was writing all these applications myself and to have a partner like him to come in, rewrite what I had written and then reapply to some of these competitions, with a better written let's say...
Joel: Better pitches, better written pitches yeah.
Rahkeem: It certainly helped in the beginning. And then getting into the finals of these competitions. And getting to the final of these competitions was also the reason why I was able to raise that pre-seed round, our very first round. We went to a competition at Rice University at their business school called the Rice Business Plan Competition.
Joel: That's creative.
Rahkeem: Yeah, right? It almost, it's like an acronym. [laughter]
Chad: Say what it's, I like it.
Rahkeem: Exactly what it's.
Rahkeem: So we enter this competition and one of the fascinating things about this competition is that they don't give you the prize. It's not a no-strings attached $50,000 winning for winning the competition. When you win the competition, they give you a convertible note. It's a fascinating way to run a competition. Initially, in the beginning, I felt gypped that it was a convertible note, but then when you realize it... Or when I finally when it happened, I realized that, we won second place in this competition was that when we got a term sheet for winning second in the competition that set off the fundraising process. And one of the best ways to kick off a fundraising process is with a term sheet. And that's exactly what happened out of this competition. And it set us up so well to raise a little bit over a million dollars for our very first round.
Joel: So a lot of our listeners didn't go to Harvard Business School, describe a convertible note for those that don't know.
Rahkeem: Yes. So a convertible note, the longer form name for a convertible note, it's a convertible debt note. And if you're thinking about the balance sheet, you know what you said to one who didn't go to Harvard, I'm gonna do it to one who doesn't have even, let's say a knowledge about business. Pretty much an investor gives you a loan, and then by the time that your business looks as if it's going to be something, that's converted into stock for that company, that's pretty much what a convertible debt note is.
Joel: So you have a little money in the bank. What's your next move?
Rahkeem: And this is around the time after our first round.
Chad: What's next?
Rahkeem: Oh, yeah. So what's next? So we're going back to August, 2018. Well, we began to begin building out toward the vision, that I had set for the company.
Chad: What's the vision?
Rahkeem: Yes, the vision is a liquid universal workforce.
Chad: A liquid. Liquid...
Chad: Universal. I like that. I like fluid better, but liquid is fluid, so that's good. Carry on.
Rahkeem: Yeah. And so, why is it liquid? Why is it universal? Liquid refers to the ability for a worker to take a skill that they have and convert it into income in a very quick way. So you think about all the assets that you have. Let's say as a company, you have assets that are liquid and assets that aren't liquid. It's the speed at which you're able to convert that into cash. And so the liquid part refers to someone's skills to be able to convert that skill quickly into cash. And that's what the liquid part of this means. And so that looks like, and we have many different proof points of this working already with our platform today, is that someone that has been previously trained at a job, let's say you've been trained as a crew member at a McDonald's. With that skill that you've been trained on, you're able to return to the McDonald's that hired you instantly through our platform. And so now you've got this skill that you've earned, you're able to make it liquid by converting that into income in the form of a paycheck by returning instantly to your employer without any questions.
Chad: If the employers get into this because the employers, they're obviously the door that you have to have opened, and these are franchises. So if they all agree that, let's say, for instance from a Taco Bell standpoint, "The exact weight of a Mexican pizza, then come on in," right? And if you have proof to do that, also what about manufacturing, being a CNC operator and being credentialed in one organization, how fluid is this? Is this just for fast food, or is this for a more broad scope? How were you thinking of this first? Was it incredibly pointed when you first executed, or was it just broad-based, come on, come all?
Rahkeem: It was broad-based, come on and come all. It's actually exactly the way that my mind works. I'm very much, especially given where I've come from and just understanding what I needed to do to get to where I wanted to go, I'm just a visionary-type person. I have the dream bigger beyond my current resources and circumstances. And in the beginning, thinking about this company and what I wanted it to do. I thought very big, very broadly. And that refers and that relates to the universal aspect of this platform so liquid universal. Universal refers to those skills. So not only do we want to have all skills on this platform, we also want someone that is in possession of one of these skills to be able to use it, that skill, at any workplace where it's currently practiced.
Chad: That's herding cats though, right? You've got all these skills, now you've gotta silo the skills, and then you've gotta get the employers to agree that said skills are exact, the exact skills so that they can open the door for all of this fluid, fluidity to happen, right? That might have been the concept, but that's not really where you started at first, right? You started with the janitorial side of that.
Rahkeem: That's right, yes. Okay. Yes. So janitorial, we started with janitorial for the reason that is a general skill that someone has. As long as you can follow directions and do some job shadowing of someone for a very limited amount of time, you'll be able to become fully proficient and competent in that role. It's a easier... There's no previous training that you need to have that job. And so we got started off with what's our first product that we had. By the way, our product was nearly killed, this product was killed by the pandemic. Although we have one legacy... Two legacy customers on it. The first product that we had, we allow for managers to request their former employees on demand. And that was with companies that cleaned commercial buildings.
Rahkeem: Around the time of the pandemic, we had about 12 to 15 of these companies on our platform.
Chad: Okay. How did it work? Did it work well before the pandemic?
Rahkeem: It did. And so what we did is we created a pool of workers, who were completely unscheduled. These were people who were employed by that employer still. And at the beginning of the week, what they did is pick up each and every single one of their shifts. The benefits of the employer was that with nearly 2000 people, but to this one employer is a case study here, 2000 people that this employer has cleaning about 300 buildings in all of Los Angeles, they incurred no overtime in a year after we were installed.
Chad: Whoa. And now these were all employees that were already on the payroll, or were they 1099? Were they W2? What kind of employees were they?
Rahkeem: All W2 employees, 92% of these employees had first jobs, which is one of the things that was important to us on this platform, that they were using this for supplemental income, so 92% of them have first jobs. What we did is we took the former employee list, that we got from this company, call up everyone that they gave us, created this list of people who are willing to do work in this way. We got a really great response from their former employees. Then we got them rehired at that employer, and then we kicked this off.
Chad: You can find more episodes of Voices, The Chad and Cheese Podcast series devoted to stories and opinions of industry leaders by subscribing wherever you listen to podcasts or just visit chadcheese.com.