I had the pleasure to sit down and learn of the unique story of CloudFactory Founder and CEO, Mark Sears! He has taken a journey unlike most US entrepreneurs, as he works to impact the world.

Mark and his wife went to Nepal for a 2 week vacation and things just kind of happened he says. Four years later, they are still there. He says that they have a strong social mission of connecting 1 million people to basic computer in developing nations, while raising them up as leaders to fight poverty in their own communities.

CloudFactory has just raised a $500K seed round from a US investment fund, and have 3 families in the process of moving from US/Canada to Nepal to join their leadership team. Right now their focus is on getting good traction from early clients, building virtual assembly lines, and using their talented and motivated workforce in developing countries.

Sit down with us and watch Mark describe in full detail of their journey and how they are actually helping change the world for better!

Interview Transcription

ERIC: So, we have Mark Sears today on TechHustlers. He is the founder and CEO of
CloudFactory. How are you doing Mark?

MARK: I am doing very good, Eric. Great to be here.

ERIC: Alright good. So, Mark, you know, Where are you from?

MARK: I grew up in Canada, Western Canada, actually just outside of Calgary. And very
far away from that now though. We live in Kathmandu, Nepal.

ERIC: So, how did you make that track all way to Nepal? What’s the story behind that?

MARK: Yeah, well it’s quite a story but we, me and my wife, we got married in Calgary. We
are both professionals. My wife’s a Chartered Accountant. And I have been a software
entrepreneur, software developer turned entrepreneur after about ten years and we
actually found ourselves on a two week vacation to Nepal. So we literally went there just to
meet a friend, Nepali young guy. We were gonna meet his family in the village. In the two
weeks, decided, well, let’s stay three weeks and four weeks and we met some young
computer engineers and I started training them on Ruby on Rails and we got a project. We
got another project, next thing I know, it’s been four years that we have been living there.
So, not our plan but it’s been awesome.

ERIC: It’s awesome. So tell us a little bit about CloudFactory.

MARK: Well, CloudFactory, we actually started as a services company. So we were
building a Ruby on Rails web apps for startups in Europe and North America. Usually, you
know, two, three people on the side. You know, they had 25 to 100,000 dollars. They
wanted, you know, a small Rails team to build their dream out. And then probably about
two and a half years ago, we got tired of all these. All of our clients kept asking, “Hey this is
great. You guys have really affordable Rails development but could you hire like three guys
to do some lead generation there for us. Or could you hire, you know, there’s one
company that wanted us to hire like a whole room of people just to watch amateur hockey
video and every time someone scored you just marked the jersey number and the time
they scored and capture all these events. And so we held these weird requests and we just
kept saying, “No, we are just Rails guys. We just do Rails development. We just keep
doing Rails development.” And you know after a while, you realize when your customers
are like wanting to pay you and give you money to do something, you think well, may be
we should do that. So, we had the demand side and then the supply side was, you know,
Nepal, we are just surrounded by really, really smart young people. So we’d meet people
with double Masters, MBA’s and they are all waiting to move abroad, you know, to come to
the US or go to Australia, Canada, UK. In the mean time they are idle. And so if they
weren’t computer engineers, we couldn’t really offer them a job. So we saw — Wow! There
is a demand and there is a supply and we’re a tech company. We need to build a platform
to connect people. And so CloudFactory really came from that place of our customers
asking us to hire people to do basically date entry, date processing, fairly low level
repetitive work. So yeah, so we started bootstrapping. And we built CloudFactory to really,
you know, take the same idea that Henry ford a hundred years ago had of, you know, to
build a car, that used to have nine mechanical engineers high, highly skilled mechanical
engineers would build one car, they’d move over and they built another car. And then they
built the next car and he broke it down into 42 really reproducible steps and he hired low
skilled staff, put them on an assembly line and mechanical engineers are sitting there
saying, “There’s no way these guys are gonna be able to produce cars.” And of course the
rest is history. We’ve got, you know, made in China, a phenomenon and we’ve seen that’s
breaking a problem or project down into small pieces. It works in the physical world. So,
we’ve taken those same ideas and now we give the tools to businesses to create virtual
assembly lines. And we staff it with six, we charge six cents a minute for cloud labor we
call it. So, cloud computing, cloud storage and now we have cloud labor.

ERIC: Man, that’s really impressive. So, do you outsource most of the work? How does
that work?

MARK: Yeah, the whole reason CloudFactory exists is to connect one million people in the
developing world to basic computer work. So, we are a social enterprise, we’re for profit
and we believe that’s the way to create jobs and really bring change to these countries that
need economic development, social development. So we actually have given work to
about 10,000 people around the world, these small tasks, but we’re just starting with a new
model and we have teams of five. So, we have a very kind of organic — it’s based on
Muhammad Yunus and Grameen Bank kind of solidarity group. So we have teams of five,
they work anywhere, anytime. They wake up four in the morning, do some of these tasks
and then they get together once a week and there’s a team leader that leads them through
kind of a two hour meeting to hold them accountable. We do some character and
leadership training. And yeah, we’ve got this very expandable, growing workforce that we
are redirecting our work to this workforce. So they are not our employees. They’re our
contractors. But they are definitely our team and the core of what we’re building. They’re
the talent.

ERIC: So that’s impressive. So you basically took what oDesk and Elance and some of
those who have done, instead of just make it just individual, you’ve taken pretty much to
assign people on there and you’ve made a team out of them. Is that right?

MARK: Yeah! We are definitely in the same space, I mean eLance, oDesk, Guru all this
different sites, they offer kind of higher level work and we like to think that, you know, if you
have a project that takes hours or days, then that’s where you’re gonna go. But if you have
a lower level work that’s more data related where, our work takes minutes. So, ours are
repetitive tedious tasks that often can take, you know, minutes long. So, that’s why we kind
of build that way as well.

ERIC: So, do the individuals that are working on the virtual assembly line, the cloud
assembly line, do they know like what they are working on or do they know the whole
picture of it or is it they just know just their task?

MARK: No, sometimes they do but a lot of the time they don’t and that’s what we love.
Like we’ve got one client in Canada that has drug and alcohol testing for employees and
so they have hundreds of these tests that are coming back, basically saying if the
employees are on drugs or alcohol. And so they used to have like 40 staff that are sitting
there entering these forms right in their office and they had all these problems of people
seeing like “Wow that was my uncle”, that’s on cocaine right! Or that was like my old
colleague that’s you know. And so, they would have these problems so what we do is,
every time now those forms come in, we literally put them through like a virtual paper
shredder. So, we take the name, gets shredded up, so, we cut that off the form. We cut off
the result, we cut off the address of the company. So, it gets shredded and then we fire
those out to all different workers and then they bring them back together. We do quality
assurance, put them back together. And we fire it back to the client all using API’s
completely automated. Hence, we’ve got this at a level of security because like you said,
nobody knows the full context of what’s going on.

ERIC: That’s something. So did you build a software to be able to manage all this or do
you use a certain software? Because that seems like a lot of management. That’s a big
task which you all are taking on.

MARK: Yeah, that’s our company so we’ve been at it for the past two years. So, about two
years we’ve been building our own Rails app, our own platform to do that. So that’s the
core of the company was to get the technology in place and now we’re getting the work
force in place. And so really, you really need the two together, right? You have to have the
technology because a lot of it is — we actually have when you build in assembly line, you
can assign robots to a task station or you can assign humans. So, we realized that in this
day and age, it takes both. Computers can’t do it all but humans can’t either. So that’s kind
of the approach we have taken

ERIC: I can see how you’ve easily raised, you know, a million dollars in funding. I mean, it
just seems like it’s definitely disruptive.

MARK: It’s a big opportunity.

ERIC: And so I don’t even know how I stumbled upon CloudFactory but, you know, I see
startups all the time and I see these sites all the time but as soon as I came across it, I
mean, it was something I’ve never seen. I mean, the website is, you know, paints the
perfect picture of that the whole assembly line. But I knew it was transforming that’s why i
had to, you know, bring you on TechHustlers. So, I remember you telling me that, you
actually you have a team thats — you’re having about three families that’s moving from US
& Canada to Nepal. So for entrepreneurs, you know, we have to inspire people to be able
to do things. So how did you inspire someone to move from the US and Canada all the
way to where you are?

MARK: That is a great question, you know, because we are in this weird place where, you
know, every startup has limited funds. But in our situation, we have got a staff of 45 and,
you know, our burn rate is so ridiculously low and so for us to start adding western
salaries, I mean its very difficult. So we don’t have a lot to offer in the way of salaries and
so it’s been amazing to see. I would have said that we have done traditional recruiting.
Everyone has had some tie to Nepal. They have got a heart for Nepal, they’ve got a heart
for developing nations. You know, hardcore we got our V.P. of Engineering is just a
hardcore tech guy. You Know, from Disney, Adobe, Club Penguin and, you know, he goes
down to San Francisco and bills out a big rate but, he sees that he can use the skills that
he’s learned to create work for a ton of people. And so he has got a heart for Nepal. He’s
got heart to use what he has, you know, to kind of give back. And that’s kind of what we’ve
seen with these latest 3 recruits that are becoming the part of executive team is you know,
just that shared desire to say, “You know what, let’s really use technology for good.” I
mean I’ve spent, you know, ten years ago I was working 20 hours a day, you know, and the
whole point of what I was doing was to make games on Japanese cell phones run quicker
for 12 year old girls. And you know, you kind of wake up one day and you’re like, “Really?”
You know. “Did I really just program non-stop for the last 20 hours to do a demo?” So, I
think, that’s where a lot of us are at is like, “Can we really dream big? Can we really try and
put together the platform to connect, you know, this untapped human potential that’s in the
developing world ’cause we’ve been sending aid to these countries right, for years and it’s
going into the education. And so all of a sudden, we’ve got these people that are coming
out with, they speak English and they are connected to the internet. I mean, we’ve got
wireless USB sticks you pop in. We’ve got 3G hanging off the side of Mt. Everest. I mean,
like all the tools are there for this to happen and so, I think that’s really the vision and the
opportunity is what’s brought together a really really cool team.

ERIC: So that’s sound good. I just read a literally yesterday about some of this basic that
we have been, you know, ingrain to say, “Hey! Lets slay the bad person.” So it’s like you all
are fighting poverty and I think that’s a good message as far as trying to bring people to
what you are doing is that, it’s almost like we’re fighting the — it’s us against the world. And
it is like it’s for this common cause and I think that’s a good thing to focus on. I think if
entrepreneurs, when they’re trying to bring people on board to their startups, and what
they’re doing, they need to try to find a bigger purpose than lets just make a whole bunch
of money. And I am glad you know, you focused on that and I think that’s genius, brilliant.
So I know that you made, I guess we would call it like a pivot from the service to the
product from a service to a product startup company. So tell us about what was the
thought process behind why you decided to do it and how difficult was it.

MARK: Sure, yeah well I’ll start with the last one, it was really difficult. I mean, I was trying
to find the resources. You know, I am reading books and blogs and just like other people
are going through this. I mean obviously, at 37Signals, many companies have gone
through this transition but we just felt really alone and really the biggest struggle we had
was this whole identity. I mean so the original name of our company was Sprout
Technology and so right down to our employees were called Sprouters and all of sudden
we changed the legal name and you have a 100% of your day and your resources are
focused on this new CloudFactory product, but there is still this identity stuff that’s you
know, just locked in. So yeah, it was a really difficult change. The reason we did it was
again it was fantastic for us to build a company. You know, we have about 45 staffs. Most
of them are Rails developers and, you know, living in a third world country you just, I
mean, you walk out a door and you meet people that, you know, you just wanna help,
right? That you see situations and unless they were computer engineers, we didn’t really
have anything to offer them. And even if they again had, you know an MBA or a Master
they are really intelligent, I couldn’t really help them with my company. And so when the
opportunity came, you know, just for something bigger. Bigger both in terms of the
business opportunity but also in the social impact potential. And when you have customers
that are asking for it, you know, it just got to the point where we need to do this, we need to
make this transition. If we are gonna make it happen, we need to go a hundred percent
and so yeah.

ERIC: So I guess, a more practical like — what was like the first three steps that you did as
far as with the transition? After you, you know, changed the business name and everything
like that so, I mean when I say like I mean did you come up with a business plan? Did you
write it out? Did you, you know, use the lean canvas as some people have talked about?
What are those like, you know, those particle things that you did to really make it happen?
Because that’s a big task that you faced.

MARK: Yeah, and you know, like everything, we did somethings well and some things
really bad. We started by putting two engineers on it, right. See, when you have a services
company, you will always have a couple of people on the bench. So, whenever we had
developers that weren’t working hard on a project, we would put them on CloudFactory. So
we started with 2 and then 4 and then 6 and so there definitely is that idea of transitioning
and bootstrapping, using your resources and your profits back in. And, you know, we’ve
built three different platforms. The first one was completely integrated with Google docs.
You know, it’s like using spreadsheets to kind of crowdsource your stuff and, you know, we
thought it was gonna be just so cool but it was just not developed, you know, with any
idea of a customer in mind and just being dependent on a third party platform, their API,
we just hit walls. We hit technical walls where it’s like, man! Like, we can’t wait another
twelve months for them to release a new version of the API. So, you know, we just hit a
wall. We gave up, rewrite. It was three times that we went through that.

ERIC: Perseverance.

MARK: Sorry?

ERIC: I said perseverance. That sounds like that was a big thing you went through.

MARK: Yeah I mean, you know, once you are committed to it again right, you are just like,
“Man, this is a huge opportunity.” The other thing that happened, you know, what’s really
hard is, you got to start saying no to clients. So, I would say that our services business
was really starting to take off. And so we were in the midst of, you know, trying to switch
over to product company and we have people that are literally like, wanting to lay money
down, right. I mean, you know, we just kept increasing our rates, increasing our rates and
people were paying them and asking for more projects. You know, more leads coming in
everyday and we’re having to start saying no. And then even having to say no to a really
existing clients, and having to turn them away and transition them to other people. You
know so, yeah it was practically right. I mean there is a lot of steps there. You know,
everything from managing cash flow, to you know, handling relationships to the identity
stuffs with internally in the culture. Yeah, lots. But we are through it, you know. And the
great thing is, you know, the good side of it is so we’ve got a staff of 45 that have learnt
how to build web apps together. You know, they’ve got the Scrum Process, they know how
to work with each other, we’ve got a fully established office. You know, so get this amazing
head start, right? It’s not three people starting kind of hacking something, you know, in the
background. We have had other people using their startups as sort of practice for us to
now go with our own. So, good and bad with that transition.

ERIC: So with your team, what did you do to try of keep them motivated and convince
them that the change was good? I mean, cause change is difficult for a lot of people. So I
mean, what was the number one thing you kept preaching to them? Was it, “Hey we
wanna fight this poverty and make a difference and change the world.” Was it that? And,
what did you do on a weekly basis? Did you have weekly meetings about it? Like what did
you do to keep people inspired?

MARK: Yeah, no question vision. No question the vision was the number one thing and
again, you know, one of the cool things about being located where we are is, you know,
beyond having access to, you know, developers and lower overhead and all those things.
It’s really a matter, we are in the heart of what we’re trying to pull off, right? We are
surrounded by the people we are trying to help everyday. So, all these software
developers again, there’s these young rails guys that are thinking, “Wow! I get to work on
something that’s gonna help my country. We can build something innovative that Nepal
could be literally known for, you know, something disruptive. We could have literally a
Silicon Valley style startup here, in Kathmandu. So, I think there was, you know, really that
idea of, you know, connecting a million people. A million people! A million people! But we
have to build a platform that’s gonna be able to attract business providing enough value to
them, that we put enough work for a million people on their lives to be changed. And so,
when you’re a programer that realizes you can sit at the computer and write code that’s
gonna change people’s lives, you know, there is no question that we kept that on the
forefront and continue to and as a team, that’s what’s driving us.

ERIC: So, how do you find leads because, you all don’t have a startup eco system there,
do you?

MARK: No no.

ERIC: So how do you find leads when like that’s just something that’s so easy for people
that’s it like in a startup, you know community there, they can just go this meetup, at this
event, and talk to a million different people and they get, you know, tons of leads. How do
you get leads?

MARK: How do we get leads? You know, from day one, we’ve never had anyone in the
US, Canada, Europe, you know and we wake up in the morning and we look in our inbox.
That’s how we get leads. [laughs] You know it really is unbelievable at this point. It’s not
that we are doing a fantastic SEO and customer acquisition online. You know, we’re
working on it. But I mean, we’re relaunching our website and stuff too. But I mean, to be
honest, I don’t know how we’re getting leads. But we are! And its fantastic!

ERIC: You do this the word of mouth from just one good customer, spreading the word?
You think it’s that way?.

MARK: It’s a combination for sure. It’s a combination of that and it’s a combination of
people looking for us online. You know, I think we’ve got a pretty good brand. You know,
people can really visualize this idea of a factory in the cloud. So, I think that’s really helped
us. But, you know, you realize it’s like, even if you’re in Chicago and you’re looking for
someone to do something for you, even if they’re located on the other side of the city, you
know, you are going to end up using email, Basecamp, Skype or whatever anyways right
Everyone talks about the flat world, I mean, we’re living that. I mean we are on Skype right
now and this is where we live, right. Every morning at 6 a.m. and at night we are Skyping
with customers. So yeah, like I said, if you’re on the other side of the city, the other side of
the country, or other side of the world in Kathmandu, Nepal, you know, it’s not that big of a
deal anymore.

ERIC: Well Mark, I admire you for staying there and trying to make something happen
there instead of doing what a lot of other people do, move. I mean, if people convicted to
be able to move, okay, that’s, you know, so be it. But at the same time, I’m a lot like you
that, you know, trying to do something where you are and end up changing your own
environment. I think anybody that adds jobs is doing something great. And not only you
adding jobs, but you are adding them in third world countries, to people that didn’t have a
job once. So it reminds me of kind of like with what [xx] is doing here in the United States.
They are providing people with jobs, that once people thought weren’t jobs. You know, it’s
these odd tasks that people can do and be known as, “Hey! This person does this and I
can rely them do it over and over again.” I think, you know, you’re committed for that.

MARK: I agree. I love everything from Air B-n-B to Task Rabbit to Exec to, you know,
Uber. You know, all these things. Just we have this resources that are there and we need
to use technology to really connect the dots and just, you know, unleash the potential. And
so yeah I agree, I love — and of course when it’s people, it’s just cool. So, that’s what we
need to use technology for and I love to see all the tech startups doing this.

ERIC: That’s awesome! We’re gonna have you back again ’cause I’d like to do an update
and then see where you are a few months down the road. That’d be awesome.

MARK: Great!

ERIC: Alright, I appreciate you coming on TechHustlers man.

MARK: Yeah, thanks ERIC.