With the war for talent at an all-time high in Silicon Valley, startups and large tech companies alike are increasingly looking beyond US borders for their future hires. It’s not always easy, given the tense immigration reform situation in Washington, but by some estimates, 10 to 15 percent of the average mid-sized tech company is comprised of foreign workers today. By solving one problem, namely access to talent, these employers have created an entirely different challenge, however: managing that talent and all the legal red tape that comes along with it.
Teleborder is a nine-month-old Y Combinator alum aimed squarely at solving this problem through a combination of a cloud HR software and a marketplace of third-party service providers like attorneys and accountants. In a similar way that Workday, Cornerstone OnDemand, and TriNet have built billion dollar businesses solving more traditional human resources problems, Teleborder sees an shrinking global labor market as an opportunity to solve immigration-related issues.
Today, in the firm’s first US investment, Teleborder announced a seed round of undisclosed size led by Khosla Ventures with participation from Indonesia’s East Ventures. Sources close to the company indicate that the total was slightly under $ 1 million.
As HR departments with one or more foreign workers can attest, hiring and managing the ongoing employment of this workforce can be a nightmare. There’s nothing in the way of a guidebook for how to obtain the necessary visas, and then manage taxes, relocation, ongoing compensation, and ultimately green card applications. The largest corporations like Intel, Microsoft, and HP have built dedicated HR teams to deal only with their international workforces, but it’s an expensive proposition and one that lesser organizations can hardly be expected to match.
Teleborder co-founder James Richards has a firsthand understanding of the immigration issue. With Indonesian, Australian, and British citizenship, and a father who is a hotel executive, he’s been a global traveler living on one form of a visa or another for 22 of his 26 years. He also understands a bit about the laws governing this process as the youngest ever graduate of Columbia Law School – he was only 20 when he passed the New York bar exam. Richards’ co-founder Michael Smith is no stranger to expat life either, a Belgian citizen now living and working in San Francisco.
There are currently over 230 million expatriates worldwide, representing an unofficial community that if united would represent the fifth-largest country in the world (bigger than Brazil!) with a population is only likely to grow over the next several decades. In the US, up to 140,000 people with special skills are are granted work visas each year.
“There’s a renaissance going on in HR 2.0,” Richards says. “Globalization is really reshaping the way HR is done and we’re excited to help small and midsize companies do global mobility just as well as big companies, but at a fraction of the cost. We’re the cheapest and most efficient credible source we know of for immigration services in the United States.”
Teleborder is already generating revenue, although not in the way you might expect. The company’s clients pay on a per-transaction basis, rather than on a recurring or SaaS basis. In this way, the company acts as a rare hybrid of a software solution and a professional services booking platform, but monetizes more like the latter. Teleborder has spent the last year testing various billing structures and has concluded, at least preliminarily, that the per-transaction model is the best fit for this particular problem. Thus, it has created a standardized rate schedule with a host of common services. Richards expects less than 5 percent of Teleborder’s revenue to come through hourly billing, and only in rare and complicated immigration cases.
“Applying for a visa is a generic process that is the same for all companies,” Richards says. “You need to submit the same documents on the same schedule. We’ve managed to distill the process into a repeatable system to make sure that things are correctly and on time the first time. Our goal is to remove the human error by automating as much as possible.”
An example H1-B visa transaction costs a Teleborder client a one-time $ 1,900 fee, as compared to an industry average of $ 3,500. Clients only pay again when they need to renew this visa, hire a new employee, or complete some other immigration-related HR task. In the meantime, client companies get ongoing free access to a Web dashboard for managing these employees, including scheduling and alerts around upcoming deadlines, as well as document management. It’s in this software platform, as well as its service pricing, that the company believes it can save its clients meaningful time and money.
“We have built out a technology system that focuses on customer experience and data security,” Richards says. “The hard part has been around permissions setting. Visa applications often contain highly sensitive information like unfunded term sheets, bank statements, revenue statements, and employee payroll information. We need to keep all that secure and only show it to the right people. Before Teleborder this was done manually with spreadsheets and email.”
Teleborder contracts its legal and payroll work out to independent attorneys and accountants through a federated network model, paying those individuals a pre-agreed upon rate for each service. The company also works with freelance writers, paralegals, and bookkeepers under a similar arrangement, to help minimize the work that its attorneys and accountants must do and increase efficiency.
This raises the obvious question of liability, with independent contractors delivering services that if done in error could mean deportation for employees and fines for employers. “Technically, the service provider is on the hook if something goes wrong,” Richards says, “but practically it’s on us. We go through a three stage vetting process to make sure we’re working with only the best.” Would be partners first complete an application and submit resume, and then complete a written challenge in the form of a mock-application – which filters out 90 percent of applicants, Richards says. The third step is a phone interview with a non-lawyer to make sure they can adequately explain the immigration process to potential clients. Once applicants pass this three-step test, they are invited into the Teleborder pool on a trial basis.
It’s unclear what this billing model will mean for Teleborder’s revenue potential, but the company already has a better than 50 percent repeat booking rate over its first 6 months in the market. Margins are also very healthy, Richards tells me, citing net margins in the range of 50 percent on most services.
Richards compares Teleborder to UberX and AirBnB in that it is taking advantage of underutilized capacity in the professional services sectors. Most of its service professionals are independent practitioners or even part-time workers who don’t have the luxury of a large firm constantly acquiring new clients. Teleborder is able to contract with them at less than market rates because these individuals don’t have the overhead of large offices or marketing for traditional customer acquisition.
“We have never lost a lawyer because we don’t pay them enough,” Richards says. “One of our best lawyers is a stay at home mom in Boston who used to work at a large, global firm. She can’t work full time now because she has kids, but she’s happy to make some extra money and our clients get access to an extremely experienced attorney.”
Just six months into its service, Teleborder is already helping its clients manage more than 100 international employees, with it’s most notable account being Jawbone and its roughly 40 international employees. The company has achieved a better than 95 percent immigration application approval rate to date, according to Richards.
“H1B visas applications are due on April 1, which means that you typically have to start the process no later than February 15,” he says. “We had a client come to us just one week before the deadline this year and say we found this guy and we need to bring him on board ASAP. We were able to spin up a visa application for him almost immediately because we’d already worked with the company and had a lot of the information already in the system. There’s no way you could move that quickly doing it manually.”
Currently, Teleborder is focused on US companies employing foreign workers domestically. But longer term, Richards aims to be country agnostic. “Long-term, we want to be the back-end for global talent mobility,” he says. Richards goes on to describe a suite of expat employee-focused services such as obtaining a credit card, a mobile phone, or an apartment lease without a social security number or its equivalent in foreign countries. “I see us being Alibaba for expat life,” he adds.
With 10 to 15 percent of the average mid-sized tech company comprised of foreign employees, Teleborder looks to have honed in on a very real problem in the industry and seems to have developed a viable solution. The company will need to prove that it can grow its two-sided marketplace healthily, balancing both supply and demand. “We try to grow the supply-side slower,” Richards says. “Lawyers can always stretch, and we would rather have only the best lawyers.
One thing that’s out of Richards’ hands, however, is the ongoing immigration reform debate in Washington. It doesn’t seem that the situation could get much worse for tech employers, but in the event that the borders are materially opened to high-skilled workers, the demand for Teleborder’s services could change. It may be that the act of getting foreign nationals into the country becomes easier, but managing them once they’re here becomes more difficult. Of course the inverse could also be true. And while more demand is always a good thing, too much demand too quickly could easily overwhelm the still nascent company. Flexibility and an ability to listen and react to changes in the market will be key.
“When we originally applied to YC, the pitch was for a more general legal services marketplace,” Richards says. “But PG [Paul Graham] encouraged us to solve a problem that we were personally facing. Everyone on our team has been touched personally by this issue. We see ourselves as building a railroad or a bridge around the world. Our hope is that whenever someone crosses that or moves around the world, they’ll use us.”