Dan Morena is a genius

Knowing where to focus tech development at a fast growing startup is the rarest skill in the world

There is no garden-variety company, so focus on your own unique needs

No army has ever conquered a country. An army conquers this muddy ditch over here, that open wheat field over there and then the adjoining farm buildings. It conquers that copse of lush oak trees next to the large outcropping of granite rocks. An army seizes that grassy hill top, it digs in on the west side of this particular fast flowing river, it gains control over the 12 story gray and red brick downtown office building, fighting room to room. If you are watching from a great distance, you might think that an army has conquered a country, but if you listen to the people who are involved in the struggle, then you are aware how much "a country" is an abstraction. The real work is made up of specifics: buildings, roads, trees, ditches, rivers, bushes, rocks, fields, houses. When a person talks in abstractions, it only shows how little they know. The people who have meaningful information talk about specifics.

Likewise, no one builds a startup. Instead, you build your startup, and your startup is completely unique, and possesses features that no other startup will ever have. Your success will depend on adapting to those attributes that make it unique.

Dan Morena is co-founder and CTO of FundThatFlip.com (now rebranded as Upright.com), a very successful startup which finances speculative real-estate investments. The way he managed to keep costs down is a master class on the right way to make decisions at an early-stage startup.

In any design, the most daring decisions are often about where we say “no.” And when it comes to FundThatFlip.com, Morena aggressively said “no” to many things that almost any other CTO would have said “yes” to.

Let’s look at his most unusual decision. When they were just fledgling, Morena decided to host their online service with Heroku. By itself, that is not an unusual decision. Many startups begin with Heroku, because it’s a cloud service which specializes in exactly that: making it easy to get started.

Here’s the thing: Heroku is a bit inflexible. It also lacks many of the backup services and fail-over redundancies that are offered by more full-featured cloud services such as Amazon’s AWS or Microsoft’s Azure service. So a fairly common evolution for startups is that they commence with Heroku, and then if they are successful, they eventually move to a bigger cloud service.

But Morena refused to move. Seven years later, they are still on Heroku. Astonishingly, he currently spends less than $3,000 a month on cloud services, while his company handles over $100 million in loans. (By contrast, I’ve had clients spending over $80,000 a month on AWS.)

Dan Morena is a good friend of mine, so I’ve had the chance to talk to him about this unusual choice.

Me: Are you really sticking with Heroku?

Morena: For now. It keeps things simple. That means my team can focus on adding new features instead of focusing on supporting a bunch of complex configurations for different web servers.

Me: But don’t you want to have a service that is reliable?

Morena: Heroku has been reasonably reliable. It gave us what we needed, especially in the early days. And if we keep our expectations limited, it still does what we need.

Me: You must have lost some business when it was down. I know it’s had some occasional downtime. Aren’t you losing business every minute your service is offline?

Morena: Well, not exactly. If someone has found a good real estate target for a flip, they’ve probably been doing research for months. Even if something bad happened to us, and so our service was offline for an hour, the customers would just come back later. No one is going to give up on a $2 million deal because they couldn’t reach our service on the first try. Other companies need to be 99.999999% reliable, but we do not. It’s simply a matter of who we are, and who our customers are.

Me: Do you worry that some might think your attitude is unprofessional?

Morena: People have to understand the whole context. Especially in the early days, we didn’t have much money, so I had to do what was simple and cheap. If I’d done what my peers considered “professional” then we would have burned through all of our money and shut down, so no one would have ever heard of us, and you and I wouldn’t be having this conversation right now. We’d be just one of those startups that burned hot for a year or two and then disappeared.

Me: But you could have a much more reliable service if you had multiple, redundant systems that you’d be able to fall back to in an emergency.

Morena: Yes, but that would cost more. In many different ways. Heroku is simple, we never have to think about it, and that means that every time I hire a new software developer, that software developer can focus on building new features that our customers will love. Moving to a more complex devops setup would probably also mean hiring a full-time devops engineer, so the cost of a full-time devops engineer needs to be part of any discussion about the costs. You can’t just say, “Oh, AWS will only cost you $20,000 a month, that’s not much for a company of your size.” It will also cost me the $200,000 a year I spend on the full-time devops engineer.

Me: But don’t you worry that you are limiting the future of your company by relying on a platform that is as limited as Heroku? Don’t you ever think about the long-term picture? Where will you be in two or three years? Don’t you have to move to AWS eventually?

Morena: Maybe, at some point in the future, we will move to AWS, but we need to think about our reasons and motivations. If we spend $100,000 setting up some complex set of redundant services, what does that $100,000 actually buy us? Does it buy us more sales? No, probably not. Seriously, what do we get in return for that $100,000 ? We get more reliability. Okay, great, so now what do we get in return for that reliability? Just more complexity for the tech team to manage, and therefore the need for a bigger staff, a staff that won’t be building features for our customers.

Me: What if Heroku gets worse? I mean, hypothetically.

Morena: I have to base my decisions on what I actually know. If Heroku gets worse, then we’ll move somewhere else, But I’m not building a hypothetical business; I’m building a real business. I can’t make strategic decisions based on hypotheticals.

Me: You must realize that, given your scale, most CTOs would consider it a matter of professional “best practice” to move to a full cloud service like AWS? The average company would have moved to AWS years ago.

Morena: They can do that at their company, but not at mine. Every company is different. There really isn’t any “best practice” that works across all organizations indiscriminately. Some companies really do need redundant high availability, but our service does not. And every CTO needs to focus on what their company needs, not what the professional average is. There is no average, garden-variety company. Each company is unique.

Morena’s focus on the real facts helps keep him grounded. Every decision goes back to what he knows about his customers. As a political matter, it probably helps that he is both a founder and the CTO, because if he was simply a hired-hand brought in to lead the tech team, he might feel more pressure to conform to generic, unspecific “best practice” professional standards. Investors might be more comfortable hearing, “We switched to AWS and that solved all of our problems,” rather than, “We stuck with Heroku, come hell and high water.” But Morena doesn’t care. He knows what is working for his company, and that’s all that matters to him. He is boldly anti-perfectionist: he knows he is losing some qualities, such as reliability, for the sake of simplicity. He is daringly comfortable with what he gets in exchange for the sacrifice. He gets a beautiful simplicity, which allows his team to move fast, and, crucially, has allowed his company to survive the early years, when they didn’t have the money to build a complex system. FundThatFlip.com is doing well because of the surprising decisions he made.

You can contact Dan here: dan@redemptive.nyc.