Andrey Kudievskiy has always been fascinated by technology, and when asked about himself, he identifies as an entrepreneur. He has been a software engineer, database developer, administrator and then jumped accidentally into management. Outside of his professional life, he is marred with two daughters. He enjoys running long distance. He has officially run 5 marathons, and unofficially, he has joined many more along the way.Right after he graduated from University, Andrey saw a fantastic level of talent in developing countries. At the same time, he noticed the amount of profitable opportunity in the United States - and decided to build a business that joined the two.This is the creation story of Distillery.SponsorsPropelAuthSpeakeasyQA WolfSnapTradeLinkshttps://distillery.com/https://www.linkedin.com/in/akudievskiy/Our Sponsors:* Check out Kinsta: https://kinsta.com* Check out Vanta: https://vanta.com/CODESTORYSupport this podcast at — https://redcircle.com/code-story/donationsAdvertising Inquiries: https://redcircle.com/brandsPrivacy & Opt-Out: https://redcircle.com/privacy
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We got stuck for quite a long time when we were at $10 million in revenue. And I believe that this is the ceiling that all the founders hit when they are unable to jump over themselves. I was one of them. Luckily, I got some help from the outside, built advisory board, then built the board of directors, brought management, brought head of finance, brought chief revenue officer.
And that allowed us to eliminate Andre, myself, from a lot of decision-making process and allowed us to grow. So I believe that it's not just about how many engineers you can hire, how many clients you can find, but also can you scale yourself? My name is Andrey Kudievsky. I am CEO and founder of Distillery.
This is CodeStory. A podcast bringing you interviews with tech visionaries. Who share what it takes to change an industry.
Who built the teams that have their back.
Keeping scalability top of mind. All that infrastructure was a pain. Yes, we've been fighting it as we grow. Total waste of time. The stories you don't read in the headlines. It's not an easy thing to achieve. Took it off the shelf and dusted it off and tried it again. To ride the ups and downs of the startup life. You need to really want it. It's not just about technology.
All this and more on Codestory. I'm your host, Noah Labpart. And today, how Andrei Kudivsky is using AI to power premier software development using nearshore engineers and agile experts. This episode is sponsored by Speakeasy. Grow your API user adoption and improve engineering velocity with friction-free integration experiences.
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With over 100 five-star reviews on G2 and customer testimonials from SalesLoft, Grotta, and Autotrader, you're in good hands. Join the Wolfpack at QAwolf.com. Andrii Gudewski has always been fascinated by technology, and when asked about himself, he identifies as an entrepreneur. He has been a software engineer, database developer, administrator, and then jumped accidentally into management.
But outside of his professional life, he is married with two daughters. He enjoys running long distance, and he's officially run five marathons, and unofficially, he's joined many more along the way. Right after he graduated from university, Andre saw a fantastic level of talent in developing countries.
At the same time, he noticed the amount of profitable opportunity in the United States and decided to build a business that joined the two. This is the creation story of Distillery.
Let me first explain the name. Because distillery, your mind immediately should be thinking about alcohol and the distillation process. The distillation process is actually what we do. We take great ideas and distill them down to something really interesting and produce a really good product from raw components. I believe that I've been working on this for over a decade already, yes.
We started as a database development and mobile app company. We were working with a lot of entrepreneurs who would come to us with their ideas. We'll take them, we'll try to distill them down, get the best components out of their raw ingredients and publish them to the App Store or to Google Play. As a matter of fact, we've been featured by Apple several times.
We built applications who got millions of downloads, and that's not an exaggeration. Those are real numbers. Lately, we actually transitioned and transformed ourselves into AI-enabled staff augmentation companies. So we help other businesses with our talent, which is located in Latin America, in Mexico, and in Argentina.
to build their vision to propel them faster to allow them to hit the market sooner than they could without our help that does not mean we stopped building mobile applications or doing other things but more and more i see us as a business helping other businesses and transitioning from what i could call a technology company into what really is right now a professional services business and
Honestly, I like it. I like helping 50 other companies to become better by using one company, us. I started Distillery with a group of friends right after university. These people, some of them still with the company and some of them left, started their own businesses. For me, the vision of starting Distillery was I saw that really good level of talent in what I call those developing countries.
And then an immense opportunity in the United States where you can make different amount of earnings doing the same amount of job and the same quality. So there was a disparity between the amount of really good companies and the amount of good talent. Good companies are located in the United States and good talent is located elsewhere outside.
By saying this, I don't say that United States don't have good talent. United States is full of great talent, but also the talent is actually equally spread across the globe. So we, on our hand, providing the access to this talent in Latin America, and we find the best engineers and we match them with the best clients. So it's a world-best talent working for world's best companies.
Tell me about what you would consider the MVP for Distillery, right? So I ask questions, and you build a lot of MVPs, you and your team, and I ask questions a lot about products on this show, but I'm curious about for Distillery, what would you consider that first version of your company?
It's a small agile team, three, four, five people that is capable to deliver results on the first sprint. Usually when you start hiring your internal talent, you're going to get person number one joining the team. Then if you're lucky, two weeks later or usually one month later, you get the second person, third person and so on and so forth.
The first MVP of Distillery is when we were able to put together a team that worked together on different projects already and was able to come and start working on the client's projects and submitting the code that can be used in production on day one, day two, day three. So that would be my definition of what MVP is for services businesses like us.
What I want to dive into next is decisions and trade-offs. When you are building your company in those early days, you mentioned it kind of started right after university. You have to work through how you're going to start. Tell me about some of those decisions and trade-offs you had to make and how you coped with them.
Number one, start alone or start with your friends and with the help from family members and such. For me, that was a tough one to make a decision. And ultimately, in the past, I had my fair share of experience working with co-founders and other people. And I really wanted to be responsible for success myself and for the failure myself.
So I decided to be a sole founder, which may or may not have been the absolutely best decision, but that's my decision. The trade-off for this is you're a one-man army until your company grows. If you fail, if you get sick, if you just somehow miss the mark, then it's on you. And the upside is also quite obvious. If things are going well, you will also benefit from this.
Once I moved to the United States, we got into a situation where we have a co-founder, which I later bought him out. And it's been a good journey to get there. Another trade-off is going wide or going deep, going shallow or actually diving into something.
Working in a professional services business, you can be known for one specific industry or you can be known for several or overall being a trainer. We have always tried to cast a wide net in terms of the number of clients we work with, but our specialization has always been towards mid-market plus to enterprise business. I believe that this is also a trade-off.
When you work with startups, it's fun, it's sexy, it's exciting, but the trade-off is startups die. They leave you with some unpaid bills. You have to churn through them often versus getting to a project with a client in the enterprise scale, those who already grew up. It might be less exciting. They might not use the latest and greatest technologies.
but what they do well they pay your bills even with 90 days after once you finish the project but they do pay them and there is a constant stream of work so you ultimately have to choose one or another and the teams that you use the developers that you hire they have to be comfortable with either one model of work startups late nights weekends friday commits
Versus you go to the other side, enterprise, a little bit more stable, but also sometimes a little bit more stale. And your work may include working with slightly outdated technologies, moving things from monolith architecture to microservices versus with startup world, you actually start with microservices and you go...
I believe last but not least is the focus and the concentration as a company that we are right now, professional services company, not a technology company, but we're building technology for our clients. Do we want to stay in the professional services businesses? Or do we want to actually build at some point projects and products internally at Distillery?
I will be honest, we've tried and we've tried unsuccessfully building several products. The trade-off is that you lose focus, you lose concentration. You lose money at the end if the project is not successful. And we are always doing this with our own investments rather than going after venture money.
You could use this attention and energy somewhere else to build your own business, to build different offerings, to become advanced in gen AI and so on and so forth versus what ultimately results in the waste of time trying to become who we are not.
So going into product world versus staying in the professional services businesses and knowing what the differences are and how you can't really do two things at once. I believe that this is another area where the choice was quite obvious, but it took me some time to figure out what my comfort level is.
Will I never be building a product that can grow 10 times a year, 10x, versus building a company that's stable growth, 15, 20, 30, 40% every year and going into what I call less exciting, yet equally challenging business, staying on the professional services side.
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Get started for free today by visiting snaptrade.com slash codestory. OK, so tell me about how you built your team. And, you know, I heard that the early days, some friends from uni, but, you know, a lot of time has passed and you've built this successful company. Tell me about how you've built the team. You know, it's the developers and it's the folks that are not. It's the whole company.
Tell me about what you look for in those people to indicate that they're the winning horses to join you.
We currently have several hundred engineers and we are by and large a company of developers built by developers. And our clients are also developers in the past. Usually they're CTOs, chief technology officer, CIO, chief data officer and such. So developers, they're divas, right? And I can say this because I was an engineer in the past and I know that I had a lot of options.
How to get there where we are right now is to never sacrifice on the quality and be an employer of choice. Meaning, once you have more than five people, you can start thinking about the actual structure that you want to build. The first five, I said it already, bunch of friends. Nobody knew who will be the CTO. Nobody knew who will be responsible for a certain department.
But as soon as we stabilized at this very first level, then my mind was, all right, what if the company is a thousand people? How would they see the structure of the technology delivery department? What would it look like? And by no means, I had a path to get to a thousand at this point. But I started to think that for every technology, we need a head of department.
This is how we call them, HOD, head of department. then every technology can actually be split by several. So if we have head of mobile department, let's split them by head of Android, head of iOS, head of cross-platform, and so on and so forth. And then you start thinking and building this pyramid. And every time when we make a new hire, We try to assess three things.
Number one, do we have someone in our team whom we can promote into this position? If that's a no, which does happen, let's go outside and let's try to interview the best person possible. Now, that comes with a challenge because if you have exceptional contributors, individual contributors, they might not have the skills to assess what the leadership will look like in this specific technology.
One of the tactics that we employed when building Distillery was let's get someone from the outside who is in the industry, field CTO, those are the positions that we call them, and let them interview the talent that we need to lead our department. and make sure that their only parameter is, is this person going to be a great technologist and a great leader? That's actually two parameters.
And then don't sacrifice on this. In the pandemic, we doubled our size. I know that some companies tripled their size, but it actually backfires when you start hiring too fast and you're sacrificing on the quality. We never did. We never will. So the goal is to, again, the strategic assessment of what you're missing, look into your own team if there is someone to promote.
There is no one, look outside. But then there is also a third component. If you have someone who has been manager of your team. And sometimes technology, it's a problem for all the delivery companies. The technology outgrows the leader.
The person who has been fine to lead a department of five engineers, when the department grows to 50, you may look into a potential replacement of this individual and ultimately bringing them one level below to manage a good department of five. Not all great engineers become great managers. And sometimes you do lose a very good engineer and you do not find a good manager by promoting someone.
And some people, they get stuck at the position where they are comfortable and they know that they can expand to 50 people. As soon as the department grows to 51, they start to struggle. They start to struggle managing their schedule, managing the workflow that we have outlined and so on and so forth.
One last thing that I want to mention is this talent also wants to be treated well, feel belonging to the company, feel culturally aligned. And also for us, that's very important to be placed on a good project and on a good client. It's not a secret that in Latin America working for US companies is seen as a benefit. This is what we actually strive to.
We want to have our talent to work for US clients and those US clients that are well-known brands. I cannot stress enough how many times we got feedback from our clients saying that they feel that our team members belong to them. They're part of their team. And that's the best feeling to me. That means that we did a very good job by finding the right talent and the right place for them.
What we also do is we assess and collect feedback from clients as well as from engineers, asking them if they are willing to go to the next year and to the next contract with the same person. Or is that the time for us to rotate? Sometimes you have a great engineer, great software developer who just is not aligned somehow, either culturally or in terms of the growth plan.
Some projects, they stabilize them. This engineer, say, wants to build something new, wants to try new technology, but there is no place on this current project. My goal is for them to never leave distillery, but to rather find a new project for them within distillery. So that's a retaining part. For us, we actually measure this very religiously, how long engineers stay at distillery.
And I believe that our latest comparison is that we have engineers staying at distillery 2.4 times longer than in competing companies and competing businesses.
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Let's flip to scalability. And this will be super interesting given you are a professional services business building technology. So there is probably technology that helps you, but it's really you're scaling people and teams. So tell me about how you approach that. And have there been interesting areas where you've had to fight it as you've grown?
In terms of scaling, we have our own limitations within company because we are ultimately limited by how our clients scale and how their projects are feeling. That's what I call a glass ceiling because sometimes no matter how much you convince the client partners that we have that you need to invest into this certain area because it will ultimately result in high revenue and larger market share.
there might be no budget or the company strategy is slightly different so for us we try to provide our absolute best advice and position our clients to here is what you need to do to grow from the technology perspective and this is where we can help but sometimes our own ability to affect the decisions are limited we worked in the busy environment and if you don't grow you die
Even if you're staying flat, you still die because staying flat, you still need to increase the bill rate because you need to adjust for cost of living adjustments and for inflation. And that means that if your revenue is not growing, then you're literally declining in terms of how the business is going. We got stuck for quite a long time when we were at $10 million in revenue.
And I believe that this is the ceiling that all the founders hit when they are unable to jump over themselves. I was one of them. Luckily, I got some help from the outside, built advisory board, then built the board of directors, brought management, brought head of finance, brought chief revenue officer.
And that allowed us to eliminate Andrey, myself, from a lot of decision-making process and allowed us to grow. So I believe that it's not just about how many engineers you can hire, how many clients you can find, but also can you scale yourself?
If you don't have this ability to check your ego at the door, look at what you're not good at and bring the people who can help you to be good at these things and ultimately are better than you in every area that they are responsible for, then your growth will be limited to how high can you jump.
So as you step out on the balcony and you look across all that you've built with distillery, what are you most proud of?
I believe right now they're publicly traded salad company. I can order a salad on my phone and I know that my team built a good portion of this ordering process. I can touch it with my own hands. I live in Los Angeles. You drive the 405, the highway, always busy, always staying in traffic. I can see two of our clients' names on the top of their office buildings.
And I like to think that there is a 0.1% contribution that Distillery did into those company successes. I think last but not least, I've seen cases when 100 plus year old financial business that felt that they're at least 10 years behind their competition. And in reality, they might have been even 20 years behind. Developed mobile application that allowed them to bring in
over a million users in the first six months and the revenue from this app that can be contributed to buying products through the application or with the help of application was in many millions of dollars and i know that we did it i know that we helped it and i'm blessed to live and work in the industry where you can see the results in the real world and they are tangible
And this is a good feeling. These are the moments that I am extremely proud of.
Let's flip the script a little bit. Tell me about a mistake you made and how you and your team responded to it.
Silicon Valley Bank, almost. They actually did go bankrupt very fast in a matter of two days. And we couldn't access any cash that was there. And there was a period in the company life when Thursday night, We're trying to log into the bank account. We understand that 80% of the cash reserves that we have are buried, are completely unaccessible. The payroll is on Tuesday. I go back to bed.
I'm trying to sleep. Impossible. Friday comes. All the news, all the media saying that the bank system in the United States is failing. SVB is just one of the banks that is affected and people don't know what to do. Saturday, silence.
Sunday, I'm still not sleeping, not having enough sleep, basically punishing myself for why I decided to go with one bank and not spread the funds in three, four different pockets. And then Sunday night comes, we're seeing some news from the government coming that they're buying out Silicon Valley Bank. So this is the stupid mistake that is completely preventable.
First, keep the money in just two different locations. Then you will always be able to make the payroll. Second, why trust a smaller-ish bank? SVB was well known in the startup community, in the technology world. If anything, they were number one startup bank.
but there are banks who have been here for way longer and they're much larger trust them and work with svb for credit line for transactional stuff but reserves should stay elsewhere so diversify that's the lesson and it was very easy to fix we fixed it as soon as the funds became available we're now clients of one of the top four banks it is unlikely that i will ever leave them but
Let me tell you, no, I do not like how big banks operate, how slow they are, how their support is usually not the best and how they rarely understand the needs of the modern businesses. So I will give a credit to SVB. They did their job well. Second mistake. During pandemic, we grew a lot. As I said, we doubled.
However, that was at some point somewhat mindless growth and not backed up by a longer term vision. We got into areas where we were not comfortable playing. We built some departments that ultimately should not have existed. As soon as the craziness was over, those departments did not align with the company vision. It's like, all right, now let's reassess. And what do we do with these people?
Some are trainable, some are movable to different projects, some are not. And then you go through a round of letting these people go, which you should not have hired. We are a team of exceptional engineers. So let's be engineers. Let's hire engineers. Let's not get into the areas where we do not belong.
That's not a mistake that I believe if I would be staying true to the company core and the values and would not get into the area where we didn't need to be. Completely, again, preventable, fixable, and we did fix it at the end.
Tell me what the future looks like for Distillery, the company, the team, and where you're going.
There is a little bit of uncertainty for the industry that we are currently in. And when I say uncertainty, it always comes with ups and downs, the benefits, the pros and cons. The abundance of Gen AI solutions right now, we're seeing that it's affecting some of our departments. Quality assurance, what before took six hours, now can be done in a couple of minutes by a knowledgeable person.
generate the dataset to test a mobile application or a website. In the past, you needed to know how to do this. You need to be an engineer, a developer. Now I can write it myself. Prompting ChatGPT to create a dataset of 2000 specifically formatted tables in order to upload them to the website and see how that holds. There is a less need for some of the functions.
However, there is no need for less engineers. There is need for engineers who have adapted to the usage and the abundance and existence of generative AI. So for us, the future is to truly become AI native company. Right now, we call ourselves and we are AI enabled business. All our engineers know how to use AI.
And moreover, they know how to use several AI tools to their advantage and to the benefits of our clients. But how far this will go, that is still unknown to me. So we're following the trends. We're trying to stay ahead of the trends. We were sponsoring, we were part of San Francisco TED AI conference, which was just massive.
The one thing that I took away from it was we're seeing the beginnings of Gen AI, not the end. Gen AI has not settled yet. So that's great. One of our company goals or motives is never settle. So we're also never going to settle. We want to continue working with this. So this is the industry angle.
And then from the company angle, we want to continue what we're doing and grow to the point where we are competing on the same level with bigger companies. There was a potential client who came to us with a question, can you please give me 250 .NET engineers? That's great. I love it. However, we only have 50 .NET engineers and then 47 of them are placed on long-term projects. Three are available.
For me to even have a chance to bid on this project, I couldn't. I really would have no chance and we would have lost the bid before even entering into this. Next time this opportunity comes, I would like to be able to say, great, we might not have 250 engineers available on the bench right now, but we have 250 we will find in the next couple of weeks.
The goal for me is to grow the business to the scale where we can be competitors for our bigger frenemies. And if time and opportunity presents, potentially, there is always a dream of any tech company. founder or any business founders to go and ring the bell on New York Stock Exchange.
So who knows, this might might happen through several different opportunities, buying the companies or joining forces with some other firms and going public together. This is also an option and an option even for professional services businesses, not just technology businesses.
Let's switch to you, Andre. Who influences the way that you work? Name a person or many persons or something you look up to and why.
Two people. One is, is and always will be my dad. He was an entrepreneur in the country where entrepreneurship was not necessarily rewarded. And it actually was punished. I grew up in the former USSR. He taught me things that you need to be resilient. You need to always be optimistic. And the meaning of sometimes enough is enough. This is something that I took away from him.
I don't have fancy car or fancy clothing. I have a warm coat that covers me when it's cold and a t-shirt when it's a hot day. I always look up to him and just recognizing how much that affected me without me even knowing when I was young that it's building me, it's building who I am. And a second person whom I am constantly looking up is actually, he fits into three categories.
He's a friend, he's a mentor, he's a advisor. Actually four categories, a client, a former client. His name is Joel Milner. And I do want to recognize him if he ever listens to this episode that he affected me in many ways that he might not even think. He's someone who taught me how to step back and assess what's good for the business rather than what's good for me personally.
What do I want versus what business needs? And just provided some guidance in life by providing the very outside looking view at Andre that sometimes I cannot even take because I am thinking about something in the business or just being very focused and deeply rooted into existing problem.
And he comes with an outside view and saying, look, focus on something else because this is where the bigger problem is. This is where 80% of the effort should be because it will give you much bigger result. And we actually started our relationships as he was a client of distillery at a business that ultimately failed. They left us with unpaid bills.
However, it was done gracefully in a way that, all right, I knew that this is coming. We had conversations and never burned bridges. I believe that in business, you just can't do this. He was the example of someone who is very business-oriented, very business-focused. And then we started, I asked him a thing or two, he got back to me on time, actually always almost immediately answering.
We got to the point where at some moment he became an advisor of distillery and they served on our advisory board for two terms. And he was actually the person who single-handedly convinced me to open locations in Latin America, in Mexico, in Argentina, because it's the same time zone. You know how to find good talent, you know how to find good clients, but now there is still an impediment.
You want them to be in the same time zone, your engineers, because your clients will like that they can work with your talent, like they're sitting in the office right next to them.
So last question, Andre, you're getting on a plane and you're sitting next to a young entrepreneur who's built the next big thing or the next big company with professional services. They're jazzed about it. They can't wait to tell you about it. If it's a product, they can't wait to show it to you right there on the plane. What advice do you give that person having gone down this road a bit?
check the ego at the door and get the board together, hire professional board directors. I wish I did it sooner and never be afraid to ask, never be afraid to show vulnerability and potentially being sick as a weak person by asking something. It's something that I shied away for way too long, thinking that I'm the smartest guy in the room. And I wish I didn't.
I wish I looked for people who are smarter than me, asking for help, sometimes begging to join the board of distillery or distillery itself. And yeah, the ego when you're running the business should not even be the part of your life. You can pat yourself on the back when you closed a good year or did something really good for the client. but you're only as good as the people around you.
And it's something that I realized too late. So if I have to give an advice to this young entrepreneur who wants to build something big, that's great. You are unlikely to do this alone. And the sooner you realize this, the sooner you will start bringing people who are smarter than me without being afraid of them, the better it is for you.
That's fantastic advice. Well, Andre, thank you for being on the show today. And thank you for telling the creation story of Distillery. Thank you so much, Noah. I really appreciate your time as well. And this concludes another chapter of Coat Story. Code Story is hosted and produced by Noah Laphart. Be sure to subscribe on Apple Podcasts, Spotify, or the podcasting app of your choice.
And when you get a chance, leave us a review. Both things help us out tremendously. And thanks again for listening.