New million-dollar question from technical startups: Do we really need an office?

Going alone in the cloud may not be for all businesses. Even in the software industry, where work does not generally involve designing and building tangible objects, there are a lot of challenges to completely dispense with offices. These range from learning the communication habits of peers who never met in person to fostering the kind of relationships that are needed to raise funds from afar. Decades of research point to the power of proximity, heightening the tradition around Silicon Valley and the birth of the world’s most successful businesses.

But some initiation founders, such as Alan d’Escragnolle, are not struggling with commitments and find the benefits of remote work worthwhile: he said his team brainstormed remotely and that the employee productivity has suffered nothing.

A year ago, Mr. Escragnolle joined his co-founder at Filmhub, an online film distribution company, in Los Angeles to sign an office lease and start hiring. Instead, he ended up renting a ski house on Lake Tahoe and has been running the business since March.

Filmhub now has 15 employees, with brainstorming teams about Zoom, keeping in touch with Slack and tracking customers and incorporating new employees with a workspace app called Notion. The company’s most recent contracts are based in Ukraine, Portugal, Atlanta and the Dallas area.

“We save at least $ 5,000 a month right now” on salaries and rent, said Mr. Escragnolle, 32. “Finally, Filmhub could have a small office in Los Angeles,” but in the end we’re not convinced it’s necessary. “

It’s too early to say how many startups will stay completely away once the pandemic is over, but there is a consensus that teams living and working separately will build and cultivate a larger share. If they are able to stay away, this could have effects on the distribution of talent and venture capital funding across the country.

In early 2020, Kim-Mai Cutler, a partner at Initialized Capital, a venture capital firm that invests in young start-ups, conducted a survey of nearly 100 of its backed founders, calling for the most beneficial location for to found a company. . Nearly 42% said San Francisco, with New York a distant second. A year later, the main response to 42% was no particular place, or rather, “distributed or remote,” compared to 6% the year before. Only 28% still said San Francisco was the place to be.

In the Initialized survey, whose investments include Reddit and Instacart, more than a third of respondents said they would keep their office model fully remote or decentralized post-pandemic. Previously, only 18% stated that the location of their company was fully decentralized.

“The pandemic will definitely restore this to a higher baseline,” Ms. Cutler. “I don’t know how high this baseline is.”

Steve Case, co-founder of America Online, founded the revolutionary company Revolution in 2005 to invest in startups outside of major technology centers. Of the 150 companies backed by its Rise of the Rest Seed Fund, at least seven that withdrew during the pandemic have already decided to stay completely away in the foreseeable future. Twenty more plan to maintain an office, but make remote work a permanent option for employees. Others are still in the decision-making process.

Case said the combination of the pandemic and the availability of publicly available software tools means that while Silicon Valley will continue to receive most of the investment, there will be changes in the distribution of talent and funding.

“Now you can be in any city,” he said. “You had to be in an office. Maybe you could be completely remote or hybrid.”

Venture capital investors said that whether it makes sense only remote control depends on several factors: what experience does the team have? At what stage is the startup? What kind of product are they building? Where is the founder’s network based?

Ryan Reede, 27, is part of a four-person startup called Teleportal that develops an augmented reality filmmaking tool. Reede had planned to move to a home in Los Angeles with the company’s founder, Thomas Suarez, so the two could work at all hours without renting offices. During the summer, Mr. Suarez decided to move to Atlanta, so Reede took advantage of the falling rents and moved to San Francisco.

“I think having a distributed workforce and having a remote culture will pay dividends first,” Reede said. “Remote-first is very cheap.”

Mr. Reede worked on the DreamWorks animation campus in Glendale, California, with koi ponds and wide corridors designed to encourage colleagues to clash with each other and, ideally, to encourage creativity. When he and Mr. Suarez started, they worked at Mr. Suarez’s parents ’house, making blackboards in his childhood bedroom. They could confer coding issues or anything else without having to shoot Zoom. “These microinteractions are important,” Reede said.

Now, with a remote computer, he has learned the importance of excessive communication. “In the morning, standups, talk about what you’re going to work on, repeat it to Slack, do it, and then re-communicate it to the channel that the task is complete,” he said.

He worries about the degree of climbing and how long he can make broadcasts with colleagues and investors. However, the founders of Teleportal plan to stay away as long as they can run the company in this way.

Christina Cacioppo, founder of San Francisco-based cybersecurity and compliance software company Vanta Inc., said that when she founded her company three years ago, she thought she would need several thousand employees before having satellite offices or a significant number of remote workers.

“You want to get rid of it as long as possible, because it’s very valuable for people to be in the same room, talk about problems, environmental talks, all of that,” Ms. Cacioppo. “Covid didn’t care about any of those words.”

Ms. Cacioppo, 34, has increased her business from 17 people to 55 in the past year. Some recent recruits come from Indianapolis, Tucson, Arizona and western Massachusetts. She has been able to find people with more work experience than she would have expected to get with the salaries she was willing to pay to employees in the bay area. He has also proven that joining remotely is in some ways better: since newcomers can’t just be overshadowed by experienced team members, the company had to develop a more rigorous training program. .

Staff have stayed connected through Zoom meetings and through a virtual office platform called Gather, where colleagues can have lunch, bump into each other and make presentations.

But Ms. Cacioppo found that working remotely caused poor communications with a member of her sales team, who moved to Los Angeles in July. When an investor advised him to follow his example and live there for a short time, he first thought that “it is crazy”; then he realized that “he was actually very smart.” The couple met on an Airbnb five days a week for two weeks.

“Problems were identified more quickly,” he said.

Ms. Cacioppo signed a new office lease in the Hayes Valley of San Francisco in January 2020 and has since paid rent, but has not yet worked. Now, his plan is to maintain this office with about 45 full-time employees in products and engineering, while maintaining remote sales staff across the country.

Ian Hathaway, an executive at the then-Techstars accelerator and a senior member of the Brookings Institution that researches home ecosystems, believes any bullish situation about moving away completely is skewed by pandemic circumstances.

“It looks like, of course, we’re going to build companies remotely from now on, we just went through the simulation,” he said. “Does that mean we’ll continue to do so?” Their assumption is that no, even if we see many more hybrid companies and tech workers end up more distributed across the country than they were before.

He cited the benefits of long-standing placement, including more innovation, simpler collaboration, and more fluid fundraising, which he said requires relationship building. These factors caused decades of talent to be concentrated in superstar cities and could be a reason why venture capital funding for start-ups is shrinking right now.

“This force was so powerful that people were willing to live in increasingly uninhabitable places in terms of costs and congestion,” Hathaway said. “To say it just because we’ve been in this pandemic and tested for a while this remote operation feature that is totally undone, I just don’t buy it.”

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