Steve Blank startups with employees in the office grow 3½ times faster.


This article was previously published in EIX – Entrepreneurs and Innovations Exchange.

Data shows that pre-race and post-race workers are 3½ times higher than those who are away from the fitness office alone.

Let the discussion begin.

During the pandemic, companies engaged in one of the biggest unintended experiments of how to organize office work – remotely, in the office or a mix of the two.

Post-pandemic, startups are still struggling to manage the best way to manage back-to-office issues — that is, with employee expectations to continue working remotely and the best way to build and grow a profitable company.

Before we ask which configuration is better, the first question is what do we mean, exactly, by “remote work” versus “office work”? Work configurations today span the spectrum from no office (full distance, default digital) to some office (dynamic hybrid, synchronous hybrid, office first,) to office only.

James Kim, an early stage technology ed investor at Rich Capital, surveyed his portfolio of 37 companies using the following taxonomy of how virtual and physical work might be structured.

Using this model, James found that Pre-seed and seed startup employees returning to the same office had nearly 3½ times the revenue growth of startups.. Those are incredibly large differences, and while other factors may play some role (see “What this means” below), the impact of an all-hands-on-deck approach cannot be ignored.

What could be the reason for these differences? Not surprisingly, 90% of responses from pre-seed/seed startups indicate that team culture influences work configuration. However, unexpectedly, self-reported team culture, eNPS (Employee Net Promoter Score) and feelings of regret—the departures that hurt the company—were similar across all work configurations.

So while employees say the team culture doesn’t seem to have changed regardless of the office setup, the performance of very early-stage startups (as measured by revenue growth) tells a different story.

What does this mean?
The data is suggestive but not conclusive. See a full summary of the survey results here.

Let’s start with the data set. The sample size of the survey was 37 companies from Rich Capital’s portfolio. That’s enough to see patterns, but not enough to generalize across startups. Next, Rich Capital’s portfolio of companies are in education and future work. Revenue results may vary in other markets due to workplace configuration. Rich Capital’s investments are made in many regions, including Brazil, so its geography is not limited to Silicon Valley.

Ultimately, office setup is only one factor that can affect a startup’s growth rate. Still, the results are indicative enough that other VCs will want to run similar surveys across their portfolio of companies and see if the results match.

(BTW, Nick Bloom at Stanford and thousands of others have done extensive research on remote and hybrid work here and here. Their research mostly focuses on workers in independent day-to-day jobs like travel agents. Early-stage startups have specialized creative knowledge workers. We need room, especially at the startup stage. look for Product/market fit and business model not when performing day-to-day operations.

If the results are seen elsewhere, one can only guess why. Working from home can provide additional distractions such as home, family, networking issues. Do those little things add up to a meaningful difference in productivity?

Do random conversations between employees at an early stage startup lead to better understanding and ideas during unscheduled and unplanned moments? And if so, is the most productive brainstorming occurring within departments—for example, engineer to engineer—or cross-fertilization between departments—for example, engineering to marketing?

Research since 20Th Century has proven that informal face-to-face interaction is essential for coordinating group activities, maintaining company culture, and team building. This informal information enables employees to obtain new, non-repetitive information by interacting with different parts of the organization’s formal organization chart and with different parts of the organization’s informal communication network. In addition, research has shown that innovation is significantly enhanced in a small global network – both highly localized And A hotbed of unplanned fluid interactions that often foster creativity. In other words, in an early stage startup.

For decades, Silicon Valley company founders and investors have known this small world network effect as common sense. The physical design of Silicon Valley office space has long been a hallmark — from Xerox PARC to Pixar headquarters, to Google and Apple.

So the statement may be true. Emphasizing remote work with advertising or regular meetings actually limits progress Creativity and new insights? Are there new tools like Discord and others that can replicate the water-cooling effect of physical proximity?

Either way, it’s the start of an interesting conversation.

What was your experience?

Lessons learned

  • Data from one VC shows that pre-seed and seed startups with employees visible to the office have 3½ times the revenue growth of those working remotely.
  • Is the information correct? Is it the same across all markets/industries?
  • If so, why?
  • Is there a difference in remote and office productivity for creative tasks and executive tasks?

In: covid-19/recovery, family/career/culture |


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