Pre-seed, seed startups with employees in office have higher revenue growth

I recall a Computer-Supported Cooperative Work paper (possibly this one? https://dl.acm.org/doi/10.1145/358916.359005) that identified different levels of collaboration including working together in the same room ("radically colocated" in CSCW jargon), working near others on the same floor, working on different floors or parts of the building, and working remotely or from different offices. They claimed that radical colocation was significantly more productive compared to the others, and collaborating across different floors was no better than being in different parts of the world.

Based on my experience since then I am less skeptical about those claims than when I first read the paper. I've been on skunkworks projects where a half-dozen people worked out of the same conference room for a couple months, offices where my teammates' desks were clustered together around a meeting space, open-plan offices with my team spread across the building, and working remote during Covid.

For well-established projects any of them were fine. But for new projects I felt like we gained a tremendous advantage by being in the same room. Maybe that won't always be true, but I wouldn't be surprised if it still holds today.

Pre seed and seed companies are very small and very young, right?

This seems to be plausible: when you don’t yet know what you’re doing, your machine isn’t even built let alone well-oiled, you need very low latency, high quality communication.

I’m doubtful that this translates into the future much, beyond, perhaps, that companies that start well are more likely to do well.

Face to face collaboration is a lot more efficient. Startups gain from the small tight knit team being able to do impromptu brain storming and discussions on the fly. Can’t do that when everyone is behind a monitor.

I am a firm believer that 100% remote work is actually a net negative for collaboration.

Workshops, ideation, brainstorming, all of these thrive when people are engaged in the moment, not on a scheduled zoom call.

There’s definitely a balance between in-office and WFH. WFH is great for corporate jobs cuz half your day is filled with boring meetings, but for start-ups, it’s the opposite.

I co-founded a remote-first organization over a decade ago, and we beat the odds of how most businesses fail in the first few years - we're still in business today, and growing.

We were remote from the beginning, but we got together in-person more frequently at the start. It was helpful to brainstorm and get other ideas generated in-person.

Along with the other comments here, it seems the advice is to get together in-person more often at the start of a business. I highly agree.

Trying really hard on the narrative to get people back to filling expensive real commercial real estate. A lot of firms are invested or locked into expensive real estate.

As someone who realized the additional life benefits of working alone and away from the stupidity of mindless commutes, I am not buying this kool aid.

Saving a ton of money on rent as well.

This is very likely just selection bias. Companies who's founders choose to be remote first are going to vary philosophically from in office companies in more than just one way. In my experience, remote first companies tend to be less focused on growth at all costs and less wrapped up in hustle culture. That probably does mean sacrificing growing revenue at the fastest possible rate, but in order to draw the broader conclusions from this that people are trying to ascribe to it you would need to have both a much higher powered study, and have a study where companies are randomly assigned to in office or remote so that you can control for all the possible confounders.

small sample, and a single VC portfolio? Could also be selection bias in who they want to fund.

This is too easy. Some forced office time means you have employees from a big tech hub working for you. Fully remote seed stage companies aren’t paying anything close to paying rent in Sunnyvale or NYC.

If you broke this down hiding the office situation, comparing startups from Kansas or Minnesota to seed stage startups in SV or Seattle, guess who would grow faster

There are plenty of us who’d like this to be untrue. Myself included.

Can’t deny that it’s a reasonable theory, especially for certain types of companies at certain stages.

If you were to start a company today that disallowed remote work you’d have to:

1.Rent or buy an office that is large enough to hold your expected work force based on your starting and expected future headcount over the course of the lease (or pay money to move when your first place is too small)

2.Pay on-going costs of operation and maintenance of said office space

3.Purchase equipment for the operation of your company (including additional perks like coffee or whatever if you’re generous)

4.Find employees within a reasonable distance of your location that have the skill set you need and will work for the wage you offer

5.Expect those employees to pay out of their own pocket the expense to get to and from work and any additional expenses they might have for childcare etc

Productivity would have to be massively increased to justify all of these additional costs and constraints so you’d think by now this would shake out in the data (at least a dataset larger than 37 businesses that may not even have a stable business model yet).

I just don’t get it. And this doesn’t even factor in the actual bullshit of working in an office or signing off exactly at 5 because your work day is done (at least in an ideal world).

The only thing I miss about going to the office is being able to talk to co-workers “off the record” - which I can do with remote co-workers on any non-company controlled channels.

This whole RTO thing is baffling.

And I'm 3.5 time happier working from home.

There is a big bias that older founders are more pro-RTO and have more network and experience. Also 37 samples from a single fund is not enough.

That's Statistics 101 : decent p-values and control your variables before making bold statements like this.

"Average % Revenue growth in pre-seed companies" is a very noisy metric.

Example:

Suppose you had one company doing $10 in sales a year, now it's doing $100 per year. 900% growth!

When you average 900% with the rest, it will skew the results wildly.

Could it be that early Startups that are doing well are more likely to be able to afford an office? If all the graphs pointed to better performance in office I'd be more convinced, but only one does.

"The survey sample size was 37 companies from the Reach Capital portfolio. That’s large enough to see patterns"...[citation needed]. n=37 is skimpy.

> Working from home may offer more distractions by chores, family, network issues. Do those little things add up to meaningful productivity differences?

When you say "more", you have to compare both sides. Working in an office "distracts" me with noise, questions by others, spontaneous meetings, socializing in general, as well as other interruptions. I find it always baffling that in such arguments, the office is per default fine, and it's always remote which is the culprit.

Could it be that the specific seed companies that "[m]ost roles required to work a traditional in-office work week" were involved with business idea that had a better chance in succeeding, because of market conditions and product demand?

That is, maybe the seed companies that did better with in-office had tangible products, versus no-office seed companies did not - and at this time the market wants tangible products?

edit: i.e., are the all software development firms? Are they all widget making companies? All service companies?

(why is it so hard today to express what I mean?)

In addition to the tiny sample size point of a sibling commenter, this seems telling:

> almost 90% of the responses from pre-seed/seed startups said team culture was influenced

Building a good work culture is hard, it’s understandable that it’ll take time to identify and distill patterns that work well in a remote first setting, and then more time for the industry to adopt them. That doesn’t mean remote work is bad for employers, it just means it’s different. The companies that adapt will very likely have a strategic advantage in the future.

pre-seed startups from a single VC and they don't release the raw data. A single company doing well could be completely skewing the data. the fact they lump all forms of hybrid remote with fully in-office is also dumb.

This seems like a VC twisting their data to push a narrative against remote work. I will say that hybrid seems the worst of both worlds, you get most of the bad parts of remote work and also lose most of the benefits like being able to recruit talent anywhere, people being happier due to shorter commute, etc.

It wouldn't be an HN comment about a survey without noting that correlation != causation. :)

Assuming their statistics are sound, could it simply be that companies with good product-market fit can afford offices? Going full-remote seems to be a popular cost-cutting measure at some of the companies doing layoffs these days (e.g. GitHub), and especially pre-revenue it may not make sense to spend thousands of dollars a month on office space.

Additionally: For startups that start in a garage, like Apple originally, is that in office or remote?

They had 16 companies in this survey that were remote, 2 that were "office", And the rest were some form of hybrid. They considered anything other than full remote "some office". This could easily get skewed if one of these office companies had 10x'd their revenue.

And even though they grew faster, the attrition for Office was higher.

I'm extremely skeptical that this kind of study can tell us anything about the relative value of remote vs in-office work.

When it comes to early stage startups, success is going to hinge on the founders and early hires ability to focus and execute on the right things. What those "right things" are is nebulous (hence the challenge of startups!), but I'm quite sure that remote vs in-office is not one of those inflection points (unless it is! in a specific case!). I'd further postulate that VCs who use remote vs in-office as a meaningful investment signal will do nothing but water down their ability to find the outliers in their non-preferred segment.

At this point it's pretty clear that remote vs in-office has a huge list of pros and cons on both sides, many of which could be showstoppers for specific individuals or businesses, but none of which are universal. It's a tradeoff. As with all tradeoffs you should make it with your specific context in mind. A founder who is keying off a study like this because they think data > gut feelings does not have what it takes to be a successful founder.

Honestly this is a pretty weak argument. The number of companies taking part in the survey is pitifully inadequate to gain any real useful insight.

Who is responsible for the revenue growth in the very early stages? Think about that person who's job is to pull cash from someone. Well, that person probably has a background in sales, and I would argue, is fairly extroverted. IMHO it might be to do with the ability to attract talented extroverted people and ask them to work remotely.

Personally I could care less which is more productive. My life is much better working from home. I've optimized for founders wealth at my own expense for too much of my career. Stock options are a gimmick. 90 days to vest after leaving? "Unlimited" vacation. Tiny little desks squished together. No thanks.

People who cannot tell correlation and causation apart appear 3½ times stupider when talking in public.

The reactions to these are just like the "marijuana causes/cures cancer" articles. If it cures, it is evidence of the Man keeping it down. If it causes, the methodology is flawed.

The reactions describe the community more than they describe the article.

YC probably has some really interesting data on this for pre-seed companies since moving from a required relocation to fully remote.

For new founders the value of being in person around other founders in the epicenter of your industry can be pretty huge. It's the questions you don't know to ask that are often the most valuable-- the overheard conversations, unexpected connections, and coffee chats that often make the difference between survival and death in the early days.

IIRC early data during the pandemic indicated that while remote work didn't impact productivity for established employees it was harder for new hires to find personal traction within the company.

I work at a small company, not a start up. I work from home 3 out of 5 days a week, but having said that:

When I am in generally most of us sit around a conference table and work together when we are in the office. All but one of us is generally at the table when we're in the office.

It works great, we can work fast and efficiently, I can overhear things other people have to say and so on. There's lots of things that happen fast and on time because we're all right there.

Having said that this is all OPTIONAL. It works for all but one guy and I think that is part of what makes it work.

Too many folks out there want a one size fits all deal and forget about the team part of team...

So employees of seed startups should have higher equity if they work in the office even once, since apparently walking through the doors of a leased cube farm leads to much better results for the management class.

From my perspective, as a not-seed investor, my expected rate of return (salary) remains exactly the same if I work from home or at the office.

Seed investors have stacked the terms so early employees get as little of the exit as possible, even in the rare instance where there is a profitable exit, why do I care about higher revenue growth?

I'd love to see a study that investigates the benefits or drawbacks of remote work + 4 hours of joint rowing and having a beer afterwards per week.

My experience is in academia, which certainly doesn't translate to business 1-1, but I suspect that most benefits of in-person office work come from social aspects of team-building such as personal bonding, meeting for a coffee, chatting in the hallway, and so on, and not from working in an office itself, especially not when the office space consist of large, shared offices.

why are news outlets so wishful for RTO?

I don't pay attention to these studies any more. It's all endless shilling, scheming, and hidden agendas to strip workers of their recent pandemic wins (WFH). I encourage all workers to push back on this. Ignore the studies, there's big money behind it. Call out this bullshit, and call out anyone pushing this as a shill with an agenda. There is no objectivity here. The capitalists have had productivity wins for the last 50 years, time to give some time back to the worker.

I've worked both 3-persons startups twice, once all sharing an apartment (with this exact reasoning: being together should make us more productive or increase motivation), one other time completely remotely.

In both cases, no member of the team know anyone else before joining the team.

Guess which one was more performant? The remote one. By an order of magnitude.

Two examples are anecdotal data, but so are 37 IMO. It almost feels like the title of the article was written before the experiment was done.

Grew their office size?

Grew their square footage of their office?

Grew their costs?

Grew their profits?

> Data shows that pre-seed and seed startups with employees showing up in a physical office have 3½ times higher revenue growth than those that are solely remote.

Revenue.. So how does that index to costs? Evidently profitability isn't changed.. or is even lowered, else it too would have been used as an anti-remote wedge.

> James Kim at Reach Capital, an early-stage tech ed investor, surveyed their portfolio of 37 companies

37? That's it?

Is it causation or just correlation? It would make sense if those who were growing fast were the ones most likely to be able to afford office space.

I would have described "Static Hybrid" and "Synchronized Hybrid" as the opposite of the way they appear in the image table.

https://i0.wp.com/steveblank.com/wp-content/uploads/2023/02/...

I wonder how long this conversation is going to continue. In-office vs. Remote. Seems like the In-office folks are pining for a bygone era, as if we will ever go back to the way things used to be. Personally, I will never go back to the office again except for special occasions. And I will never work for a company who would force their staff to be in-office.

Should also note: "In Offices" includes "Associated with an office, but work from home; available as needed."

Did they control for industry? When looking at something like revenue you so much of your outcomes at early stages are functions of externalities as much as they are from how you organize and operate. Did they control for business model? This sample just seems super unrepresentative and cherry picked for an outcome.

Aside from the tiny sample size, there's a lot of potential correlation/causation confusion here.

A pre-seed startup where the founders meet f2f every day is probably much more serious than one where the founders are just on Zoom. But that doesn't mean you can't be a serious remote team.

As others have said, the small sample size in this really quite silly.

I would also add, companies raise more for in-office in the first place - most are in the Bay Area, more need to pay more to justify in-person to employees with options -> more funding needed, etc ..

There is a very clear statistical standard here "difference of means" test at the very least. Very very small dataset. Lots of options all of which would most likely conclude no statistical difference and low power.

Revenue of a startup is no where close to being a reliable measure for such a small sample size. Give me any variable and I can make a similar graph to prove anything you want. Correlation != causation.

Articles With Headlines that Exaggerate the Story Get 300 Times More Views

What are these Seed and Pre-Seed companies that have revenue at all? Isn't landing 1 customer a huge revenue boost for many early companies?

Since these were all education related would be helpful to know exactly what that means since that could also directly affect this result.

FWIW, the company I work for went hiring crazy as soon as we committed 100% to full remote a few years before COVID.

No wonder, they have money to afford one!

Beyond the insignificant sample sizes, this study also fails to respect selection bias.

I read a study that ranked productivity as going: 1) Hybrid; 2) Remote; 3) In-office.

It doesn't surprise me. There is a huge advantage, in the first years of a startup, to be able to sit around with all the co-founders and early employees and exchange ideas as they come. Later on it matters less, as the advantage of synchronous communication diminishes once you have more employees than one office room can fit, which seems to be reflected in the research results.

Begun the RTO wars have

Pre-seed startups have offices, and revenue?

Title should be: For Pre-Seed/Seed round startups…

There’s virtually no difference for Series A and beyond.

This makes sense to me. Pre-seed/seed is all about finding product/market fit. Which means high iteration, fast collaboration and that definitely happens best if everyone is in the same room.

Series A and beyond is largely about scaling, which lends itself to more asynchronous tasks.