Physical Space or No Physical Space – No Question

Start-up with Physical Space or No Physical Space – No Question

I was going to call this blog post “To office or Not to Office” – but the term office can be used to mean where the company is located or whether people sit in little private boxes versus open space, so I changed it to Physical Space.  I am a fan of start-ups eliminating offices in their physical space, but I am increasingly NOT a fan of companies being completely virtual and eliminating physical space altogether.

Osage Venture Partners has a couple of companies that truly are virtual.  At the seed stage or pre-revenue stage maybe this works while the company is only a handful of people.  At the Series A stage when we invest, I am convinced that it doesn’t work.

Maybe I am missing the stories that are becoming cultural lore, so I welcome the opportunity to be informed.  Stories like: “We founded the company in three different cities and didn’t meet until we hired our tenth employee;” “We hire only anti-social people who don’t leave their apartments because we find they work 20 hours a day;” “Our culture is one of only using Slack from remote locations so that ideas are valued on their merit, not by how tall, attractive, or funny the person is.”  I did find some stories online about companies that had a culture of no office but I often get the impression that companies are built this way because the CEO wants to work this way, not because this is the best way to create a sustained culture of success.

The stories I know are the famous and not so famous ones like this: Hewlett and Packard in a garage; Jobs and Wos in a garage; Pied Piper in a rented incubator house (maybe a fictional company, but one with a fictional space); Facebook in that crazy summerhouse in Palo Alto; SevOne behind the comic book store; Verticalnet in that tiny little office located halfway between Hagan and Nults.   And so on.

People are inherently social.  Culture is about interaction.  Loyalty is about relationships.  Something is lost in text and email and Slack including irony.

The entrepreneurial community is redefining what an office is.  Incubators, accelerators, and co-working spaces are making it easier to have an office, to expand, and even while small to be part of something bigger.    We have two companies in WeWorks.   One of our investments, Canvas, has always had a co-working space (called Refraction) as part of its overall office model because the founders believe that being part of a broader start-up ecosystem is critical to remaining entrepreneurial.  Sidecar (not the ridesharing guys) is moving all of its people back into one office from the two they were forced into due to space constraints because the CEO felt the separation into two offices was killing their culture.  What if all of these people worked from home?   What is the culture like then?

People come up with all sort of reasons to not have offices – here are five (and my counterarguments):

• You can hire the best talent anywhere – not near the office.
  • Start your company near talent and hire people near your company or who will commit to relocate
• Offices mean more meetings
  • Meetings happen on the phone too and people on the phone are far more prone to distraction, email, games.  Meeting quality and quantity is about management discipline
• I can work more productively without distraction
  • Buy a set of sound compressing headphones and read the data – people need interactive breaks in order to sustain productivity
• It keeps costs down
  • Then why am I seeing all of the costs for all of this travel and for the Regis bills because we need to bring the team together to create culture
• I can be more flexible in my hiring – older people, blind people, handicapped people, people with social challenges – this gives me a huge hiring advantage
  • Really – do older people or blind people or people with other handicaps place a lower value on social interaction?   I don’t think so.

Senior experienced executives who have worked together in the past may have established norms that allow them to work together without being in the same place.  But when they bring in new people, and younger people, and people who need training and mentoring – how does that happen?  Without an office it is a challenge.  Entrepreneurs – if you are building something sustainable and large and meaningful, your company needs a home.  And if you are pitching us at OVP, have an office in your future.