For a Startup, Is a Virtual Office Enough?

There’s a really interesting discussion going on at Hacker News right now about the merits of startup founders being in the same city or working virtually from different locations. “Most founders will tell you [...] that being in the same physical location as your co-founders is critical to success,” writes thread starter shbrown. “My co-founder and I seem to work very well at a distance.”

Working effectively at a distance is something that we face at SitePoint as well. Though SitePoint can’t really be classified as a startup anymore, most of the team is located in Melbourne, Australia, and I am located in Rhode Island in the USA. The huge distance (11,488 miles according to Google Maps) and the time difference (Melbourne is 14 hours ahead of me) does present some problems, certainly, but are they dealbreaking ones? We don’t think so.

Pros of Working Virtually

1. It’s cheaper. With no office space to rent and no daily commute, working out of your respective homes can be cheaper.

2. Working from home can be productive. Your home is comfortable, so as long as you can ignore the local distractions (keep the TV off!), you can theoretically be more productive due to being happy with your environment. 37signals founder Jason Fried chimed in at Hacker News to voice his support of startups staying away from the physical office, at least in the beginning. “FWIW, David and I worked together 7 time zones apart for 4 years or so before he finally came to Chicago in 2006,” he wrote. “David wrote the code for Basecamp in Copenhagen and I designed the interface in Chicago. The distance was a big advantage to us. It helped us each focus on what we were good at without too much meddling. When you’re close it’s real easy to spend time worrying about stuff that doesn’t matter. When you’re further apart you tend to actually focus on the work since that’s the only thing you can do.”

3. Online communication tools are pretty good. With Skype, IM, email, online whiteboards, video conferencing, groupware tools, concurrent version systems, etc. staying in touch remotely shouldn’t be a problem. In fact, at some offices, employees find themselves chatting with one another over instant messenger even though they’re just a few cubicles apart.

Cons of Working Virtually

1. Fundraising is more difficult. Not every startup can be bootstrapped from start through to profitability — many (most?) will need to seek funding, and VCs will want to meet everyone on your team. Most investors will want the team working together after you close that first round anyway, so it might be wise to find out ahead of time if you can all work well together.

2. No office isn’t always cheaper. Strictly looking at your budget, nixing the cost of renting an office looks like a great deal. But what you may save on rent and utilities, you might lose on lost productivity. While some people might be well suited to working at home, others can’t deal with the distractions. And there are a lot of them: kids, neighbors, the mailman, the allure of the TV and refridgerator, the phone, etc. The lesson here, though, might be that you have to make sure you hire the right people for the working environment (or find the best working environment for your people).

3. Communication is better. Online communication tools are pretty good, but nothing really beats face-to-face contact. So much of human communication has to do with body language and facial expression, that chatting in person can have real advantages. Face-to-face contact is also tangibly faster. When your coder is having trouble understanding how the latest design mockup maps to the feature roadmap, for example, being able to sit down in person and work out the details will go a lot quicker than trading emails, IMs, or phone calls. And if you’re in the same city, you don’t have to deal with pesky timezones.

4. You miss the social aspect. Working at a startup (or even many corporations) can be fun. Not necessarily the part where you slog through the work day, but the bit where you go out for a beer with your coworkers afterward. Working alone and in separate parts of the world can get lonely for many people and may negatively effect their job performance. (Again, though, this could be a hiring issue.)

So Can Working Virtually Work?

Clearly, based on the success that virtual teams have had (my former employer, the very successful ReadWriteWeb blog, is completely virtual, with people working out of New Zealand, Oregon, Florida, Georgia, and elsewhere), it is very possible to find success with an all-virtual team. Being in the same city for a startup is not a necessity.

However, as you grow, it might become more difficult to work in an all virtual environment. What worked great for 5 employees or a small group of founders might not work when you have 10 or 15 people working.

The key to a successful virtual work environment is to create open channels of communication. Make sure everyone feels in the loop no matter how far away they are physically, and make sure you hire people who can handle the unique pressures of working on their own. SitePoint has done a great job of making sure I feel like part of the team, even though I’m not in the office with them every day — from including me in meetings via Skype, to keeping in touch daily with Basecamp, instant messenger, and email, to making sure I get a copy of the monthly employee newsletter. At the same time, they’ve given me enough freedom that working out of my home office still feels like working out of my home office.

Do you have any experience working virtually? How does it compare to working in a physical office? Do you think startups founders who are in the same location have an advantage over those who aren’t? Let us know your thoughts in the comments below.

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  • http://www.gen2net.net chris_fuel

    One problem of the virtual office is if anyone has IT related issues. If someone can’t access their email, and it’s a local issue, without a proper IT strategy of sorts (remote access), things can get hairy. Even worse is if the issue is their network isn’t working. While there are solutions, keep it in mind to actually have one before you go full scale with your virtual office.

  • Compumaniac12

    I would Say from my Brief Experience in the working World that Telecommuting or whatever you would like to call it requires a good knowledge of computers, networks, and the internet. Ive had to still get work to clients when my computers have had partially failing hard drives and network lock up, viruses, etc.
    I would say to be able to succeed you can’t have long distance calls that a computer is fried and they don’t know what to do.

  • http://www.Plugin-Developer.com Plugin-Developer

    My first programming job was with a virtual team and after that I was hooked.

    I worked for a startup web development agency founded by a young businessman. It was fun working from home and it was great for my productivity. I was able to work hard without distractions because of my discipline.

    It was a bunch of fun and I recommmend it to anyone looking for a different experience.

  • Khurram

    Hi
    We have helped many startups assemble their teams virtually with GenITeam. While having offshore teams, we can provide an economical solution for startups because we spread the fixed cost ( like office rent, internet) across multiple customers. Startup’s dont have to pay upfront fixed cost and no long term commitments. However, key to success are proven processes and communication.

  • elHilario

    Think virtual office or home office as many will call it is absolutly cute and what more it works best if you are an excellent organiser with great time and projectt management skills. Its fun, it works well for me.

  • http://www.foundrylabs.co.uk stuartk

    I currently work for a small company where 3 of us live about 300 miles away for each other. There have been a few IT issues which have been solved with remote access, but on the whole, it’s been great.

    The best thing is the freedom working virtually offers. I am about to move house about 70 miles up the road, and I don’t have to worry about getting to work. In fact if it wasn’t for kids, I could move to another country.

  • Fred Bates

    I completely agree how important it is to keep the channels of communication open, as it is the biggest hurdle in my opinion. With an act as mundane as communicating, steps can be taken for granted and everyone can fall off the same page. We use Regus for our virtual office services and have been happy to date.

  • http://www.aysweb.com norarubinoff

    Working in a virtual office is challenging and rewarding at the same time.

    I agree with Chris Fuel that IT issues can be challenging at times. As a virtual assistant, I’ve connected with clients’ VPNs, Exchange servers, SharePoint servers, etc. Feeling at least fairly technically literate is an important part of your success.

    Communication, as has been mentioned, is also very important. Since my clients don’t “see” me face to face, making sure that we stay connected through Basecamp, SharePoint, Box.net, e-mail, phone, fax, voice mail, IM, video conferencing, etc. is important. It’s also important to be clear in your communications and to clarify anything that you’re unclear about right away. I create unique secure online workspaces for each of the clients I work with, where we can collaborate and discuss tasks and projects.

    Working from a virtual office also requires flexibility, creativity and patience. Every project / client is different, and needs to be worked with in the way that is most meaningful and helpful to them.

  • http://www.BuildingWebApps.com mzslater

    I’m cofounder of two-person (plus contractors) startup that is operating virtually. My partner and I live about 130 miles apart.

    In my experience, this works very well, but it depends on a couple of things. In our case, we’ve worked together in the past at another employer, so we know each other fairly well. We’re both technical folks who can do our own IT support. We meet in person for ab out one day per month. And we’re good at clear, open communication.

    As the company grows, I’m not sure how it will evolve. Once we get past a few employees, I think we’re likely to have an office somewhere with most of the people in it.

    Financing is an issue. For most VCs, a virtual company is a non-starter — they want everyone in one place. Most angel investors are more flexible.

    As you add lower-level employees, I think it is much harder to have everyone being virtual. Some people need more mentoring and supervision than can easily be done remotely.

    There’s a clear benefit to being in one location for collaboration and brainstorming. But there’s an equally clear benefit (more to the individual than to the company) to being able to live where you want. And especially if that place isn’t a major metropolitan area, there’s a clear benefit to the company in being able to recruit the employees from a wider geographic area.

  • Dustin Brent

    All the cons that you’ve ennumerated are really important. Virtual tools have to be your helpers, not the only means of your communication. Nothing beats face-to-face contact. I think web-based tools like Basecamp or Wrike are really irreplacable when you need to organize your business, build a schedule, compose a plan and work on it together with your team. For example, we’re using Wrike to help us keep everything in one place. It’s also a great way for any member of your team to access your business stuff anytime anywhere. It means the job will be done faster, and that your business will become more productive.

  • Jerry

    I completely agree that working virtually has its pros & cions,But its really important it is to keep the channels of communication open and free, as it is the biggest obstacles in my honest opinion that can hinder any form of business. With an act as mundane as communicating, steps can be taken for granted and everyone can fall off the same page. We use avanta management services for our virtual office services and have been pleased for resorting on their service.

  • http://blog.pgi.com Blake

    With the current focus on green business and telecommuting, virtual offices have become important to more than just start-ups. With improvements in technology, better software services, and cloud computing, individual IT problems are becoming less of an issue.

    At PGi, we provide virtual meetings tools and discuss these topics frequently both on our blog: http://blog.pgi.com and on our green blog which focuses on sustainable business: http://greenblog.pgi.com