Data hints at the value of startup offices

Toward the end of 2022, a number of entrepreneurs — some citing Elon Musk — told me they planned to bring back in-person work culture in the following year to help promote productivity and, in some cases, loyalty. One founder even told me over drinks that they weren’t worried about losing talent — claiming that those who leave just because there’s an in-person mandate weren’t truly mission-driven to begin with.

While some founders are clearly set on a return, others are confused. There’s the argument — sometimes coming from venture capitalists desperate to see portfolio companies succeed — that being in-person will help grow productivity and, eventually, the bottom line. And there’s also the counterargument that remote work allows for more inclusive and expansive hiring, which could also help, well, the bottom line.

And if 2023 isn’t the year for the bottom line, I don’t know what else it could be. Kruze Consulting, an accounting firm for startups, mined through over 750 companies’ finances — which includes upward of $300 million in quarterly revenue and over $750 million in quarterly spend. I spoke to Healy Jones, who runs financial planning and analysis for Kruze, about his findings. The results, he thinks, offer some balance to the debate.

Jones said that early-stage startups without offices grow revenue 2.7x faster than startups that have an office. Eventually, though, after startups get big enough — a tipping point seems to be when a company gets around a quarter of a million in expenses per month, or 10 to 12 employees — he said that having an office appears to correlate with faster revenue growth.

The dataset only tracks companies founded after 2021, after the initial COVID-19 lockdown, meaning that the revenue numbers are exclusively focused on new companies, so there are no outlier older companies that can skew the data.

“When you’re a pre-revenue startup and you’re trying to get things going, you have to iterate really quickly and you’re in a rat race to sell products and get it out,” Jones said. “The companies that have gone fully remote are able to hire the best-in-class talent from all over,” which helps with that goal, he said.

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Jones noted that, of course, there are fully remote companies that have way more expenses or massive revenue — but the data does suggest a divergence when companies get to a certain size. Theories for both sides abound: Maybe it helps to have certain teams within the office, such as a sales team jumping off of each other’s pitches. On the other end, remote-focused companies are investing in collaboration tools — a cost that lands around an extra $100 to $200 per person — which, in turn, can help a company run smoother and get more operationally efficient.

Disclo CEO and co-founder Hannah Olson, who recently raised $5 million for her disability accommodation platform, is building a team across three time zones. “We’ve been able to tap talent from across the country without the overhead cost of relocation and real estate,” Olson said. Disclo is also using a budget that would have been spent on office space for marketing, conferences and contractors. The chief executive estimates that Disclo is saving around $120,000 annually on office costs.

Also, the business that Disclo is in fits well into a remote-first policy. “Most of our employees are parents, so it comes with additional costs like daycare as well. Or, they may have a chronic illness [or] disability and prefer remote work,” she said. “As of right now, remote is the way, and we don’t see ourselves changing direction.”

Dan Teran, the co-founder of Gutter Capital, prefers if founding teams work together in person.

“A lot of context gets lost when you are remote,” he told TechCrunch. “There are obvious advantages to accessing talent remotely, but doing so in the early days requires intentionality from management to build remote culture. We’re comfortable with either approach as long as founders are intentional and aware of the trade-offs.”

There are a number of subjective factors that influence revenue growth — from employee morale to customer experience to even the organizational structures in place on a day-to-day basis. Today’s data shows us that the office — or the absence of one, really — is one to think about in a more bottom-line way.