By Micah Rosenbloom, Managing Partner
Distributed teams went from being deal killers to de rigueur seemingly overnight in Silicon Valley. Bill Gurley has predicted that startups opening branch offices will be a standard operating procedure moving forward. It’s become almost a necessity in Silicon Valley, New York, and other high expense cities.
As a startup grows, geographic expansion of offices seems wise. Recently though, I’ve been surprised how many teams are starting out heavily distributed. This workflow runs counter to what I’ve seen work in over 20 years in the startup ecosystem. My old logic held that it was easier to build the culture and foster quick communication when everyone is under one roof. However, it’s happening, and in many cases, seems to be working, so it’s for the best that we all learn to adapt. Between the cost of living in the Bay Area and cut-throat competition for the best talent in every startup geography, atypical locations can be an arbitrage opportunity.
Here are the five styles of distribution I’ve seen:
Basecamp, InVision, and WordPress are the exemplars of this style. This Bedouin style of company building has a certain romance, and the three examples provided demonstrate it can work at scale. However, this style seems to work best when the founders are fanatically supportive of it and spend heavily on group meetings and tools to keep everyone connected.
Divide & Conquer
PillPack doesn’t get discussed much as a distributed team success story, but the company has been bi-located from its beginning. The product design and engineering team are based in Somerville, Massachusetts, and the pharmacy operations are located in Manchester, NH. To be fair, it helps that the two offices were only separated by one state line and less than an hour of drive time. An even more significant factor is that each site served a discrete functional purpose, with relatively little overlap. The teams obviously need to communicate, but the work is separate enough that it can be coordinated via meetings and emails, rather than the osmotic style required by the product, engineering, and marketing teams in a traditional startup.
NY-based Dia & Co. has a 20+ person data science team based in LA. Why? The founders found a talented data scientist leader who wanted to build her team in LA and was able to attract extraordinary talent from her network there. This team structure developed somewhat organically, but I’ve seen other companies find talent in a given city and build an office around her/him.
We recently backed a team that has built a strong core team in San Francisco, but who originally hails from Utah, and they want to build part of their tech team there. The plan is to hire for all roles in both offices, but given their historical trusted relationships and ongoing familial connections, why not leverage the best of both markets?
A common pattern among international founders is to have the founder move to the US and keep the rest of the team in their country of origin. I recently met a founder who had been running her business this way for a couple of years and enjoyed a surprising level of success. In this scenario, the founders often are serving as CEO and Head of Sales/BD and lead the process of building out a US presence. I think it’s often best if over time more than one of the original team comes to the US to maintain a strong connection between both locations but “land and expand” seems to be an increasingly popular strategy.
What does it require to work distributed?
- Time zones: The fewer, the better, and being an hour or two away by plane is a plus
- Clearly-delineated work: Most of the startups that we see work this way have a modular workflow where the distributed team is contributing a discrete work product. Large companies like Google and Facebook use this approach where satellite offices own clear products.
- Post-product/Market Fit: Stories of startup teams cracking the code of their product while sitting in different offices still seem rare. I’d not recommend going virtual until you’ve gotten that key product-market fit.
- Achieve airline status: One CEO shared with me that he jumped on a plane overnight because he needed to have a sit down with a remote employee. One has to expect to spend a fair bit of time on planes to make the distributed teamwork. Invest in some good noise canceling headphones and rack up the miles!