March 22, 2017

Early-Stage Startups Should Live in the Basement (aka No Office)


For many startups, an office validates their existence. An office tells the world that a startup is wearing “big boy pants”. It has evolved from an idea into a business.
Startups lease office space and then spend time and money making it look cool and funky. In many cases, they lease too much space on the belief it will accommodate future growth. And they spend too much on frills such as ping-pong tables, fully stock kitchens, coffee machines and furniture.
After this investment, the office becomes an albatross; an expensive “asset” that diverts money from more important activities – e.g. product development, sales, and marketing.

Here’s a radical thought: maybe startups, particularly early-stage startups, shouldn’t have an office.

Maybe a startup’s employees should operate remotely, getting together when and if needed. It’s a different way to do business but not having an office can be liberating and make a startup focus on bigger priorities.
I recently met two entrepreneurs leading fast-growing companies. One has 30 employees – all of them working remotely. They communicate by Skype and an email. The second startup has five employees, and the founder is thinking about moving into a two-bedroom condo so he can turn one bedroom into a shared workspace. Neither startup has plans to move into an office.
While offices are sexy, they’re expensive and a major commitment. In addition to rent, startups spend money on furniture, whiteboards, high-speed Internet, telephone systems, networking and more. For startups running lean and mean, an office sucks up money.
At the same time, not having an office reflects the growing reality that many startups use consultants, freelancers, and contractors. In the Harvard Business Review, Diane Mulcahy wonders if the gig economy is making the office obsolete.

“Gig economy employers, in contrast, focus entirely on performance, not attendance in the office. It doesn’t matter if the idea for how to solve a problem or the insight to craft a new strategy is generated in the middle of the night, or while showering, or in yoga class. The gig economy employer values the quality of worker results, not the process by which they are created.”

For startups with few employees, it makes sense to go without an office for as long as possible. Why pay rent when it can be allocated to development, marketing and sales?
At some point, a startup may need an office but it doesn’t mean going from extreme to another – from no office to something extravagant.
I learned this first-hand while working with a startup that raised $2.5-million. We went from two people working in the garage behind my house to a five-year lease in downtown Toronto with cool furniture and loads of Red Bull in the refrigerator. Not surprisingly, the money disappeared much faster than the CEO expected.
A smarter move is getting office without the frills or located in a non-hip place. One of my clients has an office in the back of a pharmacy. It’s a strange two-floor setup, but the rent is cheap and the location is sweet.
When Freshbooks moved into its first office, it was located in the north part of Toronto. It wasn’t easy to get there using public transit but it cheap space.
Some other approaches include having a small office for a few employees, and then having spots for remote employees or freelancers to work on-site when needed, or setting up in a shared space such as Brightlane.
At the same time, startups don’t need frills such as fussball tables and a kitchen oozing with snacks. A startup with good values and a health culture finds other ways to create a workplace that is motivating and comfortable. Maybe it’s about having potluck lunches on Fridays or a monthly after-work “meeting” for drinks.
For many startups, an office becomes a necessity. In Forbes, Larry Alton says many startups can’t avoid having an office due to things such as tradition, culture and retention, communication and fear. That said, he believes the remote working trend will grow.

I estimate that we’ll see double-digit growth of fully remote companies in the next several years, and possibly the rise of “hybrid” offices, which accommodate both physical and remote workers in a less obstructive, more cooperative way.

What do you think? Is it possible for startups to operate without a dedicated space? At what point, do startups need an office?

I’ve worked with dozens of startups and fast-growing companies looking to accelerate their marketing and storytelling. My services are driven by frameworks and processes to create messaging, strategic plans and content. If you want marketing that makes a difference, let’s talk.
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