When is the Best Time to Build a Remote Team in Your Startup Lifecycle

Remote Team vs. Everyone in the Same Office. Not Everybody is Ready to Work Remotely, and It’s Not Always the Best Solution at the Pre-Seed or Seed Stage.

Photo by Slidebean on Unsplash

What’s better? Remote team or everyone in the same room?

I think about this a lot, especially observing lessons learned from our 60+ portfolio of investments. When we formed Lombardstreet Ventures in 2017, we believed that distributed access to talent would outperform the canonical model to hire people and work in the same place. And that’s true.

Hire faster, have better access to talent, lower salaries than the Bay Area, fewer investments in office spaces, minimal furniture expenses, and definitely fewer distractions.

We still strongly support that model, but after five years of working on this thesis, it seems that most founders we talk to get it wrong.

Talented people live everywhere, making them and their families move to a different place to catch a new work opportunity isn’t often an option. You can add a moving package on top of the salary, but it’s easier to find the talent you need locally or hire them remotely. To be clear, I’m sure that if there’s one thing that the Internet should have made possible is an effective and seamless remote collaboration among people.

Improvement in communication tools should have made collaboration, for the most part, independent of people’s location. Still, we made a huge jump forward from ’99, and collaboration platforms like Zoom, Discord, Slack, Stonks, and remote demo days have generally benefited the lives of company founders and their teams. The Death of Distance — like in Don Tapscott’s 1999 book — should be something we can give for granted in 2022, shouldn’t we?

Still, a startup is a very special breed of tech company.

A startup is an organization measured by its ability to learn and grow way faster than an ordinary successful company. To make it happen, unrestricted access to talent is fundamental — everybody knows that — but it’s not the only ingredient for a successful recipe. The decision to build a “local vs. remote” culture depends on many factors. In this article, I will focus my attention on two of them:

  1. What’s best for the company’s success
  2. At what stage the company should start seriously considering remote work

A remote-first organization must be a founder’s decision based on what’s better for the company in the long term — not the easiest way to build an MVP.

And that ends with what’s better for customers and business growth.

For example, let’s suppose remote work does not make you reach your goals faster. In that case, you shouldn’t hire remotely. Founders should ask themselves two fundamental questions:

  1. Can we manage the complexity of a distributed organization from day one?
  2. Can we handle it at scale?

Hiring a highly skilled engineer living 6,000 miles away in Eastern Europe for half of the typical Bay Area salary sounds appealing, but can we handle that? Will that improve our ability to deliver fast, or will it slow us down?

Operating a distributed company is definitely more challenging than having all your people working in the same place, and not every founding team is ready to adopt the distributed model from day one.

I think that, in general, there are company phases when one model fits better than the other. The typical scenario is when the company starts with two or three co-founders working 24/7 on their product idea. They code, they design, and they experiment a lot. For example, suppose you and your co-founder just started the company six months ago. In that case, every decision you make, every feature you release, and every strategy you define is temporary by definition and should be totally shared among co-founders. They should embrace it and believe it is the best thing to do. Customers’ response to those product/strategy options is the way to know if you did the right thing. Every decision should be filtered by the user’s response daily, which needs time, data observation, and a lot of confrontation among the founding team.

Important decisions must be taken fast, and at the very beginning, every decision — big or small — goes directly through the founders’ review. Until your company is ten people, its hierarchy is totally flat. Once the company becomes bigger, then more structure is necessary. Some decisions are delegated to other teams, and Product Managers, Team Leads, and later VPs become autonomous for most of their jobs. In that case, spreading the company operations across the country or even through continents can be acceptable and sometimes better.

When the company revenue grows by four to six times YoY, burn rate control could impact your decision process daily. More accessible and less expensive talent can make a difference when you decide where to hire people. The financial factor affects a company’s decision process at any stage. Still, there are times when not slowing down the day-by-day decision process is more important than hiring the best people independently from their location.

When you are at the beginning of your company and haven’t reached Product-Market Fit yet, I strongly suggest the get the founding team in the same room.

That’s especially true if you are a first-time founder.

If you want to make things even better, co-founders should share the same apartment to question their decisions and results anytime they want to — and need. At breakfast or during the night, it doesn’t matter. It’s an incredible competitive advantage to build a no-wall culture between founders, and it’s not easy. But, if you can survive the co-living test, it’s healthy and the prelude to a long-lasting relationship.

Founders who avoid this constant confrontation often don’t challenge each other enough.

And that isn’t good for the company and its customers. When founders are not in the same place, it’s always hard for them to run at the same pace, and usually, the CEO makes most of the decisions because someone has to.

Founders living in different time zones can easily not survive the co-founding test, split after a while, or have an unbalanced weight in the day-to-day company decisions. Most of the time, the company suffers and sometimes shuts down its operations.

I’m not saying that you can’t build a company with a remote team from day one — and we keep looking for those guys, by the way — but, especially in the very first years, it’s an advantage to have your co-founders in front of you every single morning.

People with more experience building companies can successfully manage remote-founder relationships and build a strong company culture, but that’s rare.

If you start now as a first-time founder and you want to maximize your chances of making a dent in the universe, you should play by the book before trying something more problematic. You’ll have hundreds of complex problems to solve, and a distributed small team can be an unnecessary challenge.

What’s better? Remote team or everyone in the same room?

I think about this a lot, especially observing lessons learned from our 60+ portfolio of investments. When we formed Lombardstreet Ventures in 2017, we believed that distributed access to talent would outperform the canonical model to hire people and work in the same place. And that’s true.

Hire faster, have better access to talent, lower salaries than the Bay Area, fewer investments in office spaces, minimal furniture expenses, and definitely fewer distractions.

We still strongly support that model, but after five years of working on this thesis, it seems that most founders we talk to get it wrong.

Talented people live everywhere, making them and their families move to a different place to catch a new work opportunity isn’t often an option. You can add a moving package on top of the salary, but it’s easier to find the talent you need locally or hire them remotely. To be clear, I’m sure that if there’s one thing that the Internet should have made possible is an effective and seamless remote collaboration among people.

Improvement in communication tools should have made collaboration, for the most part, independent of people’s location. Still, we made a huge jump forward from ’99, and collaboration platforms like Zoom, Discord, Slack, Stonks, and remote demo days have generally benefited the lives of company founders and their teams. The Death of Distance — like in Don Tapscott’s 1999 book — should be something we can give for granted in 2022, shouldn’t we?

Still, a startup is a very special breed of a tech company.

A startup is an organization measured by its ability to learn and grow way faster than an ordinary successful company. To make it happen, unrestricted access to talent is fundamental — everybody knows that — but it’s not the only ingredient for a successful recipe. The decision to build a “local vs. remote” culture depends on many factors. In this article, I will focus my attention on two of them:

  1. What’s best for the company’s success
  2. At what stage the company should start seriously considering remote work

A remote-first organization must be a founder’s decision based on what’s better for the company in the long term — not the easiest way to build an MVP.

And that ends with what’s better for customers and business growth.

For example, let’s suppose remote work does not make you reach your goals faster. In that case, you shouldn’t hire remotely. Founders should ask themselves two fundamental questions:

  1. Can we manage the complexity of a distributed organization from day one?
  2. Can we handle it at scale?

Hiring a highly skilled engineer living 6,000 miles away in Eastern Europe for half of the typical Bay Area salary sounds appealing, but can we handle that? Will that improve our ability to deliver fast, or will it slow us down?

Operating a distributed company is definitely more challenging than having all your people working in the same place, and not every founding team is ready to adopt the distributed model from day one.

I think that, in general, there are company phases when one model fits better than the other. The typical scenario is when the company starts with two or three co-founders working 24/7 on their product idea. They code, they design, and they experiment a lot. For example, suppose you and your co-founder just started the company six months ago. In that case, every decision you make, every feature you release, and every strategy you define is temporary by definition and should be totally shared among co-founders. They should embrace it and believe it is the best thing to do. Customers’ response to those product/strategy options is the way to know if you did the right thing. Every decision should be filtered by the user’s response daily, which needs time, data observation, and a lot of confrontation among the founding team.

Important decisions must be taken fast, and at the very beginning, every decision — big or small — goes directly through the founders’ review. Until your company is ten people, its hierarchy is totally flat. Once the company becomes bigger, then more structure is necessary. Some decisions are delegated to other teams, and Product Managers, Team Leads, and later VPs become autonomous for most of their jobs. In that case, spreading the company operations across the country or even through continents can be acceptable and sometimes better.

When the company revenue grows by four to six times YoY, burn rate control could impact your decision process daily. More accessible and less expensive talent can make a difference when you decide where to hire people. The financial factor affects a company’s decision process at any stage. Still, there are times when not slowing down the day-by-day decision process is more important than hiring the best people independently from their location.

When you are at the beginning of your company and haven’t reached Product-Market Fit yet, I strongly suggest the get the founding team in the same room.

That’s especially true if you are a first-time founder.

If you want to make things even better, co-founders should share the same apartment to question their decisions and results anytime they want to — and need. At breakfast or during the night, it doesn’t matter. It’s an incredible competitive advantage to build a no-wall culture between founders, and it’s not easy. But, if you can survive the co-living test, it’s healthy and the prelude to a long-lasting relationship.

Founders who avoid this constant confrontation often don’t challenge each other enough.

And that isn’t good for the company and its customers. When founders are not in the same place, it’s always hard for them to run at the same pace, and usually, the CEO makes most of the decisions because someone has to.

Founders living in different time zones can easily not survive the co-founding test, split after a while, or have an unbalanced weight in the day-to-day company decisions. Most of the time, the company suffers and sometimes shuts down its operations.

I’m not saying that you can’t build a company with a remote team from day one — and we keep looking for those guys, by the way — but, especially in the very first years, it’s an advantage to have your co-founders in front of you every single morning.

People with more experience building companies can successfully manage remote-founder relationships and build a strong company culture, but that’s rare.

If you start now as a first-time founder and you want to maximize your chances of making a dent in the universe, you should play by the book before trying something more problematic. You’ll have hundreds of complex problems to solve, and a distributed small team can be an unnecessary challenge.

Marco Palladino, co-founder and CTO at Kong started his company with Augusto Marietti in San Francisco in 2010. They came to the USA as immigrants and had a direct experience with this issue. They could have hired people from their own country — Italy — and built a remote team, but they didn’t:

Early stages require rapid pivoting of ideas, lots of creativity, and stewardship with the team by building strong personal connections, none of which happen remotely on a zoom call. Once the course is set, product market fit is found, and the business is growing, then remote teams could be an option because we need a little bit less pivoting, a little bit less creativity and a little bit more process. Of course there are always outliers, but when building a company we need to maximize our chances to succeed, so I don’t find comfort in knowing that a fraction of a fraction of startups are able to be successful on Zoom compared to the vast majority that was built in person.

On the other hand, VCs look for visionary and often outlier founders, so who am I to say you shouldn’t go remote from day one?

The only sure thing I can say is that I meet hundreds of founders every year, and very few of them have been ready to create a remote company since the beginning. In a case like this, I need to understand how you think about managing your team and building a shared culture across the small organization. Hiring people in different locations can be good for accessing talented engineers and keeping the burn rate lower. But in the first years, having the founding team sharing the same physical space is so valuable that there must be excellent reasons not to do so.

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Massimo Sgrelli

Massimo Sgrelli

Founder & General Partner @ Lombardstreet Ventures. I invest in Seed-Stage companies from Menlo Park.