Data shows that pre-seed and seed startups with employees showing up in a physical office have 3½ times higher revenue growth than those that are solely remote.

Let the discussion begin.

Post-pandemic, startups are still struggling to manage the best way to manage return-to-office issues – i.e. employee’s expectations of continuing to work remotely versus the best path to build and grow a profitable company.

Before we can ask which is the best configuration, the first question is what, exactly do we mean by “remote work” versus “office work”? Today work configurations span the spectrum from no office (fully remote, default digital) to some office (flexible hybrid, synchronized hybrid, office first,) to office only.

Let’s start with the data set. The survey sample size was 37 companies from the Reach Capital portfolio. That’s large enough to see patterns, but not large enough to generalize across all startups. Next, Reach Capital’s portfolio of companies are in education and the future of work. The revenue results by workplace configuration may be different in other markets.  Reach Capital’s investments are made in many regions including Brazil, so the geography is not limited to Silicon Valley.

Finally office configuration is only one factor that might influence a startup’s growth rate. Still the results are suggestive enough that other VC’s might want to run the same surveys across their portfolio of companies and see if the results match.

If the results appear elsewhere, then one can speculate why. Working from home may offer more distractions by chores, family, network issues. Do those little things add up to meaningful productivity differences?

Is it that in early-stage startups the random conversations between employees at unscheduled and unplanned times lead to better insights and ideas? And if so, is the productive brainstorming occurring inside of departments –e.g. engineer to engineer — or is it the cross-fertilization between departments – e.g. engineering to marketing?

For decades Silicon Valley company founders and investors have known this small world network effect as tacit knowledge. It has been a hallmark of the physical design of Silicon Valley office space –  from Xerox PARC to Pixar’s headquarters, to Google and Apple.

Either way, it’s the beginning of an interesting discussion.

What has been your experience?

Lessons Learned