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Why Investors and Disruptive Companies Embrace Remote Work

By Lilia Stoyanov

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In the past, there were very few investors open to investing in all-remote companies. Despite the many advantages associated with the remote work concept, there were concerns related to governance, internal controls and productivity. At an early stage, all the company has to offer is an idea and a team capable of executing on that idea. It comes as no surprise that most traditional investors were expecting to meet with the team in an office and communicate with all team members in person.

Luckily, things have changed for good in recent years. CNBC published a study revealing that 70 percent of the workforce globally works remotely at least once per week. PWC also puts an accent on remote work and flexible working in the Future of Work: A journey to 2022. In nothing else, investors love numbers and if those numbers suggest that remote work is a trend that can't be neglected, they become more open to investing in all-remote companies. In fact, there are investors who not only have confidence in the remote working concept but have adopted it in their own businesses.

BX3 Capital is led by Kyle Asman, a VC investor who has invested in a number of startups, including, notably, Snapchat. The team of BX3 Capital works remotely and the CEO, Kyle Asman, said:

"'BX3's remote work policy has allowed us to pull from a broader talent pool. Our VP of Marketing and Communications is based a couple of states away from our headquarters in New York. Our VP of Legal works from his home in Miami (and come winter, makes us jealous of his beach photos!). Our VP of Accounting just got back from a year of being a digital nomad across nine countries and 30 cities.

Geographic diversity pays off on several levels for us. First, there's the work-life balance factor I just mentioned. We can hire the people who are the best fit for us without having to uproot their lives and, say, making their spouses find jobs in New York and having their kids enroll in a new school in an unfamiliar environment. Another downside to moving can be losing networks and support systems. Having our staff stay put in the region where they've built our careers means they can keep their connections active and allow us to have a much wider reach as a result. As an example, our VP of client operations was for years a top lawyer in the Hartford, Connecticut area; his networks have proven indispensable to us as we build out our business advisory practice. "' Source: Transformify HR Blog

It is not just BX3 Capital, many investors realize that remote work provides access to a much bigger talent pool. Geographic diversity is especially valuable when a portfolio company enters new markets as hiring people locally provides access to the local network.

It appears that there are two major reasons for embracing remote work:

Access to a global talent pool.

Early on, when the brand of the company is still unknown, it is hard for the founders to hire people having the right skill set. Those candidates who have extensive experience and can add value to the company have many options and are likely to be happy with their current job. To make it even more complicated, most stratups are conceived in technology hubs like New York, London, Berlin or Silicon Valley. The strong startup ecosystem helps a lot with sales and business development but at the same time, the high concentration of startups and scaleups competing for the same talent makes it hard to hire the right people.

On the other hand, all-remote companies can benefit from the established startup ecosystem while hiring top talent elsewhere in the world.

Low burn rate.

Investors know well that the cash they have just injected into one of their early-stage portfolio companies will be sufficient for a limited time only. A low burn rate means that the company will have cash for a longer period of time versus a company that is burning cash quickly. As headcount and office costs are likely to represent seventy percent of all costs, the opportunity to cut these costs by introducing work from home and hiring elsewhere in the world becomes appealing to many investors.

Even if the majority of the team is in Utah versus Silicon Valley and works out of an office there, has a big impact on costs and lowers the burn rate significantly. The same is valid for Liverpool and London or Heidelberg and Munich.

Depending on the risk appetite, some investors may prefer a team working remotely within the same country, while others will extend their outreach and encourage their portfolio companies to hire in Asia, Australia, EU and Africa.

When it comes to all- remote working from home or hybrid approach involving co-working offices or hubs, there are two major trends as well.

Thoughtful working.

Some companies like Hotwire go a step beyond remote work. Fiona Chilcott, Chief People & Culture Officer at Hotwire, said:

"'At Hotwire, we practice what we call "Thoughtful Working." Thoughtful Working is so much more than a remote work, flexible work or work from home policy – it's a philosophy our organization lives by that recognizes work is a thing you produce, not a place you go and we encourage our people to work where they will be the most effective for their clients, their colleagues and themselves.

We introduced Thoughtful Working at Hotwire in 2015 to encourage our people to work wherever and however they would be most effective and productive. Through Thoughtful Working, we show individuals that Hotwire doesn't exclude anyone from being able to work for our company because of the complexity of real-life factors such as distance, family or cost of living. We work with our people to help them grow and realize their potential at Hotwire by creating an environment that grows careers and provides the best employee experiences possible. At its core, Thoughtful Working follows a simple strategy: make our employees happier so they drive better results.'' Source: Transformify HR Blog

No office.

GitLab, a USD 2.75 Billion company, embraced remote work since the very beginning. Early on, it was not easy to convince potential investors that remote work is a viable option. However, the 3000-page Handbook of GitLab proved that a company having a clear strategy and structure in place can be successful no matter if it is remote or not.

Sid Sijbrandji, the CEO of GitLab, said:

Remote work forces you to do the things you have to do anyway, but earlier. Like describing your processes since the very beginning, defining tasks and the KPIs that are to be monitored. Because we did it all earlier, now, when we are in a high-growth phase, we are prepared. There is nothing nearly as effective as having a proper structure in place. Having everyone in the same room can't compensate for the lack of it. If you are on the same floor, it may work. A couple of floors – it's still manageable. Having people in two-three buildings is already a challenge. Expanding to new cities and new countries would bring pain for sure if processes, roles and responsibilities have not been addressed meanwhile.

All the remote practices we have do scale across different locations and time zones. As we get bigger, we benefit more and more from the structure that has been set early on. It's a better way to run a multinational company.'' Source: Transformify HR Blog

Running an all-remote company requires discipline, structure, clear process, roles and responsibilities. As all these are prerequisites for the success of any company, it comes as no surprise that investors and disruptive companies alike embrace the remote work concept.

Lilia Stoyanov

Entrepreneur Leadership Network® VIP

CEO and Angel Investor at Transformify. Fintech Expert.Professor.

Lilia Stoyanov is a chief executive officer and angel investor at Transformify. A fintech and digital transformation expert, she is also a professor at Zigurat Business School and expert evaluator Horizon 2020 at the European Commission.
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