Venture Capitalist at Theory

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3 minute read / May 3, 2021 /

The One Force that Will Govern How We Return to Work

This summer, startups will define how they return to work. In talking to founders and executives, I suspect the answer isn’t universal. But the force that will shape the decision is universal. That force is competition.

A startup has three main activities: (1) recruit a team to (2) build a product and (3) sell and service the product. Competition influences each of those functions.

Recruitment. Most people in Starupland spend more time looking for a parking space than for a job. The market is that competitive. To differentiate, employers find new ways of enticing the best people to come work for them.

But employee preferences vary. Some prefer fully remote, others part-time remote, and the remainder full-time office work. Startups will need to decide which of these three options they offer and to whom: which teams, levels of seniority, and geographies. But, in the end, competition in the hiring market may require most larger companies to provide all three options to maximize their recruiting success.

I suspect a significant fraction of the real estate budget will be funneled into employee salaries and periodic travel, and potentially smaller regional offices.

Product development. The Iron Triangle of product management says you can have two of these three: high speed, high quality, or low cost. Which does a team sacrifice when it’s remote vs in-person?

The OG (original gangster/old guard) remote-first companies structured themselves as distributed to wield a recruiting advantage. Modern companies distribute their teams to develop regional centers for developing a portion of a product: machine learning, algorithms, connectors, front end development. They match the needs of the business to local talent pools. In other words, labor market arbitrage, something that has been occurring since at least 2017.

Each startup will need to decide: do the recruiting and cost advantages of distributed teams outweigh the higher communication overhead and management work? The nature of competition in each segment will determine this.

Less competition affords a startup more time to focus on quality and cost. More competition implies speed trumps other concerns and in person is the better set up.

Sales and service. The pandemic accelerated the decade old movement to the cloud. Video-based selling became the norm, and so did deployment, configuration, and training.

The question on every salesperson’s mind today is: will selling in person reprise its role as a competitive advantage? We’ve shown there’s no need to be at a place to sell effectively: sales efficiencies steadfastly persisted at previous levels through the past year.

However, account executives do need at least one more call to close that deal. Though we understand sales efficiency, we haven’t answered the question, how does pressing flesh influence conversion rates now that it’s possible again? Should the data show a meaningful lift, competitive pressures will compel AEs to travel again.

As with every decision in business, this one is all about tradeoffs. What does a management team trade off to develop the sharpest competitive edge? The universal force of competition should be the lens teams use to decide how to structure their businesses post-vaccine.

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