It's been 3 years since COVID now. During 2021 and the first half of 2022, many companies provided fully remote opportunities. In 2023 we see the opposite. According to Hubble, this is how work culture is distributed across 3 categories - In Office, Hybrid, and Fully Remote
From personal experience, this infographic is not surprising. Companies that initially announced a fully remote work culture are now backtracking. Here's why
- The economy
- Company size
- Culture at its root
It's harder to raise money in 2023. How much harder? Series B funding rounds are down by ~75% when you compare Q1 numbers YoY. After the Saas crash of 2022, startups are scrutinized even more.
Not only does the public market want companies to make more revenue, but they also want them to do this efficiently. Efficiency for private startups is measured in a metric called burn multiple. Not only do startups need to reach $5 million, but they must do so efficiently. Ideally, with a burn multiple between 1-2.5x.
One aspect of the discussion that gets left out while discussing WFH is the size of a company. Imagine you work at Paypal. They have thousands of developers. They also have well-defined processes to roll out code. This is not the case with startups. You often figure things out with a small team and must adapt with time.
Want to roll out a new AI feature? Paypal would've already used AI and a pipeline for fraud detection for existing use cases. This is not the case for most startups. They have more to think about than other established players.
Those companies that started out remote-first have it in their DNA. Everything new process assumes everyone is in a different timezone and collaborates async. But companies that adopted WFH during COVID did so because they had no choice. They did figure out how to work remotely, but it was a band-aid. Companies that had not adopted digital transformation had to do so rapidly, but we're returning to where we started now.
To truly succeed with remote-first, it needs to be in your DNA. Your company also needs the sort of culture where processes are documented. Writing and communicating clearly is important when your coworker might be in another timezone.
A return to the office
So how do these factors affect the current return to the office? Many companies are in trouble because they raised at 100x revenue multiples in their seed or series A rounds. If they're not making revenue, they're in even deeper trouble. The median public Saas multiple for B2B companies is now ~5.5X.
A small team that was forced to work remotely during COVID did well. Or did it? Valuations were sky-high even when companies were making little to no revenue. In 2023, many of these companies are being served humble pie.
The culture that seemed to work initially is crumbling in slightly larger teams. You can make fully remote work easily at <25 employees or >1000 employees. At <25, coordinating between employees is not hard. At >1000, you have robust teams and processes already. Everything in between is a work in progress.
Founders of Seed and Series A companies must make revenue in a tough economy while remaining capital-efficient, amending processes, and remaining employee friendly. To do so, founders choose a middle ground - the hybrid model. This model is here to stay. The adoption of
hybrid is comparable to the adoption of
fully remote during COVID. For most, there is no other choice.
There will still be companies that operate fully remote. They will either learn how to make it work and incorporate it into their DNA or die before reaching Series B.