Emily Maltby reports on a new style of jumbo spaces being set up to accommodate these larger startups, including the Cambridge Innovation Center in Cambridge, Massachusetts and RocketSpace Inc. in San Francisco:

In recent years, though, some new ventures have bucked the traditional model by creating pay-as-you-go setups for sizable start-ups.

Some of these spaces have vast, open floors that can be partitioned according to the size of a company, or enclosed offices with adjustable walls. And they often provide communal reception services, copiers and conference rooms—or even amenities like showers and massages.

Many entrepreneurs are turning to these spaces as a way to save on overhead as they expand, as well as maintain the communal feel of the business incubators where they launched their companies.

Though staying in communal space may be good for the budgets of these adolescent startups, and may be comforting to entrepreneurs used to the supportive community aspect of coworking, experts apparently warn their may also be downsides for businesses that fail to cut  the apron strings and move out on their own. These include, the “difficulty of keeping secrets from rivals. And some critics worry that coworking for too long may hinder businesses from developing an individual identity,” writes Maltby.

Other startups in the space stealing your employees could also be an issue. “You have human-resources issues…. I don’t want another company to romance my guys away,” George Deeb, founder of start-up consulting firm Red Rocket Partners, told the WSJ.

Should firms with dozens of employees rather than a handful stick with communal office space? 

Image courtesy of Flickr user novemberwolf. 

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Zaarly exec Shane Mac, for example, recently published a piece in VentureBeat, which we highlighted here on GigaOM, arguing that a remote set-up stinks for startups who need their staff in close proximity to form a company culture and generate the maximum number of ideas by sparking their thinking off each other. Mac makes a compelling case for the usefulness of physically close teams, but not everyone in startups is buying it.

ProofHQ, a British company that sells tools to help review design work, for example, has been remote from day one. “The company has literally never had an office with employees in it,” founder and CEO Mat Atkinson told GigaOM, explaining that having had an earlier experience starting a company with VC backing, he opted to bootstrap ProofHQ and avoid venture money, necessitating he skip the office as a budget-saving measure. Plus, he found a development team in distant Poland and wanted to be able to serve customers globally right from the outset. The result is a team spread from the west coast of America to the Middle Eastern country of Qatar.

So did he experience the squeeze on ideas and the less binding company culture that Mac predicts? “From our experience it just simply wasn’t the case,” says Atkinson, who uses constant Skype chats, regular video calls and daily scrums for each area of the business to keep his team collaborating and innovating. He also insists on regular face-to-face meet-ups for the team.

“I do understand when people say face to face matters and I agree with that. We make an effort to do things face to face both virtually by video conferencing, as well getting together in person, but I disagree when people say it’s the only way to make it happen,” he says, though he concedes that working at a distance is tougher on managers. “Remote working works really well for the team, but if you’re managing people, you have to put more effort into it. I would say it takes probably 20 percent more effort.”

Besides admitting that a distributed setup is tougher on managers, Atkinson also acknowledges that those looking for venture money might have a reason to shy away from a remote set-up. “If you’re looking to go down the venture capital route then your VCs will probably want you to be co-located and co-located close to them,” he says. “I know that’s breaking down more and more but I think VCs are still skeptical of companies that work remotely.”

But it’s not just VCs who Atkinson sees changing their minds about remote work. According to him, skeptics like Shane Mac are slowly going to the way of the dinosaurs. “There has been a real transition in the perception that people have of working remotely. In the early days it was seen as kind of odd — it’s never going to work. Now customers that we talk to about it are very interested. I have quite a lot of other early-stage technology companies wanting to talk about how we’ve managed the business, and it’s just not seen as weird. When we recruit now, people see it as a positive rather than a negative or a neutral, so I think there’s a massive change in people’s perceptions at all levels.”

Within five years, Atkinson feels, remote work will be as unremarkable as cubicles and laptops seem now – even for startups — and its posts like this, discussing the issue as contentious, rather than the practice itself, that will seem odd.

Do you agree?

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One such remote work doubter just proclaimed his skepticism loudly on VentureBeat. In the post, Shane Mac, the director of product at local jobs marketplace Zaarly, announces that he has been converted from his earlier belief in remote work and argues strongly for co-located teams for startups. He offers seven reasons for his change of heart, ranging from the logistical (remote communication slows down the speed of decision making and takes extra work) to the more nebulous, including:

Hallway conversations are priceless. You can’t create true serendipity over instant message. It’s crazy to think that one discussion can make, break or change the path of a company, but sometimes, those “accidental conversations” do turn into some magical idea, approach or direction.

Passion in person is contagious. I’d argue that it’s almost impossible to convey passion accurately to someone at a remote location. If you think back to times when you’ve been convinced to do something, it usually results from face-to-face interaction. It’s harder to influence and create change through the digital highway. Also, in-person passion helps to create a social pressure that makes people work better. If the person next to you is working late, it’s much easier to ignore if you can’t physically see staying in the office longer.

Company culture is key. Culture binds a company early on, so maintaining that culture in multiple locations requires extra effort and even a separate “culture team” — members of management who ensure that the culture is universal across the company…. it’s hard to live and breathe something if you aren’t actually breathing the same air.

Also, in a gripe that may be of particular interest to the many companies peddling online meeting platforms, Mac isn’t buying the effectiveness of the virtual whiteboard. “I haven’t once seen a collaboration session for a critical decision happen successfully from sending files back and forth,” he writes. When it comes to whiteboards, the real deal, he feels, is key.

None of Mac’s issues with remote work are completely out of left field – even the most ardent of location independents suspect from time to time that they’re less bonded to their team and less able to generate and act on serendipitous ideas or encounters when they’re at a distance. And it’s easy to see how these concerns would be most relevant in a start-up atmosphere. After all, the autonomy and life-work balance that remote work can bring are mostly of benefit to those that are trying to maintain a career that won’t drive them crazy over the long haul, rather than founders in the startup scene where it’s pretty much par for the course to work like a lunatic short-term in hopes of an eventual payoff and easing up of your schedule.

So perhaps the truth about remote work isn’t that it’s a binary yes-no choice, but rather a sliding scale with workers you’ve never met a world away on one end and teams that fall asleep under their desks together on the other. One side offers an engaged but not obsessive worldwide pool of talent and the ability to sustain a career without driving yourself batty with office politics, repetition and horrid commutes, the other a short-term burst of productivity in a hothouse of ideas with a high potentiality for interpersonal conflict, burnout and stunted personal lives if you try to keep it up for too long. Viewed that way, varying degrees of remote work make sense for different teams, with the only true mistake being misjudging exactly what sort of structure your team needs.

What’s you reaction to Mac’s take down of remote work for start-ups – amen, absolute disagreement or something in the middle?

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At GigaOM’s Net:Work conference on Thursday, executives from HIGEAR and Spiceworks discussed why startups tend to collaborate better than their enterprise brethren. The short answer is that they’re smaller, which means they’re more likely to know each other. “I don’t think humans are wired to deal with large groups of people,” HIGEAR President Murtaza Hussain said at the conference. HIGEAR currently numbers about 10 employees.

As for the tools they use — when it comes time to pick an application, the best advice is to adopt those which are easiest to use. Hussain said that HIGEAR leans heavily on Skype for chat and messaging, and employees tend to use Google docs. Why? Because they fit the lowest common denominator for access and usage.

Few organizations have success when a senior-level executive decides which tools or applications are best. Hussain said the industry is full of examples where a C-level executive feels that one particular piece software is great and pushes it down to the rest of the company to use. “The last thing people want to want to do is learn a new piece of software,” he said.

But one potential drawback to that strategy is that letting employees pick their own tools can relate in data silos across an organization, according to Spiceworks VP of Products Tabrez Syed.

At the end of the day, the best type of collaborative efforts are those that happen face to face, which is one reason why Hussain is a big believer in employee happy hours. “When a new employee comes in, we take them out for beers,” he said. “I don’t think there are any tools or technology to make that kind of collaboration happen.”

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Crowdsourcing startup 99designs recently received $35 million in venture capital and is currently advertising six positions in its Melbourne and San Francisco offices. These hires will see the team grow by about 20 percent and expand management capacity, paving the way for the creation of additional operations roles.

The business has a strong culture and a flat structure. How does 99designs plan to manage its expansion without compromising collaboration or culture?

Collaboration

The tight-knit business was originally run from Melbourne, Australia, and Vancouver, Canada, so communication has always been a focus.

Says CEO Patrick Llewellyn, “We have a long history of collaborating with people all over the world. [Parent company] SitePoint has been connecting [people and contributors] forever and a day from different parts of the world. That’s part of our DNA.”

Indeed, growth has actually boosted collaboration. Since the business moved out of its startup phase, Llewellyn and COO Jason Sew Hoy were given more operational authority. A more formal management structure was put in place in August of last year, and Llewellyn notes, “We’ve been more collaborative than ever.”

Collaboration tools that the team favors include instant messenger, Yammer and Campfire for development problem solving. Email is also essential, as are scheduled and spontaneous video conferences.

But people are crucial to the process: The outcomes of management’s quarterly strategy meetings are fed back to the staff by both team leaders and business leaders. “We get some pretty wild debates, but that’s a good thing,” laughs Sew Hoy. “It’s definitely the variety of the different viewpoints that creates a really robust strategy.

“It’s a pretty open communication model. Everyone’s encouraged to share ideas and make contributions,” he adds. “It’s designed to help everyone have a voice and feel like they’re being heard, but it also helps to guide some of the decisions that we make on a day-to-day basis.”

Culture

The pair see communicating culture as a major challenge as the business grows in the coming months.

“From a cultural and team management point of view,” explains Sew Hoy, “it comes down to having a core group of leaders that represent the business and who we want to be.”

He says that the focus on creating the right management positions and putting the right people in them “will essentially set the foundation for how we communicate and manage the team as it gets bigger.”

As Llewellyn reveals, “The most important thing in our hiring process is making sure that we hire people that we trust. Unless you trust someone, I don’t think you can openly communicate with them.”

The pair also requires staff to have a collaborative philosophy. “It’s got to be a core competency for everyone to be an excellent global communicator,” explains Sew Hoy, “regardless of whether you’re a support person, a developer, a marketer or someone in senior management.”

Recruiting candidates with great communication skills is only part of the equation, he says. “It also comes down to the expectations that you set early on with that person.

“We’ve got two people starting together today, so one of the things we’re doing is getting them to sit down and meet all of the people in San Francisco on video chat.” The team does this, he says, “just to make sure that there’s a little bit more interaction there than seeing that there’s a bunch of people there on our ‘About Us’ page, and to break down those barriers toward getting conversations started.”

Moving team members between offices is also central to ensuring cultural consistency. “We see that as an important investment,” Llewellyn explains. “Even before we raised the money . . . we brought over four people for South by Southwest this year from Melbourne, and a couple of those guys spent another two weeks in our office. We’ll continue to bring some others across to San Francisco and we’ll take people from San Francisco to Melbourne, so that we get that cross-pollination,” he explains.

Competitive advantage

Llewellyn believes that the travel potential within 99designs represents a competitive edge for the business, especially when hiring in the Melbourne market.

“I’m really excited about the opportunities that this will open up over time,” he says. “One of the things about hiring talented Australians is that there’s always a significant wanderlust. And I think that by having offices in two pretty cool cities, we can . . . use that as a competitive advantage in the hiring process.”

The business has already relocated its CTO from Melbourne to San Francisco because, “In terms of new technology, and where things evolve the fastest, San Francisco and the Valley is in the heart of that. So there were definitely going to be advantages to having a technical leader stationed over there,” explains Sew Hoy.

Such relocations — Llewellyn himself was originally hired in Melbourne, Australia — have presented new collaborative challenges. “I don’t want to pretend that we’ve got all the answers,” Llewellyn says. “We’re iterating and learning and finding that there are complexities that we haven’t thought through.” But, he says, open, trusting team communication is key to the business’s future.

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Despite (or maybe because of) these adjustments to my work day, I manage to meet or exceed the expectations for my job. My employer is flexible about when I work as long as I get the job done, and I occasionally pull some late nights, early mornings or do work on the weekend to make sure that I’m taking care of the community that I manage.

All of this flexibility works for me, and it looks like I’m not alone. According to a recent study by a group of researchers at Brigham Young University, people who telecommute balance work and family life better than those who work in an office, but only when flextime is also part of the plan. These researchers analyzed data from more than 24,000 IBM employees from 75 countries to find that telecommuters using flextime could work 57 hours per week before work starts to interfere with their personal lives, while the number was a paltry 38 hours per week for traditional office workers.

This isn’t just an IBM phenomenon, either. About a year ago, I looked at a Cisco study of its telecommuting employees that found:

69 percent of the telecommuting employees see increased productivity.

67 percent said that their work quality improved.

80 percent had an improved quality of life.

One of the biggest surprises for Cisco was that people actually spend more time working when they telecommute. This isn’t really surprising to me as I spend more time working when I telecommute. For one thing, I shave over 1.5 hours of driving time out of my daily schedule. I also tend to start work as soon as I get up around 6am and then take a little break later in the day to go for a quick run, take a shower and put on something other than my pajamas. This lets me get a jump on the work day and take a break when I need it, thus increasing my productivity while allowing me to be flexible with my time.

Smart companies should be taking a serious look at web working as a way to improve employee productivity while saving money that they would spending on extra office space. By being creative and flexible about working arrangements, both companies and employees can benefit.

How do you benefit from telecommuting and flextime without sacrificing productivity?

Photo by Flickr user gibsonsgolfer used under the Creative Commons Attribution-Share Alike 2.0 Generic license.

As a freelancer, I get the chance to work with startup companies that are still too new or too small to have a lot of in-house staff. Because of this, I’ve become familiar with the common characteristics that many startups share. As I come to expect these characteristics with new clients, I become more efficient at avoiding problems and maximizing opportunities.

But first, a definition: What exactly is a startup? Although the term “startup” is usually associated with tech companies, it’s not necessarily that specific. As long as the business is young, usually still in development, then it can be considered a startup.

The first common trait that most startups have is their tight or unpredictable income. Usually they are bootstrapping (working without external funding) which leads them to minimize their expenses. Even if they have the benefit of external funding, startup founders still tend to keep a close eye at their cashflow. Some of them might be looking for low freelancer rates, or perhaps some prep work to justify your cost. You shouldn’t be selling your services as an added expense: talk about your fees as an investment.

To minimize any negative effects a startup client may have on my own finances, I tend to bill early and send reminders before the due date indicated on the invoice. This sometimes isn’t necessary, but it can be useful, especially if the people in charge of paying you are wearing too many hats or paying attention to several other aspects of the business –  a common situation in startups.

Also, if you’re working with a startup, you’ll be dealing with their growing pains firsthand. This means you’ll be part of an exciting and interesting stage in the development of their business. While this stage is typically filled with new ideas and innovation, there will also be a lot of mistakes, which will often affect your work. They might even be a bit disorganized, since they don’t have standard processes in place.

There might even be major changes when the founders get a better (or simply different) idea of what they want to do. One of my earliest freelancing jobs was writing web site copy for a tech startup. When they hired me they were developing a simple chat application. By the time I left them six months later, they had plans to turn their app into a full-featured social networking tool. Because of possible changes like this, it’s important to keep communication lines open so that you’re updated with the latest developments. Startups are flexible organizations, and you should also be equally flexible as you work for them — as long as you are treated and paid fairly.

There may be some exceptions, but I usually find that working with a startup is also like working with a small, close-knit family. They often don’t have a large staff since they’re just starting out. With few, if any, bureaucratic hoops and hierarchies to deal with, getting feedback and disseminating information is usually faster. In fact, you may be working directly with the founders.

Although working closely with the big bosses has its advantages, there are a few challenges you should expect. Sometimes, founders can be micromanagers. They tend to think of their startup as a baby whose every tiny step they should monitor and approve. While I appreciate this devotion to one’s business, too much of it can prevent growth through other people’s ideas, experience and perspective.

Working with a startup certainly has its own opportunities and disadvantages. We need to be expect both these things if we want the working relationship to go as smoothly as possible.

Have you ever worked with startups? What was your experience like?

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Even though the current economic climate is not so hot, amazing advances in the open-source software movement, coupled with vastly reduced costs for such things as infrastructure, bandwidth and software services are allowing web-based companies to develop online products and services faster than ever before. And Internet companies themselves are developing non-traditional strategies that best meet the needs of the hyper-paced modern web marketplace.

Rapid Iteration Model/”Ship It!”
socialmedian founder and XING Chief Product Officer Jason Goldberg discusses the utilization of a rapid iteration model that allows development of “great products and enhancements that meet your needs.” Goldberg has evolved this model into something he terms “Ship It!” Boiled down, “Ship It!” means that product development cycles are run in quick succession, making user feedback explicitly part of the build process. Goldberg goes on to define an ethos that many cutting-edge startups live and breathe today: launching features publicly before they are “fully baked,” with the expectation that avid users will provide the feedback and direction needed to allow development teams to put on the final spit and polish.

We will launch new features before they are finished. Our plan is to get new stuff out there on the site and learn from our users as to how to make them better. You tell us what you like, don’t like, and want to see improved — and then we’ll do our best to keep up with your input.

Whereas for most industries it would be sheer folly to release products that were not yet perfected, on the Internet this is beginning to be more rule than exception, particularly for free and advertising-supported products.

Goldberg further strengthens his company’s policy of transparency by making himself available for answering questions and receiving feedback both on his XING profile and on Twitter.

The Lean Startup
Web-based startups are getting faster and more responsive, and they’re also getting leaner. Eric Ries, entrepreneur and co-founder/CTO of IMVU, defines the lean startup as “a disciplined approach to building companies that matter”:

It’s designed to dramatically reduce the risk associated with bringing a new product to market by building the company from the ground up for rapid iteration and learning. It requires dramatically less capital than older models, and can find profitability sooner. Most importantly, it breaks down the artificial dichotomy between pursuing the company’s vision and creating profitable value. Instead, it harnesses the power of the market in support of the company’s long-term mission.

So not only are startups becoming faster and more adept in rolling out product iterations, the lean startup concept allows startups to conserve resources while utilizing feedback and a rapid iteration model to find the fastest and most efficient path possible to maximum profitability.

The Microstartup
In November, Mahalo founder and CEO Jason Calacanis issued “The Future of Startups,” a proclamation on the state of startups and the Internet. Calacanis lays out that the era of “The Zero Cost Startup” (vastly lowered overhead, servers, hosting costs, and so on) has led to “The Age of the Microstartup.” Echoing the trends of the Rapid Iteration Model and the Lean Startup, Calacanis muses that “[m]icrostartups are amazing because they can try ten different things over a year with very little pressure to “break out.” This leads to a lot of people taking a lot more risk, starting a lot more crazy ideas.”

Low costs and freedom to “crowdsource” feedback allow, then, for a “Try Everything” era in which startups can spin out ideas, fail, and try again in rapid succession until finding the idea, product and business model that gains traction. In the microstartup model, the most important resource is the founders’ and team members’ time.

What do you make of the trend of web-based startups going rapid, lean and micro?

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Led by Bijoy Goswami, CEO of Aviri, and Marcy Hoen, founder of Austin Art Start, the focus was on bootstrapping, or a period of self-funding that many businesses choose to follow in their early stages – and, at times, later stages for established companies, which is referred to as “rebootstrapping.” The dynamic of bootstrapping was presented as sitting between the worlds of “cookie cutter” and “funding-driven” business models (see Slide 8 of the online slide show). Cookie-cutter businesses are those that require little creativity or innovation, such as purchasing a fast food franchise, whereas funding-driven businesses take money from investors with the idea of quickly reaching profitability.

The bootstrapped model, on the other hand, allows start-up founders to have maximum flexibility and creativity while seeking out the business model that will best suit the growing company. In fact, Goswani went so far as to present an opinion that some would likely disagree with: that founders who take venture funding are not true entrepreneurs because it is not their money being used to fund the company. The implication, then, is that creativity and innovation are curtailed from the moment of taking funding forward, because the primary concern is returning the investment to financial backers as soon as possible. Goswani cracked up the room by saying in a mock lecturing tone: “At a funded company, it’s not about your journey, guy.”

Alternatively, bootstrapping your company allows the business model to “show up as you go along,” and may become the true extension of the expression and passions of the founder. Of course, this is why many web workers seek to start their own online businesses in the first place, so the bootstrapped model is therefore seen as an ideal way to bring the best ideas to life and then into full-fledged and profitable businesses online. Money, critical of course for every business, is needed to keep bootstrapped businesses afloat, but the advantage of the bootstrapped model is that overhead is often lower and there’s not a “ticking clock” to meet the demands of anxious investors. If a bootrapping founder has a spouse or significant other with a good job with a high salary, it was asserted that, in theory, a bootstrapped business could have an “unlimited runway” to find its way to profitability.

The “bootstrapper journey” takes on a number of different phases, such as discovery, ideation, and the “valley of death.” The journey starts with the old maxim to “know thyself.” In terms of obtaining true expertise in any field, it’s noted that most people need to have 10,000 hours of practice under their belts. “Skipping ahead” on the broadly themed bootstrapper roadmap can often lead to having to circle back to go through each step once again in order to find success. Taking on each stage to its natural conclusion, however, allows for organic creation of successful businesses, which means a formal business plan does not have to be a major concern.

Many of the bootstrappers in the room were, it turns out, somewhere in the midst of the “ideation” phase, where it’s important to create a working demo of the product or service that the business will be based around. Finding the right co-founder(s) is key during this phase as well.

Overall, however, it was emphasized that while the bootstrapper journey is partitioned out into broad phases for the purposes of explanation and conversation, each bootstrapper finds his or her own way in the process of creating and sustaining a new online business.

A final note of encouragement was that “failure is feedback.” Each part of the journey will create opportunities to learn great lessons that will aid each bootstrapper along his or her route.

Where are you on the bootstrapper’s journey?

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The main reason is that we haven’t seen anything coming out of either one of those events that looks like it will make a difference to the average web worker in the short run. Indeed, we suspect that the majority of these high-profile launches will vanish without a trace. The world already has a pretty good supply of mobile, social applications who mistake using Google AdWords for a business strategy. While that doesn’t characterize every startup at the conferences, the level of innovation seemed to be off from some past years.

But surely the web can’t be running out of innovation steam, can it? Here’s our invitation to you, the real web workers: what have you seen lately that was new and exciting? What tools and services have you run into that do help streamline your day? What’s worth shouting from the virtual rooftops about, even if it didn’t participate in the VC-fueled dog-and-pony shows this week?

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