Startups are starting to launch without a central headquarters, or any designated office building, in an attempt to create “fully remote” businesses. The premise is simple; operate with all your leaders and employees working remotely, sometimes all over the world, to cut costs and broaden your potential employee pool.

To conventional businesses, the notion seems absurd; they rely on in-house collaboration and the reputational allure of a headquarters. So how, exactly, are these fully remote startups succeeding, and is it reasonable to prioritize it over having an established location?

The Benefits of Fully Remote Businesses

Most startups are attracted to the fully remote model because of one or a combination of the following benefits:

  • Cost savings. First and foremost, offices are expensive. Smart city technology may one day make commercial space more appealing and less expensive, but for now, the average entrepreneur can expect to shell out thousands of dollars a month for leasing even a small office space, and even more money to keep the lights on. Eliminating the need for a physical office space means thousands of dollars of savings every month, which can then be spent on more important assets and improvements, like research and development or marketing and advertising.
  • Management reduction. Keeping up with an office isn’t just a matter of money; it’s also a matter of time. Most businesses have a designated office manager, or some other combination of roles to ensure the facilities are clean, organized, and conducive to a productive work space. Fully remote models also reduce the need for this time expenditure, sometimes cutting out the cost of a full-time salary and other times freeing up more hours for productive work.
  • Commute elimination. The average commute in the United States is something like 30 minutes each way, resulting in an hour a day, or 5 hours a week of lost time. On top of that, many workers come into the office in a bad mood because they got stuck in traffic, or end up with less family time than they’d like because they get home so late. Fully remote models completely eliminate the need for commuting, or at least greatly reduce it.
  • Flexibility for workers. Working from home (or from another place of your choosing) gives workers a tremendous amount of flexibility. They can set up and customize a home office of their very own, or work from a local café or coworking space. They can wear a suit if it helps them get in a “work” mindset, or something typically inappropriate for a workspace, like pajamas and custom gold grillz. Workers can choose the environments that suit them best, which means they’ll work better and be happier at the same time. That means higher team productivity and higher morale.
  • Branding potential. Some startups get clever with their branding, showing off their fully remote model to improve their brand reputation. For example, you could claim that you’re doing it to positively impact the environment, reducing the carbon emissions previously associated with vehicular commutes.
  • Wider hiring options. Companies that operate fully remotely don’t need to restrict their hiring options to any one local area. Instead, they can hire people all over the world, broadening their employee pool. This could be beneficial because it allows you to hire people in other areas of the world for lower costs, or simply because the number of potential applicants you can consider skyrockets.
  • Productivity. There’s significant evidence to suggest that people who work from home are more productive than their office-bound counterparts, though it’s not entirely understood why this is the case. It might be because workers have more flexibility, so they can work in a style that best suits their needs. It could be because working from home makes people happier, or because they’re less distracted by office conversations. It could also be that remote workers are eager to preserve their benefits, so they want to prove that they work harder under these circumstances. Regardless of the motivations, the benefits are real.

The Drawbacks of Fully Remote Startups

However, some startups inevitably fail when trying to capture these advantages, because of the strength of these downsides:

  • Communication issues. Communication issues can kill productivity, and when you’re working with people exclusively through digital communication channels, it’s inevitable that communication issues will arise. People will miss messages or not respond to them fast enough, and people will misinterpret the subtle tone of another coworker’s email. It may also be hard to tell who’s working on what project, resulting in redundant effort or missed deadlines.
  • Client impressions and meetings. Open workspaces and excessive meetings can be annoying, but they are incredibly valuable for making good client impressions and settling matters as a team. Without a central office location, startups need to find some other way to meet with clients in person, or else resolve to merely communicate over the phone, or through digital messaging.
  • Brand visibility. Having a designated office building in a high-traffic area results in better brand visibility. For some startups, this is crucial for attracting new customers and improving their reputation. For others, the loss of this brand visibility is no big deal.
  • Team camaraderie. Teams of employees usually work best when everyone feels like they’re a part of something bigger, and when individuals have the chance to bond with one another. Because there will be fewer opportunities to talk face to face or bond with others, team camaraderie usually takes a hit in fully remote models.
  • Work-life balance. Work-life balance is key to a team’s overall morale and productivity, and you might think that working remotely can actually improve this balance; after all, people are often working from home, closer to their families. But in reality, working from home tends to blur the lines between work life and home life, which can result in psychological distress, and a feeling like work is never really over.
  • Technical issues. Fully remote models are possible thanks to fantastic advancements in technology, but what happens when those technological tools aren’t working? If your project management app goes down or your email servers aren’t working, it could derail the entire day. Plus, if an individual is in need of tech support, there’s no in-house IT department to pay them a visit and fix things up.

The Startup Advantages

Startups have some extra advantages that established businesses don’t, which is why they’re the typical proponents and progenitors of fully remote setups:

  • Agility. Startups run leaner, with few employees and flexible business models. They don’t have existing assets to worry about, and don’t need to stay bound to a given formula. This allows them to make drastic changes on the fly, or adopt a business model that might not otherwise work.
  • Limited budgets. Startups typically have lower budgets than their big business counterparts. Ordinarily, this is a weakness, but it provides a strong incentive to adopt a fully remote model. Not only does it cut down on operating costs, it also enables them to seek employees and contractors from other areas, who might be cheaper to employ.
  • Employee options. Finding a talented core team is challenging for startups, so the extra breadth of the employee pool is valuable. Getting to select candidates from all over the world is much better than only relying on people in your immediate vicinity.

Entrepreneurial Vision

Even with all the advantages offered by the fully remote business model, there’s still no guarantee of success. The startups that have grown into large-scale businesses using a fully remote foundation have done so because they’ve established a workplace that recognizes and compensates for the possible disadvantages. Taking advantage of the benefits and putting new procedures, tools, and staff in place to minimize the impact of the downsides is the key to making a startup tech company succeed without a headquarters.

Frank Landman

Frank Landman

Frank is a freelance journalist who has worked in various editorial capacities for over 10 years. He covers trends in technology as they relate to business.