How Remote Work Helped Tech Companies Outside Silicon Valley Grow

Sunday, April 24, 2022

Main News Photo

(The New York Times)

Photo by Audra Melton for The New York Times: Craig Fuller, founder of FreightWaves at his home office in Chattanooga, Tenn. His business improved when the company shifted to a virtual office, he said, and he hasn’t had trouble filling jobs.

Some companies that hired remote workers during the pandemic say going back to the office isn’t an option.

More than two years after the pandemic sent workers packing and hunkering down in their home offices, many companies are now doing everything they can to lure employees back in office buildings — at least for a few days a week.

But some companies that hired remote workers during the pandemic say going back to the office isn’t an option. Remote work made more normal by the pandemic has altered how companies operate, especially when it comes to hiring. Tech companies outside Silicon Valley have been able to grow because their talent pool has expanded.

Take, for instance, Craig Fuller, the founder of a logistics data analytics company in Chattanooga, Tenn., who is used to recruiting software engineers and data experts who live outside the area. In the past, that meant making a case for why they should move to the midsize Southern city. He would emphasize the low cost of living and outdoor community: “We look for people who have families,” he said.

But during the past two years, these sorts of conversations have been unnecessary. Mr. Fuller’s company, FreightWaves, has doubled the size of its staff by expanding remote work. And of its 120 new hires, about 60 percent live outside Chattanooga.

“All of a sudden, the rules and restrictions of where we can hire no longer became an issue for us,” Mr. Fuller said.

That’s also the case at Olive, an automation company in the health care industry in Columbus, Ohio, which grew during the pandemic to 1,350 employees from about 200. The company’s workforce is now distributed across 47 states.

“There’s no way that we could have scaled the way that we have without tapping into these national, more diverse talent pools,” said Brian Rutkowski, the company’s chief people officer.

For some start-ups outside Silicon Valley and other major metropolitan tech hubs, remote work has been crucial to unlocking rapid growth. Companies can recruit talent from anywhere without asking candidates to relocate.

This makes many keen to continue remote work after the pandemic. Revolution, a Washington-based investment firm with a focus on companies outside Silicon Valley, informally surveyed its 200 portfolio companies about their remote work policies this year: About 20 percent said they offered remote work options before the pandemic, and 70 percent said they would allow remote work going forward.

Remote work could be good for tech ecosystems outside Silicon Valley, said Steve Case, the chief executive of Revolution and a co-founder of AOL. When he started the firm in 2005, he said, “even if an entrepreneur was there, the question was, could they build a team to build the company and particularly build a team to scale the company?” Now, he said, “they can stay where they are.”

But even as remote work has broadened the pool from which start-ups outside Silicon Valley can recruit, it hasn’t necessarily made hiring easier.

That’s because it works both ways: Just as a start-up in Chattanooga can hire a software engineer in San Francisco, deep-pocketed start-ups and big tech companies in San Francisco can hire software engineers who live in Chattanooga.

Mr. Fuller said remote work broke the “protective moat” around his business. “All of a sudden, we’re now competing against companies in the Valley, in New York, for equivalent staff of our existing staff, so they are starting to pick off our teams,” he said. For Olive, competing on a national scale has meant the company has had to adjust its pay scale, Mr. Rutkowski said.

“We’ve had to get creative with compensation in this model,” he said. Olive employees who live in places with higher costs of living make more, and the company has applied additional inflation adjustments on top of its salary ranges.

Hiring remote workers during pandemic lockdowns has also made it more difficult for companies to require a return to the office. Those that require office hours would have to return to a more limited local talent pool — but one that is now more competitive than it was before the pandemic.

“I don’t think that you can put the genie back in the bottle,” said Scott Siegert, the chief operating officer at Buildertrend, a company in Omaha that makes software for residential contractors and acquired three small companies during the pandemic, none of which are nearby. “I don’t think that that’s what workers expect, and I don’t think that’s best for the company.”

Mr. Fuller said he wasn’t disappointed that completely returning FreightWaves to the office seemed implausible. His business improved when the company shifted to a virtual office, he said, and he hasn’t had trouble filling jobs, even if it has meant paying higher salaries and hiring a recruiter for the first time.

“Every metric that you would care about actually increased,” he said. “Sales increased, momentum increased.” Most of his employees continue to work from home, even if they’re based in Chattanooga.

Robert Hatta, a partner at the venture capital firm Drive Capital, which is in Columbus, Ohio, and invests in companies outside coastal cities, said that before the pandemic, about 20 percent of the firm’s about 70 portfolio companies allowed remote work. Now, about 90 percent have added some form of logging in virtually to their permanent office plans.

But he’s not convinced that remote work will remain the default.

“I think most people would agree, all things considered equal, the co-located team beats the distributed team, even in tech, and this continues to be sort of the default belief in the start-up world,” he said.

Mr. Hatta said it was too early to say which model would become the new normal. “Right now, we’ve got over 60 companies, each running 60 different versions of an experiment on what will work from a work force perspective,” he said.

Mr. Case said he believed that eventually workers outside Silicon Valley who were hired for remote work during the pandemic might join local companies. “They will realize their opportunities in those cities and maybe even identify opportunities to start their own companies and in those cities,” he said.

Category: Economic News, Remote Work