Other aspects of running firms that used to require major real estate - like hosting your own servers, or having an accounts-receivable and payable department - can be outsourced online with a credit card. At the same time, the financial environment pushed start-ups to be parsimonious: In the wake of the 2001 dot-com bust, venture capitalists began handing out smaller chunks of money, and the giddy, cash-out-quick IPO market was gone.
That's why software companies and online services comprised the first big wave of officeless start-ups in Canada. These industries were ripe for virtualization. One example is Aydin Mirzaee, a 25-year-old who, in 2006, founded Boknow, one of Canada's first "callback" services that let mobile-phone users get ultra-cheap long-distance rates. (Since phone plans at the time often came with unlimited free incoming calls, a user dialling China could text the number to Boknow's service, hang up and, a few minutes later, Boknow would call back, patching in a connection to the Chinese number. Presto: an international call for only pennies, with Boknow routing the number over the Internet.)
At the time, Mirzaee was working full-time for Nortel, but in his spare time during the day and at night, he collaborated with two friends, who were still students at McGill, to design and program the service. "We'd spend a lot of time in Gchat" - Gmail's free chat application - hashing out problems and responding to customers and suppliers, he recalls. They closed down Boknow after two years, but a few months after he left Nortel, he started full-time - still working remotely with his Montreal colleagues - on their next firm, Fluidsurveys, a service that lets companies quickly design and deploy surveys. Today, it has 10 employees and clients in all layers of government. Mirzaee won't reveal revenue figures, but by operating so lean for so long, his firm was able to offer survey services for hundreds of dollars "that you'd normally pay $15,000 for," he estimates.
Mirzaee argues that operating officeless is a natural extension of the entrepreneur's urge, which is to move quickly and with as few costs as possible. For him, an office would have been an enormous cost that he couldn't afford; the company began without any capital financing at all, so work had to be done from dorm rooms. And it isn't just rent, he points out: Tending an office is like tending a plant, with an endless set of things that suck up time and money.
"When you get an office, you have to get an office printer, they charge you more for your Internet, the phone lines are more expensive because you're in commercial space," Mirzaee tells me. "And your employees are going to want parking spaces, and then you have to pay for the parking spaces. There's a whole bunch of things you don't expect."
Scott Annan is another proselytizer. Last fall, in a blog post for Ottawa start-ups, Annan - an Ottawa entrepreneur - urged his audience to avoid getting an office for as long as possible. "It's just additional costs that aren't necessary to innovate," he says. For five years, Annan has run Mercury Grove, a software development firm he founded while living in Kentucky and now runs from his home in the Glebe area. Today, he employs 12 people full-time and 40 part-time worldwide - including partners in Cincinnati, Ohio and Lexington, Kentucky, as well as a few in South Carolina.
He even has a testing team in Pakistan and a development team in India. "We ship over their laptop, we pay their Internet connection fee every month," Annan says. "For six years, we've had a great relationship with them." He estimates that forgoing an office saved him hundreds of thousands of dollars, which he could plow into hiring more and better talent.
Running a completely unphysical firm isn't necessarily easier, of course. By his own admission, Annan spends hours each day on the phone in order to keep in contact with his employees and clients. He's clocked months of travel time visiting his teams in the United States. "All business comes down to relationships," he adds, "and nothing beats spending time face-to-face and talking. So there's a lot of work spent making those relationships, and making clear expectations. There's definitely additional work."