Why Nonconforming SaaS Startups Win — Wherever They’re Based

In short:

• Being a nonconformist can increase growth, lower burn rates and let you do more with less capital.
• Software companies based in low-cost regions grow 20% faster than those in tech hubs.
• As Facebook, Twitter and other big tech firms tell employees they can work from anywhere, the question becomes: Why pay Bay Area rents?

SaaS firms that heeded the findings of a survey released by VC OpenView Venture Partners late last year might have gotten a jump on COVID-19-driven trends.

One insight that stands out from the survey of some 600 SaaS startups is that firms located in low-cost regions grew about 20% faster and realized 20% to 30% greater efficiencies at scale. That made sense then, because those founders weren’t expending energy thinking about how to cover San Francisco or Boston rents. In fact, OpenView found that leaders in tech hubs were 33% more worried about fundraising and 27% more concerned about cash burn than their peers in lower-cost areas.

Those fears may be getting more intense. If you plan to bring all employees back to the office, social distancing means you likely need significantly more space than before. And software firms with archetypal open offices, shared work tables and communal kitchens may need to come up with big bucks to retrofit. As we’ve discussed, using an average per-square-foot cost of $35 — dirt cheap for a tech hub — a firm of 100 employees could spend $1.35 million just to accommodate social distancing. That doesn’t include buildouts, sanitization or testing.

We get why young companies thought they needed to be where the top talent was. But now Twitter employees have been told that they can work from home forever if they want to, and other big firms including Apple, Google and Facebook say most employees will be remote until at least 2021.

Given the cost of living in places like San Francisco, New York and Boston, will we see an exodus to smaller cities? Maybe. A survey of 4,400 tech workers conducted by employee discussion app Blind found that two-thirds would consider leaving the Bay Area if they could work remotely permanently.

Bend, Oregon anyone?

Check out the video for more on the OpenView survey, including why experience matters for founders and how much faster SaaS companies headed by women grow versus male-led firms.

Melissa Goraj is a licensed CPA and a solution consultant in the software/high tech vertical at NetSuite. She works with financial professionals to evaluate business processes and develop system-based solutions to facilitate organizational growth. As a former controller with a decade of experience in accounting, Melissa understands the impact that processes and systems can have on an organization and has a proven track record of increasing operational efficiency. Melissa is a Vermonter now living in Austin, Texas.