It is time to go out, again!

How can you say we are sort of out of the pandemic without saying we’re out of the pandemic? On my transatlantic flight two weeks ago (the first one in a long time!), passengers weren’t 'really' wearing masks anymore. Last week in Mexico, I attended the first Kauffmann summit in three years, with about 450 attendees – a record number. And, of course, the Oscars returned this year to its home, The Dolby Theatre, with a much larger audience. The list goes on...

More importantly, one of the leading tech companies out there, Google, told its employees to return to the office by April 4 - With the vast majority of workers coming in about three days a week.

There is no hybrid model. Only remote first or in-person first.

Over the last two years, work from home has been celebrated by most companies, especially in the tech world, as this new Eden that allows employees to be more productive while having a better lifestyle. It was a bit of a binary take, either you are remote, or not. Twitter has taken early on a strong position by allowing its employees to work remotely, indefinitely, if they want. Very few business leaders have taken a negative stand on the situation. Netflix’s Reed Hasting was one of them. From the start, he considered working from home as ‘a pure negative…’. This is interesting as Netflix always has had a relatively flexible working culture (see video). Last year, Goldman Sachs CEO, David Solomon, stated that working from home is an 'aberration that we’re going to correct as soon as possible'...

In Mexico City, I had an interesting breakfast with an old friend who founded one of the hottest healthcare startups in the country. We had a chat about where the markets are heading, and what the future of work will look like for his startup. His case is interesting as he founded his company 4 years ago, right before the pandemic. Since then, I had similar chats with a bunch of post Series A and B founders, but also CEOs of established businesses such as banks. My summary of these discussions is the following:

While this policy is set at the top, most of these leaders have decentralized a significant amount of decision-making and empowered managers to their team's needs, by following the overall policy. So, what does this mean?

A remote first culture is one where you can work from anywhere, most of the time. It usually means regular company-wide update calls, including top management, while each team manager sets up their own frequency of online or in-person team meetings. Often tech teams interact mostly online, while sales teams have more regular local in-person meetings. An in-person first culture is one where you have regular in-office meetings. It is probably the closest to what most people call 'hybrid' nowadays. The top policy usually requires that most people are in at least X days per week in the office. It is then up to each manager to decide if he wants to have people even more days in the office or not. There are exceptions for specific teams within organizations, of course.

'Future of Work' market trends.

According to the 2022 Microsoft Work Trend Index, 50% of leaders say their company already requires, or plans to require, full-time in-person work in the year ahead. While my conviction is that most companies will go for an in-person first culture (see definition above), I was surprised that so many companies want to go back to the office full time. It feels like this will be a constraint to hiring tier 1 human capital. But the reason is simple: There’s no question tech helped preserve productivity during the pandemic, but fears about lost gains may be factoring into the pullback to in-person work. On the other hand, according to LinkedIn, 1 in 7 U.S. jobs offer a remote work option (up from 1 in 67 two years ago...). And remote jobs attract 2.6 times more views and nearly 3 times more applicants than on-site roles. This trend is mainly driven by younger people: 'Gen Z’s likelihood to engage with a company posting if it mentions 'flexibility' is far higher (77%) than Millennials (30%) and others.'

Here are some data points. Despite 80% of employees saying they are just as or more productive since going remote or hybrid, 54% of leaders fear productivity has been negatively impacted since the shift...

On the face of it, for the average Microsoft Teams user, meetings, chat, workday span, and after-hours and weekend work have all risen over the past two years. Remember when email was supposed to be 'dead'...? Compared to last year, teams also start meetings later on Mondays and wrap up earlier on Fridays. There are also fewer noon meetings, which may point to people taking a midday break. More employees are also using their vacation time, with out-of-office time blocks on calendars increasing by 10% in the last year...

Why showing up in person is everything...

Personally, I believe in the second, in person first, culture. 'Showing up in person is everything' in my opinion. However, I also think freedom and flexibility are essential for great talent to develop; but team dynamics and social capital can only flourish when together.

There is a reason why nearly 50% of employees do not feel included when working remotely. This % is much higher for younger employees. Worse yet is the killing of innovation. Microsoft reports that companies have become more siloed than before the pandemic. To my point, data proves that in-person first cultures have been better at maintaining great relationships within (60% vs. 50%) and outside (50% vs. 40%) of teams compared to remote first organizations.

Founders, it is time to go out, again!

We recently discussed the upcoming fundraising processes with a couple of our founders. Instead of only having Zoom calls, we strongly suggested that they catch (again) a train or plane to go and see their potential future investors IRL. When trying to close a deal, there are just no shortcuts: Showing up in person is everything... for both, investors and founders, of course.

Nowadays, investors will always tell you: 'Don’t worry, a zoom call should be fine'. It is never fine. You can’t remember well why you loved somebody over the phone. It just doesn’t have the same energy or chemistry. Especially not in the current buyers market, where many companies are out there raising capital with more conservative investors than in the past 3 years. While we got used to 'zooming' over the last two years, old habits come back very quickly. Believe me. On a phone call it is very easy to be distracted and thumb through paperwork, stare out the window, or glance at your computer screen.

When you sit down with someone, it is much easier to remind someone why there was magic, to make them dream. You get to show them your enthusiasm, ask questions about their process, and judge whether they’re 'feeling it' by looking them in the eyes.

Fundraising is the same process as any other sales process. It takes time. The investor has money, and the entrepreneur is selling ownership in his or her company. But the real product being bought or sold is 'trust' and 'conviction'. As Mark puts it: 'Trust that you can deliver on what you say you’re going to do, trust that you will be a pleasure to work with, conviction that in good times and bad you’ll be committed to making the investment valuable.'

There is no short-cut, no conference or collaboration tool, that can build trust as effectively as being in person. It is time to go out again!

Last week, I was in Brussels to catch up with some old friends and entrepreneurs. Can't believe I left this great city soon 10 years ago already. Driving by some of the European institution buildings in the city center, I came across this mural. It reminded me of a panel I participated in two weeks ago on the current Ukraine/Russia crisis and the potential new 'world order'. Here is my prediction I shared back then with the audience: Europe will come much stronger out of the current conflict, from a defense, green energy, and general 'industrialization' level perspective. Go Europe!

Life is awesome,

Yannick

Other content I found useful

- Our company Brain.Space went into Space... The company is analyzing the brain activity of some astronauts on the ISS at this very moment. It is the first-of-its-kind EGG experiment in space with the aim of understanding how the environment affects astronauts' cognitive abilities. Check out this video for more on what the company is doing.

- Here is the latest on the state of VC funding in the US: As predicted earlier this year, VC funding broke records in 2021, then saw a 19% drop in Q1 2022... Dive into the trends behind the plunge in the latest CB Insights report.

- Great advice by Andreas for 'people joining hypergrowth startups'. Lots of tips on what to expect & how to excel.

- Great thread on the reserve management for VC funds. Here is also a fun modeling tool to test out different reserve scenarios.

- Two (one and two) interesting analyses on the current market state of B2B SaaS. With valuation multiples down, growth + growth efficiency/profitability are trendy again...

When it comes to valuation outlook, here is a rule of thumb I like to use:

It is important to nuance the current evolutions: Cloud stocks have taken a drubbing in 2022, but not all companies have been impacted equally... When looking at EMCLOUD, the average forward revenue multiple today is ~10.5x, down 62% since record highs over 27.5x in early 2021. Compression is most pronounced for the lowest growing companies in this basket.

Where are the areas of resilience? Growth is only one part of the story. While valuations were more correlated to growth in the past several years, there has been a recent shift toward a stronger correlation between valuations and growth + growth efficiency/profitability (vs. growth alone).

- A great read by Subscribed on the importance of brand building in tech companies - 'The Bland D2C Trap': What is a ‘bland’? They are predominantly D2C/digital-first businesses that don’t believe in brand building, instead putting their faith in product benefits, organic growth, and performance marketing.

VC Europe Future of Work