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Survey: Working from home may cost Startup Nation its innovative edge

Newly released Startup Snapshot report based on data from over 200 Israeli startups has highlighted the many disadvantages of remote work.

By Meir Orbach, Calcalist

Working remotely from home, a reality that has been forced upon many companies due to the Covid-19 pandemic, has severely damaged companies’ organizational culture and changed it completely, so much so that it is posing a serious threat to Israeli tech’s ability to survive. That is the grim bottom line that arises from the newly released Startup Snapshot report based on data from over 200 Israeli startups.

According to the survey, conducted by Y. Benjamin Strategic Marketing, Leumitech, Intel Ignite and Yigal Arnon Law, in partnership with the Zell Entrepreneurship Program and Benson Oak Ventures, 87% of startups shifted to remote work, whether partially or completely, due to the pandemic. Some 44% of startups reduced office space or canceled leases.

Tech companies were fighting over prime real-estate prior to the outbreak of Covid-19 and invested large sums in renovating their offices, but that trend has been reversed by the pandemic, with the likes of Check Point recently saying that it has no intention of adding to its office space and is likely to reduce it in coming years.

However, alongside the cut in costs due to the decreasing demand for office space, the survey also showed that remote work has significantly hurt the organizational culture of startups, with 79% saying that coronavirus either greatly (20%) or partially (59%) impacted their culture. Some 50% of those surveyed said that due to Covid they view the importance of employee location as less important, while 29% claimed they are now increasing their reliance on outsourcing.

“As time goes by, we are seeing an erosion of the WFH (Work From Home) model,” said Tzahi (Zack) Weisfeld, General Manager of Intel Ignite. “At first, we saw great acceptance of the WFH model, including improved productivity for certain employee groups. Yet, innovation will suffer in the long-term, as the lack of water cooler conversations will limit the flywheel effect of new idea creation.

“It’s very hard to innovate in a vacuum. It is difficult for startups to retain talent, and companies end up losing their souls. It is difficult to create a deep organizational culture. It is easier to move between companies because there is no close connection between the employees and the company, and that is something that is devastating for early-stage startups. Google and Facebook have a culture of working remotely and the ability to do so. Young companies have a very difficult time in creating a soul and organizational culture while working remotely.”

Yifat Oron, CEO of Leumitech, said entrepreneurs will need to come up with models that combine working from home with working at an office. “WFH happened due to a medical necessity,” she said. “People got used to it quickly and were excited about it. But the thinking today is that once people physically disconnect from the office, the organization might lose that special something that makes Israeli companies unique, which is the dynamic of creativity and problem solving.

“Entrepreneurs will need to come up with ways to combine working from home with the necessity of creating a physical dynamic between people.”

Leading Israeli entrepreneurs have told Calcalist that innovation and output have suffered due to remote work.

“People’s ability to work together harmoniously can only come out of physical interactions. Above all else, people need to be able to trust each other, and that can only be born out of a true connection between people,” said Cato Network co-founder and serial entrepreneur Shlomo Kramer.

“Thirty percent of companies are counting on outsourcing remote work with no significance as to the location of the employee,” explained Yael Benjamin, founder of Y. Benjamin Strategic Marketing. “Companies are becoming international, and when the culture suffers, so does the teamwork. The problem is that Israeli tech’s biggest strength is in its problem-solving quality teamwork.”

According to the survey, Zoom and other remote communication applications still leave much to be desired, with 38% saying that lack of travel has negatively affected their business relationships and sales. Some 32% said they have seen less interest from international investors while 46% believe it is currently more difficult to close deals.

“The halting of flights and the inability to spontaneously set up meetings has severely hurt entrepreneurs,” added Weisfeld. “Zoom has sapped the energy of the Israeli entrepreneurs, and that has hurt the ability to create sales.”

Nimrod Vromen, a partner at Yigal Arnon law firm and CEO of Consiglieri, highlighted one of the positive changes remote work has provided Israeli startups.

“Israeli companies historically raised far less money than their U.S. counterparts. The pandemic has leveled the playing field, and the world will discover that, pound for pound, Israeli startup companies generate more value than their global counterparts,” he concluded.