Web-based communication and collaboration tools are supposed to make physical proximity irrelevant by letting employees work together regardless of where they happen to be. But when it comes to building???and investing in???those tools, it turns out proximity is relevant as ever. For instance, the VC firm Y Combinator requires recipients of its seed money to move to either Cambridge MA or Mountain View CA for three months. And not because Y Combinator provides office or living space (it doesn't).
Y Combinator puts company founders in one location because face-to-face communication is best for solving complicated problems (such as building a software application). Proximity is also essential for Y Combinator's principals to monitor their investments, provide advice and mediate disputes among founders.
Another example is Foo Camp. Founded by Tim O'Reilly, Foo Camp is an annual gathering of smart people doing interesting work in a variety of technology fields. Foo Camp helps innovators connect through the lowest of low-tech communication methods: live presentations in front of live audiences.
A recent Deloitte & Touche survey on global VC investing also speaks to the power of proximity. 54 percent of U.S.-based VC companies do not have foreign investments, and 74 percent of those have no plans to invest overseas in the near future. These numbers are interesting given the increased pace of globalization and the billions of tech-hungry consumers emerging in China, India and elsewhere around the world.
Of VCs that do invest overseas, the report states "51 percent invest only with other investors who have a local presence." That's because the VCs want to be physically close to the companies they are investing in, in part because it helps them manage these companies, but also because a local presence provides better knowledge of the culture and environment in which the companies are situated.Drew is formerly editor of Network Computing and currently director of content and community for Interop. View Full Bio