July 05, 2017
Holden Page is a Crunchbase News editor and columnist.
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Your startup may be headquartered out of San Francisco, but your employees don’t have to be.

For startups looking to retain cash, hiring remote workers is an attractive alternative to traditional office environments. But to fuel growth, saving money isn’t enough; startups, even those without an office, will need to be able to raise money, too.

So for today, let’s take a look at which startups with a distributed workforce have raised thus far, and what we can possibly learn from the data gathered.

Funding For Just Under Two Dozen Startups

To find out how much startups with remote workforces raised, Crunchbase News pulled from Remote.co’s database of remote work companies. In order to be included in this dataset, 50 percent or more of the company’s workforce needed to be remote work employees. Out of 105 startups that fulfilled this qualification, only 23 have received VC funding, according to Crunchbase data. And this fistful of startups has raised boatloads of money.

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In total, startups with majority-remote employees have raised nearly $1.2 billion across 79 rounds of funding. But like the general funding environment, a mere few walked away with the majority of VC funds.

Unicorns Take The Cake (Again)

The largest funding round made in a remote workforce startup was Github’s $250 million Series B, followed by Automattic’s $160 million Series C. In total, these two unicorns have raised $567.3 million, just under half of the amount raised by all 23 remote work startups. Notably, both startups are headquartered in San Francisco (although Automattic recently closed its San Francisco office). But Datastax, a budding unicorn and data management startup in Santa Clara, California, has left the pie of funding much smaller for other remote workforce startups.

Including Datastax’s $190 million raise, Automattic and Github make up more than 65 percent of known total funding amounts. These three startups are collectively valued at nearly $3 billion, over double the amount invested in all remote workforce startups, according to the Crunchbase Unicorn leaderboard.

So where does this leave other startups who employ remote workers?

Round by Round

Using Crunchbase data, we mapped out total funding and rounds from our list of startups who employ majority remote workforces. Prior to 2011, 16 funding rounds were announced totalling nearly $38.7 million—$30 million of which was raised by Automattic’s Series A and B rounds. For the sake of readability, funding announcements made before 2011 were not included in the chart below:

As you can grok, 2011 was an active year in terms of number of deals, but in relation to total funding, it was a lackluster year. Datastax, the aforementioned near-unicorn, raised a series B to the tune of $11 million, making up over half of the year’s total investments. Notably, Buffer, the social media sharing company and remote work champion, also raised an angel round at $400,000 dollars.

As we move through to 2015, investment in startups with remote workforces picked up considerably, yet dropped sharply in 2016 and 2017 in terms of deal count and total funding. What caused such a sharp withdrawal?

A Desert of Unicorns

Automattic, Github, and Datastax, the latter of which is an emerging unicorn, made up the majority of funding in our cohort through 2015. In 2016 and 2017, not one of those companies raised a round. And as the chart below clearly shows, a unicorn raising has an outsized impact on the overall look of funding in startups that employ majority-remote workers.

The situation does not brighten as we look to 2017. Barring a considerable purse from the current crop of unicorns, 2017 is projected to underperform 2016 in regards to funding. However, it’s possible that other startups with remote workforces may pick up the slack.

From 2014 forward, investment in seed-stage startups has slowly dwindled. Meanwhile, series A and later investments are on the upswing. And while it’s difficult to make much of a small sample size, follow-on investment into startups such as Gitlab, which raised $20 million in 2016 as parts of its Series B, hold promise that non-unicorn, remote workforce-fueled startups can hold their own.

For remote workers and those who aspire to it, that is likely welcome news. As IBM can tell you, transitioning back to an office isn’t easy.

iStockPhoto / LawrenceSawyer