Can a tiny start-up succeed as a virtual company? Here are seven tips to help make sure that yours does

Most people can readily grasp how virtual principles work in a company that has thousands of employees. But how do you make them work in a start-up, which by definition has a small staff and no set protocols?

In the past two years I've learned firsthand--sometimes painfully--the pitfalls and rewards of being part of a virtual start-up. In December 1997, I helped found AgInfoLink Inc., a virtually run company that tracks beef from ranch to refrigerator case. By sharing information, everyone along the supply chain--ranchers, feed-lot operators, packing plants, processors, distributors, supermarkets, and restaurants--can better manage product quality, profitability, and especially food safety--a matter of grave concern in all segments of the agriculture industry. "Feedback loops are essential to success in any business," says AgInfoLink CEO Mark Armentrout. "Everything we've learned in the past 50 years from the quality movement tells us that providing no feedback on the ultimate suitability of our products is disastrous for an industry."

Feedback has been all but nonexistent for beef producers, who have faced record losses in the past two years. Using technologies such as computerized ear tags, DNA tracking, bar codes, and computer networks, AgInfoLink plans to change all that by expanding its feedback-tracking system into all agricultural sectors. AgInfoLink grew out of Texas rancher Anne Anderson's frustrated decade-long attempt to form a cattle alliance that could produce steaks of a consistent size, tenderness, and flavor for restaurants and consumers. She found that there was no one company providing the tracking technology, networks, and security needed to carry information from one place to another. So she pulled together a four-person team, of which I am one, to found AgInfoLink.

A virtual operation made sense from the start: the talent Anderson wanted was spread out across different states. In its first year the company signed on as clients cattle alliances and ranchers in Argentina, Australia, Canada, Mexico, and seven of the United States. The company's 40 employees are spread out, mostly in ones and twos, to cover those customer bases. The lessons we have learned are instructive for anyone considering a virtual start-up or managing a small virtual operation.

Place your limited personnel near your customers. AgInfoLink got this one right from day one. For every virtual operation, there must be strong business reasons to have staff geographically separated. Proximity to customers is one of the most compelling. AgInfoLink's technical analysts must work closely with ranchers and cattle alliances to maintain systems. Only three full-time staffers are at "headquarters," in Austin. The largest concentration of employees--seven--is in Longmont, Colo., where software programmers, who need face-to-face interaction, develop the company's tracking technology. Even the programmers are located close to ranches, so they can test the technology in the field.

Get an intranet going as quickly as possible. As AgInfoLink's primary adviser on operating virtually, I maintained early on that we could easily keep everyone informed by E-mail and phone. I was wrong. If successful, a virtual start-up is going to be steadily hiring new employees. When employees and managers all work in the same place, there are hundreds of "by the way" opportunities to ask all those basic questions that new hires have (What equipment do I need? Is there a health-care program, and if so, how do I sign up? and so on) and lots of people to ask. In a virtual company, new employees are often reluctant to bug a far-off supervisor with message after message. And if employees are in different time zones, there may not even be anyone available to ask when the questions come up. Over and over at AgInfoLink, new hires were needlessly confused and frustrated, and time was wasted over those questions. A company intranet, sort of an electronic employee handbook available on the Web, is where you can store all that information. And you can easily change the content as the company evolves. Once AgInfoLink decided to set up an intranet, it made a further mistake: waiting until it had compiled an 80-page soup-to-nuts primer before bringing the intranet on-line. No one can get an intranet right the first time anyway, so why not bring it on-line a page at a time?

Have face-to-face orientations. In more than half its hirings, AgInfoLink has been able to have new staffers meet with two or more founders. Sharing the company's vision firsthand with new employees establishes the critical personal relationship that determines whether people can succeed in the company.

Understand the power of two. The concept that a highly trained professional can be as effective as a whole team has long been a driving management concept for me. But as I watch new virtual companies develop, I'm beginning to modify my thinking. It gets lonely in the outposts. One of the biggest problems of a virtual operation is that almost all employees feel isolated and away from the action. A second person helps reinforce the company mission and provides a friendly sounding board. AgInfoLink lost a key staffer in its infancy, and I suspect the power of two--rubbing shoulders every day--would have prevented that loss. When it's not possible to locate two people together, AgInfoLink tries to assign buddies who contact each other daily.

Train employees in productive E-mail use. The life of a virtual company happens on E-mail. AgInfoLink asks employees to check their E-mail at least twice a day, whether at their home offices or on the road. That was new to some new staffers. Some had used only office-based networks that required you to be at your desk for E-mail, others didn't want to travel with a laptop, and some had never used E-mail. But if you're not connected for a couple of days, you may miss critical developments that affect your work.

Another threat to productivity is letting E-mail become too disruptive. Early on, a number of AgInfoLink staffers set their computers to alert them whenever they had a message. What they found was that the signal disrupted their concentration and dramatically reduced productivity. The same can be true, of course, with face-to-face interruptions, but it often seems harder to ignore your curiosity about a message and who sent it than to wave someone away or ask him or her to wait. For most people, checking E-mail a couple of times a day keeps them informed but lets them focus on their projects.

Stamp out rumor wildfires. The virtual environment is a perfect breeding ground for rumors. If a manager in a regular company sees people whispering in a cluster or a number of empty offices, she knows something's wrong. But in a virtual company, there's nothing to see--and no one to see it. Rumors--about finances, employees, company performance, and so on--start in the absence of information. At the very least they cause people to worry about something other than their jobs; at worst they can destroy a company. AgInfoLink's motto is "Ask early and often." The company encourages employees to bring questions to the attention of a senior staffer so the correct information can be communicated by broadcast E-mail or a telephone conference call to everyone concerned.

Realize the power of communication. Every day all AgInfoLink staffers receive the Daily Flash, a report of the day's sales and cattle enrollments, compared with both the previous day's sales and projections. Then every week the staff newsletter, called the Relay Station, reports on activities such as sales, fieldwork, customer comments, and technical developments, and gives staffers a chance to share how their operations are going. Those two regular communications help reduce anxiety tremendously. Or, if the news is bad, they create anxiety, but in a way that's focused and helps solve the problem.

A virtual start-up isn't likely to find too many models or employees experienced in this way of doing business. AgInfoLink's chief financial officer, Henry Scheil, found operating virtually to be "one of our greatest corporate challenges." But working through the kinks and the resistance will likely pay off when you see how quickly your start-up operation has the reach of a global entity.

William R. Pape cofounded VeriFone Inc., in 1982, which was sold to Hewlett-Packard in 1997. He was VeriFone's first chief information officer and a senior vice-president. Pape has been operating virtually since 1978.