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Meat Space Still Matters In A Web 2.0 World

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, Mass., or Mountain View, Calif., 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 also is 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. Some 54% of U.S.-based VC companies do not have foreign investments, and 74% 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% 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.

It's important for enterprises to recognize the limitations of Internet-mediated communication and collaboration. While the Web has transformed the way we work, there's still no substitute for being there.

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