[e1ven]

I've found that for the design phase of projects, it's VITAL to be in the same room.

There are tools to replicate so many things- You can use phone calls, and shared whiteboards.. But they are half-way measures- They don't let you work against each other, or argue back and forth easily, making changes to a design..

I've worked with friends in other states before, and at times, we'd struggle for a design problem for several weeks, before I flew down and we hashed it out in one all-night session of pizza and caffeine.

If it's pure code to spec, perhaps you'll be able to get away without out, but even then, working in the same place ensures that you stay friends, and that you can talk over a design while going out for lunch.

If at all possible, I strongly recommend working in the same place.