Leasing a trendy office with exposed ceilings or hiring one more engineer?
Those are the kinds of trade-offs entrepreneurs are making during this tech boom.
I was interested in how the space wars for startups differ today from the dot-com era. The new startups, like their forefathers, are reinventing the workplace even as they fight for survival. But some key differences are apparent.
Then, companies boldly signed long-term leases for large office spaces, confident that they would soon become humming workplaces with years of success ahead of them. When the funding dried up, many were stuck.
Now, space is not an afterthought but a key element to a firm and its business plan.
For one thing, entrepreneurs are in general more cautious and strategic about timing their physical expansion with funding rounds or product launches, commercial real estate brokers say.
Second, new business models for leasing work space have given startups more flexibility. Now, founders often go from working at a kitchen table to nabbing a few desks on demand with Airbnb-like services to moving into a communal work space, all before signing their own lease.
Shared “co-working” offices, which started appearing in 2005, are now in most major cities, said Liz Elam, owner of one in Austin, Texas and executive producer of the Global Coworking Unconference Conference, which will be in Berkeley next month. “Nobody wants to give you a short-term lease,” said Elam. Startups in co-working spaces can meet with clients and get to “look more legitimate than they are.”
The four employees at Cloudstead work remotely in the East Bay and rely on an array of cloud-based productivity tools to collaborate.
When they need to meet, whether with a client or with each other in front of a white board, for example, they reserve a spot with Port Workplaces, a co-working firm with three Oakland locations.
“This gives us a tremendous amount of flexibility,” said E.J. Blumberg, the firm’s founder
Still, the location of an office and amenities such as a kitchen have never mattered more. For startups, the space itself is often its calling card, part of the recruiting pitch to attract talent. That may mean adding something novel, such as a climbing wall, an indoor go-kart track or something as basic as adjacent outdoor space for fresh-air thinking.
“Tech companies feel a ton of pressure to have a great place to work, even the small ones,” said Anthony Shell, a vice president at Avison Young, a commercial real estate firm.
“Space is one of the things you can do to offset yourself from your competitors,” said Kelly Dubisar, a senior associate at Gensler, the global design firm.
But young tech companies with tight finances can’t offer their employees the extravagant perks of a Googleplex or an Apple Spaceship. Venture backers remind startups to keep their monthly burn rate manageable, lest they overspend on overhead costs before getting their great new product or service off the ground first.
Complicating matters, it’s a landlords’ market. In San Francisco, some won’t even give tours of office spaces to prospective tenants unless they are prepared to sign a seven-year lease, Shell said.
That makes it hard for some firms to find the right startup office aesthetic. Among the desired elements are an open-planned space with natural light, a variety of sizes for meeting rooms and exposed concrete, brick and wood over sheetrock. And most importantly, a kitchen — because food fuels creativity, or so the theory goes. At Impact Hub Oakland, a co-working space in a revitalized brick building, workers sit at desks and tables or stretch out on couches. There are daily events as well as weekly potluck lunches and cocktail parties. Dogs mill about.
The trade-offs can be tough. It was a client of Shell’s who chose not to pay extra for exposed ceilings in order to save that money for an engineer’s salary for a year.
In the two years since co-founding his firm, Noah Abelson, chief executive of ShareRoot, a mobile marketing firm, has moved the company three times.
Now, with 11 workers, the firm occupies a west Berkeley space abandoned by another startup that fell on hard times.
Abelson says he feels lucky to have windows, vaulted ceilings, a shower, a kitchen and room to add a dozen more people.
But the company is a few miles from a BART stop, one downside. And there is no gym. “We want to offer gym as a perk to our team members,” he said.
He may have to move again to get that.
Contact Michelle Quinn at 510-394-4196 and mquinn@mercurynews.com. Follow her at Twitter.com/michellequinn.
