Startups in San Francisco are tasked with more than just navigating their own competitive space. As often the second-largest cost center for companies, real estate poses a whole new set of challenges for many early stage startups. I set out to learn from founders who have “been there, done that” and hear about the thoughts shaping their decisions. This is the first in a four-part series that attempts to bring you their stories, along with relevant market analysis. #1 – A Sweaty, Summer Hacker House is Fun… Until It Isn’t. Founders in the Bay Area lead the world in strategic thinking, and using office space is no different. People.ai CEO/founder Oleg Rogynsky took a creative approach to attracting talent during the early days, posting his hacker-house on Facebook as the perfect place to live like the guys from “The Social Network”. He shares that his first hires “totally bought into the dream”, and work excelled. Until summer rolled around… As temperatures rose, they found themselves living out the real-life version of Gilfoyle working in a futile attempt to cool off “Anton”. People.ai survived that sweaty summer, went on a hiring spree and made moves for SOMA. Founders of early stage startups often pride themselves on their ability to maximize the value of every inch of floor space. And so they should. Without the luxury of a funding “cushion”, founders are forced to think outside the box. Or, as in the case of Blueboard, inside the closet – no, literally… Founder approved tips on how to be strategic with your space: Wallpaper a closet space to create the most stylish of built-in call booths. Make sure you are zoned right. No one wants to be evicted halfway through beta testing. When your work is life and life is your work… Look for a live-work space. A single dinner table with bench seating fits more people and brings you closer as a team. Keep an ear out for failing startups. They often need to sublease space or at least sell some monitors. #2 – Don’t Quit Your Day Job. With so many hats to wear, founders need not wear that of commercial broker. Average rental rates are in the low $70s/Sqft/year in San Francisco. That’s over twice the national average, so stakes are high. There’s an industry saying: “San Francisco real estate costs more and takes longer.” Most early-stage startups I spoke with admitted they started out reactive instead of proactive when it came to making real estate decisions. What I found was that given the benefit of hindsight, many who went it alone certainly wouldn’t again. “In the beginning, I didn’t really have an appreciation for the process. I assumed it would be a much more standardized thing. Our broker was able to negotiate way more than I ever thought possible. I would have known to negotiate on some things, however having him as an advisor was great. He helped us understand where to push on some things and where there was no wiggle. I think this was really important. From a founder’s point of view, you need to consider: What is your time best spent doing? I felt it was best served managing the process and overseeing its direction, not spending countless hours looking online, making calls and looking at spaces that may not necessarily have been a good fit.” Drew Dewalt. COO/Co-Founder @ Rhumbix #3 – “That Escalated Quickly.” Even Ron Burgundy would be shocked by the speed of the San Francisco office market. In more ways than one, it’s a dynamic beast. Many early-stage founders today have known nothing other than sky-high rates, entitled landlords, and limited choice. That’s exactly what Taylor Smith @ Blueboard found three or four years ago, when “Things really got out of hand fast.” Smith recalls, “Even ‘sleeping on it’ can prove too lackluster in this market. Demand meant that things moved a lot quicker than we originally expected. [Office spaces] came on and off the market really quickly!” I wasn’t surprised to hear several founders tell of the moment they became acutely aware there was no time to be without a plan. In such a dynamic market, it is important to remember, as fast as space is filled other spaces empty. This reinforces the need for three things: 1. A tenant rep broker that has access to off-market opportunities approaching, who has done this before. 2. A growth plan and space strategy that enables proactive, and not reactive decisions to be made. 3. A person to help with #2 – See #1. #4 – Everyone Needs a Place to Call Home. “Offering an inspiring, functional and flexible office space is one of the most critical and often overlooked elements to nurturing a highly productive employee base, attracting future talent, and developing and maintaining a positive company culture.”– Jason Kalira, Head of Finance and Operations @ BrightFunnel Company culture can be viewed as your team’s “user experience”. Before setting out on an office search, successful founders ask themselves: What is the employee experience we’re trying to create? Keenan May of Coworkr explained how we are seeing a progressive shift toward reinforcing that it is, in fact, ok to work remotely. He says fully remote companies often struggle with creating a company culture based on collaboration, communication, and creativity. StudySoup, RecruitLoop and Coworkr, are some that have made it work. They suggest: Have your company processes clearly laid out. Adopt a strong results-driven approach. Utilize tools that allow for efficient communication. Increasingly, startups are adopting a liberal, semi-remote option. But whether it be a loose WFH policy, or a concrete “3 days in; 2 out” schedule, founders I spoke with agreed on the importance of a home-base location. “There is nothing like getting your team in a room and having a good brainstorm session over a white board.”- Bryant Hawthorne, CEO @ Spotted Places #5 – It's Not You… It's Me. With the rise of the sharing economy came the notion that space too can be utilized in a more efficient, collaborative manner. San Francisco has one of the highest concentrations of accelerators, hacker-houses, and incubators in the world. While most offer a short-term solution, co-working spaces are often the next step for many early stage startups as they begin to hire staff. The vast majority of founders I spoke with had far more positive than negative experiences in co-working environments. Their elasticity is important during periods of growth, or when scaling back the workforce. But at what point do founders generally break it off with co-working spaces? People.ai realized that “The pay per desk model breaks at about 10 desks. It becomes much more expensive than even your own office space.” An economic driver for Umbo in considering a move out of its live/work incubator type space was the need to portray a sense of professionalism to potential investors. Unfortunately, like many relationships, that of the startup and co-working space reaches a point, whether for economic, cultural or even IP security concerns, where staying isn’t in a company’s best interests. At that point, it’s time to say, “It’s not you… It’s me.” Content Provided By Jack Seymour jack.seymour@transwestern.com The Evolution of REX. Prototypes, Seed Rounds, and Beta. And it started with a Tweet. How about a Halloween costume contest #CRE! I bet someone is dressing up as @dukelong pic.twitter.com/yBkBJPPtTH — Matthew Smith (@CREMattSD) October 13, 2017 And then it escalated. Ok, officially this is ON... Oh, the things they do. Want a fascinating take on the legal side of brokerage? Would you even attempt to cross the line? How do you know when and if you are? What if it's happening today? You might be surprised. All this and so much more... The issue of conflicts of interest between parties exists in a variety of industries. Ethics rules prohibit a single lawyer from representing competing sides in the same transaction. It’s common sense. You can’t ensure fair and equal representation...