Dan Graham never expected he’d be looking for real estate to house a business other than his own.
The entrepreneur launched BuildASign.com, an online custom sign printing business, in 2005. The company’s ranks soon swelled to 300 employees ; revenue is expected to come in around $90m in 2015, up from $70m last year. In his spare time, Graham mentored other entrepreneurs.
Supporting other startup founders who were trying to launch new businesses from coffee shops or their kitchen table gave Graham an idea. What if there was a dedicated office space for them to go while they readied their companies for launch and beyond? He began looking for such a place, and soon found one not far from BuildASign.com’s headquarters in Austin, Texas. In January, Owen’s Garage officially opened its doors.
With 15 startups now populating 6,500 sq ft and paying between $150-$400 per month to rent space in Owen’s Garage, Graham says his first order of business is taking care of people.
“It’s not a money maker for me,” he says. “The primary goal is giving [the entrepreneurs] one less thing to worry about.” One of those things is a professional space to see clients and confer with staff.
Collaboration and camaraderie are other reasons why many choose the co-working route. A study by Emergent Research predicts that globally, co-working membership should grow about 40% per year to pass 1 million members by 2018. In a global survey of over 2,700 co-working facilitators, seven out of 10 claimed they couldn’t keep up with the demand for desk space. 60% of existing facilities were on track to expand last year, according to recent data from Desk Mag.
This explains why Graham didn’t think much beyond his initial good intentions. Without a clear strategy, he recalls that challenges arose immediately, from dealing with a leaky roof to having the Wi-Fi blink out. Though co-working spaces provide peace of mind from the worry of who might be looking over your shoulder, Graham points out that when businesses are elbow-to-elbow, other problems arise.
Good vibrations and negative undertones
This was what happened to Kurt Rathmann, CEO of ScaleFactor Partners, one of the first businesses to join Owen’s Garage. With his own accounting and office operations business just a year old, Rathmann was more than ready to move out of his living room and into a more professional environment. At first, the flexible terms and the ability to create partnerships with the other companies working there were huge perks, Rathmann says.
But as ScaleFactor Partners grew, Rathmann says preserving his startup’s culture was a concern, because, as he puts it, “you don’t get to choose your neighbors”. A communal environment can be challenging, particularly when noise and activity from other tenants becomes too distracting.
Entrepreneurs are also prone to “high highs and low lows”, says Rathmann – sometimes in the same hour. ScaleFactor Partners has logged steady growth since its inception, according to Rathmann, but other businesses in the space haven’t been as lucky. Rathmann says he sometimes felt that negative vibes permeated the common areas like the kitchen, as well as the open office space. “We felt this judgement from a lot of folks that we were disruptive,” he says.
Rathmann says he worked around this by having meetings in closed rooms and constantly reiterating to the growing staff that they were working hard to eventually move into their own space. By the time the staff grew to 16 full-time workers, Graham reports that ScaleFactor Partners moved out of the more communal space and into another side of the building. “Now we have a door,” Rathmann says. “But we are still part of the community.”
Brand visibility vs visible distractions
Kyle Rosenbaum, founder and CEO of the marketing and branding agency Kyle Arnett, originally started using the co-working space WeWork as a “virtual member”, paying to use the global office sharing startup on an as-needed basis. (The Guardian has been a WeWork tenant since moving its US newsroom in June.) But as his agency started to grow, Rosenbaum realized he needed to establish more of a presence, as well as have a place for his contract workers to gather when they were working on a project together. He now pays around $2000 per month for a space big enough to accommodate himself and three colleagues.
Rosenbaum says he is impressed by the amenities at WeWork, like the conference rooms, which are integrated with the latest AV equipment. “Clients are impressed by the technology in meetings,” he says. But he admits he hasn’t availed himself of many of the other perks, most notably access to health care or human resources, which has helped WeWork climb to a $10bn valuation.
Rosenbaum says that the rapidly growing coworking community harbors challenges amid the amenities such as meditation rooms, free beer on tap, and karaoke – namely getting acclimated to new neighbors. Rosenbaum says that there are challenges amid the meditation rooms, free beer on tap, and karaoke, namely getting acclimated to new neighbors. A veteran of three different WeWork spaces in Manhattan, Rosenbaum says the energy changes depending on the location and the tenants. “There is always a new class of startups coming in at the beginning of each month,” he says, adding that no one at WeWork is masterminding the complex choreography required to put likeminded businesses and personalities closer together. (A company spokesperson from WeWork declined to make anyone available for this story.)
Coming from a more formal corporate environment at Nickelodeon, Rosenbaum says he experienced a culture shock at WeWork. Though he maintains his company is pretty casual, other entrepreneurs and freelancers who share the space are even more lax. “At the end of the day, this is a business, and real things need to get done,” Rosenbaum says. “Some people are there for the fun – they focus on showing off as opposed to showing up.”
For Rosenbaum, it took moving to WeWork’s location in Manhattan’s financial district to change the dynamic. “There’s a much stronger sense of camaraderie,” he says. Desk Mag’s recent survey shows nine out of 10 professionals left a poorly rated co-working space within 12 months.
The whims of Wi-Fi and other pitfalls
Both Rosenbaum and Rathmann agree that losing an internet connection is an inevitable problem for members of a co-working community. For Rathmann, a four-hour internet outage could cost him as much as $3000, a calculation that he says he didn’t make initially.
“We went in blindly and hoped it wouldn’t be an issue,” he says, mainly because he was one of the first tenants and didn’t know of any data connection problems.
Since then, Rathmann says he’s had to have several conversations with TimeWarner, the internet service provider, to ensure there was a proper redundancy installed to mitigate downtime. Now that his company is installed in a dedicated space at Owen’s Garage, Rathmann says he’s also invested in a dedicated company network. “It doesn’t completely solve the internet going out, but we isolated ours to handle our number of users,” he says.
One thing Rathmann did consider from the beginning was privacy and security. ScaleFactor Partners handles accounting records for a number of small businesses, so it’s important the data remain secure. Because of the communal space and the potential threat of theft, Rathmann says the five CPAs on staff never leave their laptop in the office. Any paper documents are locked in a fortified filing cabinet with multiple locks. Rathmann says that he had to implement a checklist system for his staff to fill at the end of each day to track who was responsible for the lockups.
Though there is a temptation to move out completely to maintain control his own space, Rathmann says the co-working space is less expensive than signing a three-year lease on a commercial space.
For now at least, flexibility trumps any other frustration.
This article was written by Lydia Dishman, for theguardian.com on Monday 28th September 2015 21.51 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010