The #1 Mistake Many Startups Make When Managing Growth. Remember the Garage?

In a galaxy far, far away…

In the beginning, most start-ups follow a certain pattern:

  • Inspiration leads to the “killer” idea
  • Bootstrapping
  • Sourcing Capital
  • Recruiting an A-Team
  • Product Development
  • Building an Infrastructure
  • Iteration
  • Managing increasing Costs
  • Growth

There are many versions of the story but in my own career and listening to the anecdotes of many other entrepreneurs, most folks like you and I have sang and are singing the same song.

Boot Strappin’ 

In the early stages, everyone including founding members are wearing many hats.

  • You may be starting your empire from the confines of your garage.
  •  You may be able to delegate certain tasks to your founding team of two.
  • You may want to hire or outsource but the cost benefit may not make sense at this time.
  • This may not be most efficient but it’s cost effective.

Everyone is burning the midnight oil to get to market as quick as possible and the Agile Development model is adopted. Your development team is furiously taking feedback and the products and business models evolve. You and your team have proof of concept now and the future looks bright.

Your first two revenue models don’t produce as you hoped they would, so you scrap them and finally find a revenue model that works for you.  Soon, the revenue grows from a trickle to a stream and it looks like it will be a steady stream. Life is good and all the blood, sweat, and tears seem to be paying off. Team morale is high and even the instant noodles taste infinitely better!

You Did What With My Money???

Depending on your cash situation, this may be the time you seek additional funding. You’ve proved your concept, generated revenue, and now you’re looking to scale that model. I won’t go into valuation models, capital structures, or optimal equity distribution, but another major attribute that most investors want to see is fiscal responsibility.

When I talk about fiscal responsibility, I don’t mean extreme conservatism, as say an accountant would, but more of a prudent balance of risk, reward, and stewardship. There will be a certain amount of cash burn related to the Agile Development process as some features will be pushed to the side or scrapped all together, but cash burn that locks you into long term contracts that increase your fixed cost structure that may not contribute to the business are things to look out for. This may be one of the most overlooked aspects of the start-up life.

Pre-Y2K Hysteria

In the early go-go internet days, many companies got to this stage and proceeded to secure prime Class A office space with room to spare for their burgeoning venture only to find out that they over estimated the growth that they would experience. This left many start-ups in a precarious position, after all, most start-ups aren’t experts in commercial real estate.

There are many more practical options for office space nowadays. We will always have the garage to start out in, move to a shared or co-working space, perhaps graduate to an executive suite space, or look for a screaming deal on a sublease space offered by perhaps some of the less fiscally prudent start-ups out there.

Your Space Says A Lot 

Many successful entrepreneurs look fondly on their days of bootstrapping:

  • Remember when we had to float all our credit card balances to pay for the gear?
  • I miss those days all 5 of us were huddled on top of each other in the basement working 14 hour days.
  • It’s lunch time, 7-Eleven or the Gas Station?

Another common thread among many successful entrepreneurs is balancing image from reality. From the type of marketing spend to the type of office they lease. Don’t be fashionable, be fundamental. If you just raised money, it can be difficult to justify contracting for prime office space when you’d rather hire more people to get you to your goal.  Not only will your investors appreciate this, so will all other equity stakeholders.

For all you start-ups out there, the sublease space may provide you with the most flexibility and lowest cost to leasing office space. Unfortunately, this market is underserved and is sometimes difficult to find. Many brokers also aren’t very helpful in this type of space search as they have to put in the same amount of time as a normal search but only get paid a fraction of their commission rate, on a sublease.

Craigslist is the most common place to find the smaller sublease spaces out there and they do a great job of aggregating those spaces. However, as many of you are familiar with, the craigslist experience is not for everyone, especially those that don’t have much time to spend on sifting through endless ads. Let alone setting up tours and other logistical tasks.

As you can guess, I work for a start-up called OfficeSpace.com and we focus not only on larger spaces, but smaller spaces and sublease spaces as well. We are looking to solve the small and sublease space problem and we’ve launched our Beta in Portland.

Stay tuned for my next article, where I will share an example of another start-ups’ experience. All the best to the brash, brave, and entrepreneurial companies out there. All comments are welcome!

Image credit: http://creativehomeoffices.com/wp-content/uploads/2012/02/Basement-Before-e1328914683809.jpg

Image credit: http://www.lifeknowledgefm.com/what-is-bootstrapping/

#CRE a Little Spam Sandwich For Everyone?

Social Media is all you hear about these days and Commercial Real Estate is catching this wave.

But I have to ask, why does it seem that the twitter #CRE is a regurgitation of other’s breaking news retweeted to insure that the headline has been reinforced subliminally?  Is anyone really responding to the new “hot” listing via twitter? Is this just the nature of twitter? or are we taking the proverbial ‘first steps on the moon’? Am I just missing the point?

I especially love some of the well respected tweeps start talking about the spamminess of #CRE yet they too are contributing their share of 150 or so retweets/day.  I guess we are all guilty of this and the sense of lost opportunities by not getting on the social media express is tough to ignore.

I certainly don’t have the answers but would love to hear from you!

PDX Small Space Success!

Shared Photo Studio

With our recent Beta Launch of OfficeSpace.com, we would like to share a successful lease story.

Timeline:

  • Jan 31, 2012, space was fully leased.
  • Feb 1, 2012, received a 30 day notice from her existing tenant.
  • Feb 1, 2012, posted  her listing with OfficeSpace.com.
  • Feb 2 to 13, 2012, received her leads & tour requests from OfficeSpace.com.
  • Feb 14, 2012, found new tenant, signed a lease, move-in date 3/1/2012 and no lost revenue days!

Client’s comments:

“I got significantly more inquiries through your site than I did via Craigslist or posting flyers, so I’m definitely happy with the experience!” – SLG

Is Portland LEEDing the Sustainability Race?

"General Automotive Building Portland Oregon LEED"

We all hear about the ‘Greening’ of our office buildings across the country and Portland, Oregon, is certainly no exception. With more and more national press spotlighting Portland, Portlanders are justifiably proud of their majestic city.

The General Automotive Building located at 411 NW Park Avenue, in the heart of the Pearl District in Portland is one of many local showpieces for the core principles of Green Design and Construction. The building is striving to earn LEED Platinum Certification, which will further reinforce Portland’s reputation as the nation’s leader in sustainable urban development.

This remodel of a 1930s building blends the charm of tradition and sustainability of a modern, efficient Green Building.  The remodel allows for increased water and energy efficiency, and a superior work environment in terms of indoor air quality, natural light, design and construction quality. The design team at ConoverBond worked with the existing structural systems, column bays, operative windows and the original brick walls to preserve as much of the original structure as possible.

This is one example, but would love to see and hear from you…what are some of your other favorite green building remodels?  Post your comments here or check out our Pinterest Boards and let’s reinforce the LEED!

Rates Don’t Improve, but Vacancy Rates Show Good Growth in Seattle Office Space Market

The year ended on a high note for the Seattle office space market in 2011.  Net absorption for 2011 ended just over 1.6 MM sq.ft, almost double the net absorption for 2010.  2011 also marked the best year since a high of 2006 that ended in a little over 3 MM sq. ft of net absorption.

While the overall vacancy rate for the Seattle market didn’t change dramatically over 2010, there is a good story once you dive into the details.  We ended Q4 2011 with 14.8% vacancy in the Seattle office market compared to 15.3% in Q4, 2010.  And while the changes don’t appear significant, there’s a story going on in the Downtown submarket.  Last quarter, several significant leases were closed with Amazon taking 386,000 sq. ft. and a total of over 800,000 sq. ft.  The impact of these leases definitely showed up when we looked at the Downtown area vacancy rates which dropped to 12.9% this last quarter compared to 15.1% in Q4 2010.

Average rental rates remained fairly steady for all of 2011 ending the year at $25.80 per sq. ft slightly lower than the $25.89 in 2010.  However, as the supply and demand paradigms shift due to lower office space availability, particularly of larger spaces in the Downtown area, we would anticipate this to have a positive impact on rental rates.

OfficeSpace.com Launches New Service in Portland, Oregon

Also offers landlords and brokers free listing capabilities, real-time tour booking and social media integration

SEATTLE, Washington – January 24, 2012 – OfficeSpace.com today unveiled a new service designed to arm tenants with the information needed to help them make better real estate decisions for their businesses. Launching first in the Portland, Oregon metro area, the new site provides businesses with a free and powerful search functionality to help them find available office space that meets their search criteria. OfficeSpace.com also helps tenants-to-be, obtain in-depth information about properties, book tours and ultimately provides the ability to close their lease transaction online.

In addition to providing time-saving tools and resources to tenants, OfficeSpace.com also offers landlords and brokers the ability to post their listings for free on the site, and the ability to set their availability for tours using a real-time calendar where they can even provide tours to multiple tenants simultaneously.  OfficeSpace.com will be providing a valuable service, connecting tenants to landlords and brokers. 

OfficeSpace.com also makes Social media integration with Facebook, LinkedIn and Google+ easy for both landlords and tenants. For example, tenants can read reviews of other tenants in the building and share comments with each other on the spaces that they have toured in order to help keep organized. Landlords can leverage social media integration by sending out new properties to their networks from OfficeSpace.com with one click of their mouse.

“We understand that entrepreneurs and business owners are busy people and they want to start their research online, in their limited spare time, before committing to taking the next step, ” said Susie Algard, OfficeSpace.com’s CEO. “With OfficeSpace.com, tenants can access more information instantly and for free.”

While all size businesses can benefit from leveraging OfficeSpace.com, tenants of smaller spaces can benefit disproportionately as most commercial real estate brokers avoid working with these folks altogether. OfficeSpace.com is focused on disrupting the current business model in commercial real estate so that tenants of all sizes do not need to depend on brokers for all of their office space needs. The new service launches today in the Portland Oregon metro area and plans on serving several additional cities within the coming year.

About OfficeSpace.com

Experienced Internet entrepreneurs Susie Algard and Alex Algard purchased OfficeSpace.com in late 2010.  Frustrated by some of the trials and tribulations of their own experiences trying to find office space for companies that they were involved in, they decided that it was time to make a change in the commercial real estate space. Susie, CEO of OfficeSpace.com, was previously a senior executive and founding member at WhitePages.com, a top 30 Internet property.  Alex is the founder and chairman of CarDomain Network as well as founder and CEO of WhitePages.com.

OfficeSpace.com also operates one of the leading commercial real estate marketing and analytics services in Seattle, Spokane, Denver, Minneapolis, Cincinnati and Columbus.

Check out the site at www.officespace.com.

Half of Our Tenants Think They Have to Pay a Broker Hourly, Like an Attorney

Tenants use OfficeSpace.com to do their own space searches and learn about the commercial real estate market.  These are typically business owners and entrepreneurs.  We talk to them regularly and one thing that always amazes us is that about half of our tenants looking for space believe that their broker will charge them an hourly rate, like an attorney.

When we hear this, we explain to them that actually, there’s no out of pocket expenses and that the landlords pay out a commission once a lease has been signed.  However, since we know what the downfalls are with respect to skewed incentives because the landlord is paying commissions to your broker, the question arises, why don’t we make a change and properly align clients interests with broker incentives?

What would happen if this were the norm?  Would deals get done faster because the tire kickers would go away and we’d work with only the serious and motivated?  Would tenants pay less in rent, receive better terms or get a bigger TI budget because the landlords wouldn’t have to pay the tenant brokers commission?

Would this reduce a lot of frustration that brokers have when a tenant just goes silent.  We’ve experienced or heard of the horror stories of the broker who is left at the alter.  In the real estate world, this means that the broker diligently worked on a deal for the tenant:  the tours are done, negotiations concluded and a deal is reached.  And just when the lease is supposed to be signed, the tenant disappears, just goes silent.  At least in this scenario, the broker would get compensated for their work which seems fair.

What do you think?  Why isn’t the industry moving this way, especially since some tenants already think this is the way the industry works.

How Much Red Before Going Green?

In the days of “Occupy Wall Street” where social media and the internet showcases the delivery of various political and social viewpoints to the masses at the speed of thought, never before witnessed in our history, we are still slow to push forward some initiatives that would greatly help this country.  This occurred to me while reading a very interesting post from a Sustainability Roundtable member http://www.sustainround.com/category/corporat-leadership/sustainability-initiatives/.

I am talking, in particular, about Green Building and Sustainable Development in our cities.  This notion of incorporating green building practices in retrofitting and new building developments has been bantered about, and vehemently debated throughout the country for over a decade and yet we are still at the beginning stages of a wholesale build-out.

I can’t help but be confused by all the differing reports from industry experts regarding the true cost of building green.  The extremely conscious city of Portland in the beautiful state of Oregon is no exception to the differing opinions on how much green initiatives to be incorporated into the development plans of the city.

No doubt, on a national level, the awareness is growing and some states and local municipalities have already implemented Energy Performance Regulations requiring various levels of disclosure and reporting.

The big question in my mind is, where is the bottleneck that is preventing this renaissance?  There are many incentives and subsidies that help diffuse the pain of high capital costs, as well as, the recurring operational cost savings from a “greener” building.

In the latest Sustainability Roundtable: Management Best Practices http://www.sustainround.com/wp-content/uploads/2011/08/SRInc_SRER_Leased-Space_ExecSumm.pdf

publication, they outlined three recent trends:

  1. The most respected statistically normalized studies consistently demonstrate that green buildings create value through leasing (5%) and sale price (5-7%) premiums.
  2. When consultants are not overpaid, green buildings and, specifically, green building certification, are in fact far less costly to achieve (0-2% additional cost) than many real estate professionals assume.
  3. There is increasing recognition of the health and productivity benefits of green buildings.

Another key takeaway from the report stated, “leading companies are moving to a more sustainable leased space to lower operating costs, reduce environmental risks, increase productivity, improve recruiting and retention, implement corporate sustainability mandates, and enhance brand and reputation.”

It all sounds great but I am neither a civil engineer nor a city planner, so where is the Beef?  What else needs to be done in order to motivate a faster change?  Your voice is welcome!

Is Re-founder Even a Word?

is Re-founder even a word?I’m not a stickler for grammar, but I want to know if this at least makes sense.  A quick search for re-founder brought me to dictionary.com’s definition – “one who refounds” but “refound” has no definition.  Okay, not so helpful but then I stumbled upon linkedin and bingo, someone who has the title refounder, and that’s what I’m talking about.  I may find myself explaining this to people more often than I want, but basically what this means for me is that even though OfficeSpace.com is a 15 year old company, we’re back in start-up mode.  That’s really the most concise way I can think to explain what we’re doing with this “new” company.

We’re taking a good look at our business and our opportunities for growth.  Evaluating the office space market, there are great resources for brokers, landlords and property managers but limited options if you’re an actual tenant looking for space, even fewer options if you are a tenant looking for smaller spaces.   Our goal is to change that and create an effective marketplace for both tenants and landlords/brokers.  We’ve been busy at work over the past year, our small team of 7.  Stay tuned, we’ve got some exciting new stuff that should launch in the early part of 2012.

Susie Algard, re-founder.