Office costs can be a major hurdle for entrepreneurs, but these days more startups are finding rent-free workspaces.
While accelerator programs have long offered this perk to startups, usually in exchange for equity, entrepreneurs are finding other types of free space available, says Steve King, partner at Emergent Research, a consulting firm focused on small business in Lafayette, Calif. But, he adds, “the gravy train will end at some point,” usually after a couple months to a year, so startups should be looking for alternative space.
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Here are three types of workspaces that entrepreneurs can get for free:
1. Community-Sponsored Space
To encourage local economic development, chambers of commerce in some cities, including Durham, N.C., College Station, Tex., and Des Moines, Iowa, have been working with local government and businesses to entice entrepreneurs with free workspace the last few years. "We are going to see a lot more of these free spaces because the world of economic development agencies have just discovered these spaces and understand that it’s a powerful tool," King says. Programs typically require entrepreneurs to submit a business concept and show its growth potential. The programs are competitive: Last year, Durham’s Startup Stampede selected 11 startups from 78 applications, offering them two months of free office space.
Joel Sadler was one of the chosen when he launched Bound Custom Journals, a company that sells customizable notebooks. "Having physical office space was tremendously legitimizing," says the 31-year-old, who spent two months working from the lobby of a defunct credit union as part of the program. Meeting with accountants and attorneys in the free office space downtown rather than at his home, he says, "made a big difference."
Even though Startup Stampede is an incubator-type program, don’t expect it to function with strict deadlines for achieving entrepreneurial milestones, Sadler says. There was little accountability, he adds, and many of the small businesses using the free space didn’t participate in events to share advice with other entrepreneurs. "There were lots of times where we would have pitch practice or other group check-ins and only half the participants would show," Sadler says. (Startups are not required but strongly encouraged to participate in group events, given the fast pace of the two-month program, according to Adam Klein, who helped launch Startup Stampede.)
2. Co-working Space
Co-working spaces offer an office-type environment free of charge on a first come, first served basis, and most are meant for solopreneurs who would otherwise be working from their couches. Such spaces include Wix Lounge in New York and San Francisco; Dogpatch Labs in New York, Cambridge, Mass., Palo Alto, Calif., and Dublin, Ireland; and Gangplank in Phoenix. Companies interested in targeting entrepreneurs run the co-working facilities, and some have an application screening process. Dogpatch Labs, for example, is funded by Polaris Venture Partners, a venture-capital firm that gets a first glimpse at startups that use its free space. And Wix.com pays for the Wix Lounge workspaces, where entrepreneurs are encouraged to use its free platform to develop their websites.
Abby Ziff, co-founder of Beauteeze.com, a New York-based spa and salon appointment-scheduling site, has worked at Wix since last January and likes the opportunity for informal networking with graphic designers and app developers. The shared space also provides her with a routine and keeps the 33-year-old from going stir crazy at home. "You are still waking up, going to the office and putting on makeup," she says.
But be ready for a less-than-conventional environment. Most co-working spaces are set up with large tables, making it tough to make phone calls or hold meetings because of the noise level, says Ziff, who schedules most of her calls in the morning while she’s still at home. Another downside: You can’t easily add employees because of limited space and lack of dedicated desks. "It’s really a place where you go with one person or by yourself, but once the company gets bigger you need to move," Ziff says.
3. University Space
To spur entrepreneurship on campus, such universities as Purdue University in West Lafayette, Ind., and the University of California at Berkeley are offering free office space through on-campus incubator programs. Applicants must present a viable business plan to qualify for space, and most university incubators require that at least one member of the startup be a student or alumnus.
Some entrepreneurs say it’s definitely a set-up worth pursuing. Being affiliated with a university-sponsored space brings a certain cachet to your business, says Tucker Hutchinson, 27, cofounder of GoOverseas.com, a website for people looking to study, teach, volunteer or intern abroad. “There’s a certain cachet with being affiliated with Berkeley,"he says. What’s more, he and his two coworkers have recruited interns from the university and tapped into the knowledge of both business and engineering professors who regularly visit the space.
But the quality of free office space can be hit or miss. When GoOverseas started up, it was in a windowless basement with a rodent problem, Hutchinson says. Now, it has moved to a penthouse office that was previously an Intel Corp. research lab and is leased to the university. “We are really lucky to take advantage of that,"says Hutchinson, whose company has worked from the free space for more than a year.
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