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Startup Fills Unused Office Areas With Like-Minded Tenants

October 21, 2013
URL: http://www.entrepreneur.com/article/227896

Ever want to see a startup's momentum slow to a crawl? Watch its founders search for their first office. David Mandell, CEO of Boulder, Colo.-based PivotDesk, says he sees too many people spend too much time looking for space and haggling with landlords. PivotDesk, itself a new startup, wants to mitigate this speed bump by playing matchmaker for office space, helping fledgling companies find the right digs by connecting them with other businesses that are locked into long-term leases and have floor space to spare.

"Commercial real estate typically forces you into a three- to five-year lease, but a startup doesn't know how big it will be in three months, let alone three years," Mandell says. "We take the risk out of a lease by giving a company that signed one the opportunity to gain revenue from any excess space, and then take it back when it needs to expand."

Companies pair up through PivotDesk's website, with "hosts" and "guests" providing details of their business, their culture and the office environment they prefer (quiet and professional, or loud and informal?). The agreement between host and guest renews automatically every month until one party decides to opt out. PivotDesk takes 10 percent of the monthly license fee.

The service currently pairs officemates in New York, San Francisco and the Boulder/Denver area; expansion to Boston, Seattle and Portland, Ore., is planned by year's end.

After Boulder-based startup Simple Energy moved out of its incubator space in 2011, the team of six, who wanted a downtown location, selected a massive 5,000-square-foot space with a three-year lease. The company, which uses social media and apps to promote energy efficiency, turned to PivotDesk to rent out its back offices. So far five different startups have moved in before moving on to bigger spaces themselves, and Simple Energy, now with 22 employees, is gradually filling the empty offices. "PivotDesk found us people we wouldn't have met otherwise, and when we had much more important stuff to do," says CEO Yoav Lurie.

Another key benefit: PivotDesk matches often result in collaboration. "I hear so many companies saying they want this location, those amenities, exposed brick, whatever, and my response typically is, 'No, you need to find the most productive, collaborative space to grow your business,'" Mandell says.

Case in point: VerbalizeIt, which offers on-demand access to human translators via phone or web browser, used PivotDesk to find space in New York's hip Chelsea neighborhood when it moved from Boulder last August. CEO Ryan Frankel says one of VerbalizeIt's goals is to create brand awareness through video marketing; conveniently, one of the other tenants was able to help Frankel's team zero in on how to do it. "Without them, it would have taken us a lot longer to learn those ropes," Frankel says. "So it's not about just paying rent, but what can you do for each other."