10 ms·

The outlook for Bay Area startup space in 2017

86 points by jtbed 10y ago

overcast 10y ago
Spending that much on rent for a starting company, is just completely ludicrous.
- api 10y ago
  I've said for a long time that if investors insist on only funding Bay Area companies they should just skip the middleman and cut checks directly to real estate owners and speculators.
  - overcast 10y ago
    Seriously, they should just become real estate investors. They get paid in all the funds funneled into startups, and the circle of life is complete.
    - jedberg 10y ago
      A lot of them are also real estate investors.
      - r00fus 10y ago
        So is it just the right hand paying the left hand but "funneling" it through a mechanism that's inefficient but may be profitable on it's own?
        boomzilla 10y ago
        No the idea is that you invest on the real estate with your own money, and invest on start up with LPs' money.
  - alarge 10y ago
    To be a little pedantic here, the numbers quoted here are San Francisco numbers, not "Bay Area" numbers. With just a quick check, I found considerably cheaper commercial lease rates in Mountain View.
    - jtbed 10y ago
      You are totally right. It was heavily focused on SF. there are great options outside of SF, but all along the Caltrain stops there is really expensive space because they are more accessible. Castro Street in MV can be very expensive. It matters a lot where the founding team lives and also where you want to recruit from and at what scale. there is a ton of talent in SV as well as East Bay to pull from. Good luck on your startup! thanks so much for your comment.
  - jtbed 10y ago
    I agree, it often seems like money flows from the investor right to the landlord, bypassing the startup. we talked about this in the article. aside from the value of office space and its cost, to your point about the role of the broker, there are very good reasons for brokers to be involved, as it is such a big expense and there are a lot of factors to think about when finding and negotiating a deal that we help with. In my last company, 42Floors, we made (and they continue to make) listings available on a website, and even when founders find a great space themselves, it turned out they still wanted to have a broker on their side to help with the process. In any case, I totally respect your opinion and appreciate you joining the conversation.
- jtbed 10y ago
  Office space is usually the 2nd biggest expense for any business, startup or not. but prices certainly get inflated with vc funding and high demand. aside from the price, office space is really, really important for attracting talent and creating a productive work environment. but I agree, it's so expensive and we try desperately to find the best options for the startups we work with in order to achieve these things but also be cost effective. another issue is the cost of living, which makes it hard on employees. We really want to see more housing (both market and affordable) and more office space developed to bring down the prices and let more people work and live in SF.
  - api 10y ago
    Really? That blows my mind. We are small granted but for us office space is a little under 3% of our burn. Of course we're in SoCal and use an economical coworking space. Are there no such things in the Bay or do they cost way more?
    - ryandamm 10y ago
      You can get coworking spaces for ~$300-500+/month per desk, sometimes more for dedicated space. For a funded startup, I've heard that you should budget ~100+ square feet per employee, and rents in SF are in the $50 (very low) to $100 / square foot/year range. How much are you paying your engineers? 3% of burn sounds pretty low, but it's not completely out of the range of what I just penciled in here. (I was prepared to disagree... but the numbers aren't crazy on either side.)
      - api 10y ago
        We pay our engineers near or maybe a bit below the average for the Los Angeles metro area. Our coworking space is a bit cheaper than what you quoted, but not radically so. We pay about $800/month for three desks, storage space, and amenities. Our #1 expense by a massive margin is employees and associated benefits. #2 is probably the combined cost of hosting and SaaS services we use (AWS/OVH/DO/Vultr, Gusto, Xero, Slack, Zendesk, etc.). #3 is probably a tie between travel and other incidentals like accounting and computer hardware, and our coworking space. The rest is change. I guess some people just splurge on office space. I don't know what kind of office you'd have to be getting for it to even approach labor cost for a startup. Personally if I were an investor I'd do everything I could to veto that since it's insane and wasteful. Does it help with recruitment? Maybe, but personally I'd rather work for a hip company in a garage than a boring company in a posh office. Maybe that's the problem.
- enknamel 10y ago
  For a lot of companies it is worth it because it gives you access to the talent in SF.
flippyhead 10y ago
You could always move to Seattle!
- sharkweek 10y ago
  I'm pretty sure we're headed the same direction up here
  - umanwizard 10y ago
    Not even remotely close. I have lived in both Seattle and NYC and the difference in rent cost between the two places makes you feel like you are in totally different countries at dramatically different levels of development.
- TheOneTrueKyle 10y ago
  Working on it :)
  - jtbed 10y ago
    let us know if you want to move to Seattle, we know some great people there that can help with an office! good luck and happy new year!
- shmerl 10y ago
  Or a number of other places.
jedberg 10y ago
I still don't understand why software startups get offices today. I don't see any value in pissing away half my capital enriching a landlord when there are perfectly good tools out there to collaborate without making everyone come to the same place every day. And it's even better for the environment if we don't make everyone commute. Can you imagine a world where all the software startups go fully remote and all that prime office space becomes residential? You'd still need the restaurants and bars and whatnot, but instead of a bunch of office workers coming in at noon, you'd have a bunch of neighbors who are all taking a break from their jobs. It would be glorious.
- jessalyst 10y ago
  100% agree. This hits an even bigger discussion around the "norm" of working. The whole 9-5 going to work 5 days a week was developed during an industrial revolution. Now a days 9-5 applies less and less to certain industries in which it's more about getting the work done by a certain time vs. completing it within a certain time. The amount of resources saved by those who are able to work from home would not only have a positive impact on environment but also travel times, this would reduce the amount of both foot and vehicle traffic overall having a positive impact on everyone else's well being. It's unfortunate the solutions to these problems are so slow to move or often times missed by the top. All in good time!
- foobar241431 10y ago
  Collaborating IRL is more effective IMHO (and my experience working with remote offices). Plus, having an office can be a great perk: with a small commute (~20 min) and 3 meals a day, I save a lot of time/energy just on the food.
  - jedberg 10y ago
    > Collaborating IRL is more effective IMHO I've done a lot of both, and what I've found is that in person works better if the company isn't "remote first". Being one or a few remote people sucks, lots of stuff happens in the office without you. But having the right tools for remote work makes it in some cases better. But even in the case of an office, when everyone goes remote, suddenly it's not so bad. At reddit, since when I was there everyone else was just out of college, we always worked the last two weeks of the year from home because we had "winter break". So for those few weeks, we were a 100% remote company, and it worked out ok. BUT, we didn't make any big decisions or do any deep collaboration because even though everyone was remote we waited till we got back to the office, not because it was better but because we weren't set up to do it remotely. It's really all about having good processes for remote work -- ie. as much async as possible. And once you do that, even if you go to an office later, you've get better systems set up for tracking what happened and seeing history for new employees. The worst thing for a new employee is having to get up to speed when all the meetings were in person and not recorded.
rubicon33 10y ago
>> "Will SF still be as appealing when the talent can’t afford to be here?" If you're living responsibly, and saving like you should be, then I'd argue we're already at a point where talent can't afford to be there. >> "Transportation is a major factor around where buildings are being built. It has to be unprecedented with how many more people are coming downtown and we basically have the same transportation system from 50 years ago, and similar levels of parking." Call me cynical, but my faith that this city will, let alone state, will ever pull their shit together and build public infrastructure, is nonexistent.
- JimboOmega 10y ago
  I wonder what it would take to really kill the golden goose, so to speak - to really drive away the startups. Every year I hear how place X is the new startup mecca and it's so much cheaper and has all these advantages, and it doesn't happen. Some people would argue it's basically impossible for the city to kill the industry (if they are even vaguely reasonable); others argue it's already dead. I don't know, myself.
  - jayjay71 10y ago
    So long as the investors are here (and often times require you to move to get funded), the startups will be here.
  - nugget 10y ago
    To paraphrase an author I read recently ... it will happen slowly, and then all at once.
  - closeparen 10y ago
    I think there'd be overwhelming support among the voters of San Francisco, Palo Alto, Mountain View, etc. to establish border controls, with "proof of residency before 19XX" and "proof that you are not employed in tech" as conditions of entry. As far as tactics that might survive Supreme Court challenge, I could see SF's affordable housing program ramping up to 100% of units. The city could then apply those tests for eligibility in the program, in addition to the income ceiling it already uses. The city is already a command economy; state allocation of apartments according to the community's values (i.e. make life hell for tech workers at all costs) is a natural next step. Seattle, Portland, Boulder, and New York might just do the same. I will not be surprised to see the end of freedom of movement in the United States within my lifetime. The cities that are attracting migration do not want more people. There is widespread support, both among the greedy (who don't want their views and neighorhood character ruined) and bleeding hearts (who don't want the urban poor to suffer from gentrification) that urbanization needs to be stopped. Maybe someone with a ton of money to spare (Apple?) will start a new city. Or maybe somewhere which is not so attached to its current state (Detroit?) will let us in.
anxrn 10y ago
The article primarily discusses SF, and not the Bay Area. The economics are likely very different in the South/East Bay.
beatpanda 10y ago
All I want is for everyone who complains on Hacker News about living in San Francisco or in the Bay Area to be able to live wherever their heart desires and keep their jobs. I think that would fix everything. Can we all resolve to make that happen? Please?
- bdcravens 10y ago
  > able to live wherever their heart desires This may be SF/Bay for those complaining. They feel they "deserve" for it to be cheaper.

86 points by jtbed 10y ago

overcast 10y ago

Spending that much on rent for a starting company, is just completely ludicrous.

api 10y ago
I've said for a long time that if investors insist on only funding Bay Area companies they should just skip the middleman and cut checks directly to real estate owners and speculators.
- overcast 10y ago
  Seriously, they should just become real estate investors. They get paid in all the funds funneled into startups, and the circle of life is complete.
  - jedberg 10y ago
    A lot of them are also real estate investors.
    - r00fus 10y ago
      So is it just the right hand paying the left hand but "funneling" it through a mechanism that's inefficient but may be profitable on it's own?
      - boomzilla 10y ago
        No the idea is that you invest on the real estate with your own money, and invest on start up with LPs' money.
- alarge 10y ago
  To be a little pedantic here, the numbers quoted here are San Francisco numbers, not "Bay Area" numbers. With just a quick check, I found considerably cheaper commercial lease rates in Mountain View.
  - jtbed 10y ago
    You are totally right. It was heavily focused on SF. there are great options outside of SF, but all along the Caltrain stops there is really expensive space because they are more accessible. Castro Street in MV can be very expensive. It matters a lot where the founding team lives and also where you want to recruit from and at what scale. there is a ton of talent in SV as well as East Bay to pull from. Good luck on your startup! thanks so much for your comment.
- jtbed 10y ago
  I agree, it often seems like money flows from the investor right to the landlord, bypassing the startup. we talked about this in the article. aside from the value of office space and its cost, to your point about the role of the broker, there are very good reasons for brokers to be involved, as it is such a big expense and there are a lot of factors to think about when finding and negotiating a deal that we help with. In my last company, 42Floors, we made (and they continue to make) listings available on a website, and even when founders find a great space themselves, it turned out they still wanted to have a broker on their side to help with the process. In any case, I totally respect your opinion and appreciate you joining the conversation.
jtbed 10y ago
Office space is usually the 2nd biggest expense for any business, startup or not. but prices certainly get inflated with vc funding and high demand. aside from the price, office space is really, really important for attracting talent and creating a productive work environment. but I agree, it's so expensive and we try desperately to find the best options for the startups we work with in order to achieve these things but also be cost effective. another issue is the cost of living, which makes it hard on employees. We really want to see more housing (both market and affordable) and more office space developed to bring down the prices and let more people work and live in SF.
- api 10y ago
  Really? That blows my mind. We are small granted but for us office space is a little under 3% of our burn. Of course we're in SoCal and use an economical coworking space. Are there no such things in the Bay or do they cost way more?
  - ryandamm 10y ago
    You can get coworking spaces for ~$300-500+/month per desk, sometimes more for dedicated space. For a funded startup, I've heard that you should budget ~100+ square feet per employee, and rents in SF are in the $50 (very low) to $100 / square foot/year range. How much are you paying your engineers? 3% of burn sounds pretty low, but it's not completely out of the range of what I just penciled in here. (I was prepared to disagree... but the numbers aren't crazy on either side.)
    - api 10y ago
      We pay our engineers near or maybe a bit below the average for the Los Angeles metro area. Our coworking space is a bit cheaper than what you quoted, but not radically so. We pay about $800/month for three desks, storage space, and amenities. Our #1 expense by a massive margin is employees and associated benefits. #2 is probably the combined cost of hosting and SaaS services we use (AWS/OVH/DO/Vultr, Gusto, Xero, Slack, Zendesk, etc.). #3 is probably a tie between travel and other incidentals like accounting and computer hardware, and our coworking space. The rest is change. I guess some people just splurge on office space. I don't know what kind of office you'd have to be getting for it to even approach labor cost for a startup. Personally if I were an investor I'd do everything I could to veto that since it's insane and wasteful. Does it help with recruitment? Maybe, but personally I'd rather work for a hip company in a garage than a boring company in a posh office. Maybe that's the problem.
enknamel 10y ago
For a lot of companies it is worth it because it gives you access to the talent in SF.

flippyhead 10y ago

You could always move to Seattle!

sharkweek 10y ago
I'm pretty sure we're headed the same direction up here
- umanwizard 10y ago
  Not even remotely close. I have lived in both Seattle and NYC and the difference in rent cost between the two places makes you feel like you are in totally different countries at dramatically different levels of development.
TheOneTrueKyle 10y ago
Working on it :)
- jtbed 10y ago
  let us know if you want to move to Seattle, we know some great people there that can help with an office! good luck and happy new year!
shmerl 10y ago
Or a number of other places.

jedberg 10y ago

I still don't understand why software startups get offices today. I don't see any value in pissing away half my capital enriching a landlord when there are perfectly good tools out there to collaborate without making everyone come to the same place every day. And it's even better for the environment if we don't make everyone commute. Can you imagine a world where all the software startups go fully remote and all that prime office space becomes residential? You'd still need the restaurants and bars and whatnot, but instead of a bunch of office workers coming in at noon, you'd have a bunch of neighbors who are all taking a break from their jobs. It would be glorious.

jessalyst 10y ago
100% agree. This hits an even bigger discussion around the "norm" of working. The whole 9-5 going to work 5 days a week was developed during an industrial revolution. Now a days 9-5 applies less and less to certain industries in which it's more about getting the work done by a certain time vs. completing it within a certain time. The amount of resources saved by those who are able to work from home would not only have a positive impact on environment but also travel times, this would reduce the amount of both foot and vehicle traffic overall having a positive impact on everyone else's well being. It's unfortunate the solutions to these problems are so slow to move or often times missed by the top. All in good time!
foobar241431 10y ago
Collaborating IRL is more effective IMHO (and my experience working with remote offices). Plus, having an office can be a great perk: with a small commute (~20 min) and 3 meals a day, I save a lot of time/energy just on the food.
- jedberg 10y ago
  > Collaborating IRL is more effective IMHO I've done a lot of both, and what I've found is that in person works better if the company isn't "remote first". Being one or a few remote people sucks, lots of stuff happens in the office without you. But having the right tools for remote work makes it in some cases better. But even in the case of an office, when everyone goes remote, suddenly it's not so bad. At reddit, since when I was there everyone else was just out of college, we always worked the last two weeks of the year from home because we had "winter break". So for those few weeks, we were a 100% remote company, and it worked out ok. BUT, we didn't make any big decisions or do any deep collaboration because even though everyone was remote we waited till we got back to the office, not because it was better but because we weren't set up to do it remotely. It's really all about having good processes for remote work -- ie. as much async as possible. And once you do that, even if you go to an office later, you've get better systems set up for tracking what happened and seeing history for new employees. The worst thing for a new employee is having to get up to speed when all the meetings were in person and not recorded.

rubicon33 10y ago

>> "Will SF still be as appealing when the talent can’t afford to be here?" If you're living responsibly, and saving like you should be, then I'd argue we're already at a point where talent can't afford to be there. >> "Transportation is a major factor around where buildings are being built. It has to be unprecedented with how many more people are coming downtown and we basically have the same transportation system from 50 years ago, and similar levels of parking." Call me cynical, but my faith that this city will, let alone state, will ever pull their shit together and build public infrastructure, is nonexistent.

JimboOmega 10y ago
I wonder what it would take to really kill the golden goose, so to speak - to really drive away the startups. Every year I hear how place X is the new startup mecca and it's so much cheaper and has all these advantages, and it doesn't happen. Some people would argue it's basically impossible for the city to kill the industry (if they are even vaguely reasonable); others argue it's already dead. I don't know, myself.
- jayjay71 10y ago
  So long as the investors are here (and often times require you to move to get funded), the startups will be here.
- nugget 10y ago
  To paraphrase an author I read recently ... it will happen slowly, and then all at once.
- closeparen 10y ago
  I think there'd be overwhelming support among the voters of San Francisco, Palo Alto, Mountain View, etc. to establish border controls, with "proof of residency before 19XX" and "proof that you are not employed in tech" as conditions of entry. As far as tactics that might survive Supreme Court challenge, I could see SF's affordable housing program ramping up to 100% of units. The city could then apply those tests for eligibility in the program, in addition to the income ceiling it already uses. The city is already a command economy; state allocation of apartments according to the community's values (i.e. make life hell for tech workers at all costs) is a natural next step. Seattle, Portland, Boulder, and New York might just do the same. I will not be surprised to see the end of freedom of movement in the United States within my lifetime. The cities that are attracting migration do not want more people. There is widespread support, both among the greedy (who don't want their views and neighorhood character ruined) and bleeding hearts (who don't want the urban poor to suffer from gentrification) that urbanization needs to be stopped. Maybe someone with a ton of money to spare (Apple?) will start a new city. Or maybe somewhere which is not so attached to its current state (Detroit?) will let us in.

anxrn 10y ago

The article primarily discusses SF, and not the Bay Area. The economics are likely very different in the South/East Bay.

beatpanda 10y ago

All I want is for everyone who complains on Hacker News about living in San Francisco or in the Bay Area to be able to live wherever their heart desires and keep their jobs. I think that would fix everything. Can we all resolve to make that happen? Please?

bdcravens 10y ago
> able to live wherever their heart desires This may be SF/Bay for those complaining. They feel they "deserve" for it to be cheaper.