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Monday, February 4, 2013
Lesson #134: Where to Best Locate Your Startup
to BuiltinChicago, there is a new
startup formed in Chicago every 48 hours.As more startups are created, and the existing companies grow and
expand, demand for well located, creative and affordable office space is
increasing.Today’s lesson is going to
tackle how to go about locating your work activities, in general, and more
specifically, with some alternatives here in Chicago.To help me with this project, I solicited the
help of Steve Schneider, an EVP at DTZ, a corporate real estate specialist in
can startup a new business pretty much anywhere these days, especially given
global connectivity to the internet.But, I would suggest locating your startup in a city that has a
well-established startup ecosystem for your industry, where you can easily
source needed employees, mentorship or investors.In the tech world, that used to be limited to
places like Silicon Valley, Boston and Seattle.But, startup ecosystems are popping up
everywhere, both in big cities, like New York and Chicago, and around key
university campuses, like Austin, Boulder, Ann Arbor and Raleigh-Durham.So, do your homework to see if your city is
well positioned to help you succeed, or whether you should consider making a
reason to locate your offices in large population centers are numerous,
including: (i) large pools of first class talent, from entry level to high
level executives; (ii) easy access to public transportation; (iii) an oversupply
of available space, where discounted rents can often be found; (iv) plenty of creative,
open loft space buildings which are
better suited for startups; and (v) close proximity to digital infrastructure hubs
for your tech connectivity needs.
NEIGHBORHOODS, IN GENERAL?
locate your startup in neighborhoods within close proximity to other startups
in town, to leverage the local startup ecosystems and to more easily share
learnings with other startups near you.
NEIGHBORHOODS, IN CHICAGO?
North has become the premier destination for startups in Chicago, given its
proximity to the startup epicenter at 1871
in the Merchandise Mart, and its concentration of open, creative loft space,
which are in high demand from marketing, technology and other startups.However, due to the higher rental prices ($22-$26
per foot) and lack of space in River North, the River West market has become a
destination for start-ups seeking less expensive alternatives ($18-$25 per
foot).For even lower rents ($15-$18 per
foot), consider other area neighborhoods, like
Evanston, Bucktown and Ravenswood were many startups are located., although they are harder to commute to.
SPACES, IN GENERAL?
have always heard about “two guys in a garage” launching a startup, but
frankly, I have never known any startup to actually do that here in
Chicago.So, where should you work from?High level: wherever you can keep your costs
at an absolute minimum, even at zero, until the business has its “sea legs”
underneath it.And, these costs need to
be flexible and variable based on your growth needs, so don't lock into any
space you’ll quickly outgrow or a lease you can’t easily exit.Here is some high level guidance by company stage:
is on the table at this point, from working at home, to working out of a
Starbucks, to finding an empty cubicle in your lawyer’s office, to
a more formal startup co-working space, where you can rent a desk for
$300-$400 per month.The advantage of
the latter, is immersing yourself into a startup ecosystem, and sharing
learnings with other entrepreneurs.Not
to mention, many of these facilities bring in outside mentors for tutelage, and
help negotiate discounts for services from outside vendors.If you can afford it, I suggest the shared
startup space, given its advantages.
Employees:At this stage of
your growth, you have to think creatively how to find space.Some startup co-working spaces can handle companies
of this size, but many cannot.So, you
need to make a call how certain you are of your company’s future.If your growth is solidly taking off, you can
perhaps look for a longer term, permanent space.But, most likely, I would try to find a
company that has more space than they need, and ask if you can share in their
rent costs, on a month-to-month basis, to work at a some of their open
workstations.They would gladly like the
cost savings, since they are paying for more space than they need, and you should not have to lock into a long term commitment.
is hard not to move to a committed space of your own, at this point.You’ll want it for privacy, security and
convenience by this stage of your growth.Your two primary options are direct leases with landlords, which can be
expensive, or sub-leases from current tenants, which can be 25%-50% cheaper
than direct leases with landlords.If
you can find it, a sub-lease is the way to go, especially if you can find one
with your desired open floor plan, that is already furnished and already wired
for your connectivity needs, since it will most likely be a shorter term in
length.CoStar is a the MLS of the corporate rental industry, where you can find available subleases. If you can’t find a sub-lease,
try to find a direct lease where there will be limited build-out requirements,
so the landlord can pass along those savings to you in the form of lower
rent.And, shoot for shorter term leases
(e.g., 1-3 years), if you can, to allow you maximum flexibility to move as you
grow, or to cut the lease if you need to lower costs. Assume you will need 150-200 square feet per employee, and take your future growth into consideration.
SPACES IN CHICAGO?
Space: Numerous shared
co-working spaces for startups have been established in Chicago, with more
launching all the time. Some of the bigger shared spaces in town include:
if you can, consider applying to local startup incubator or accelerator
programs in town, to leverage their office space, including TechStars Chicago
(formerly Excelerate Labs), Healthbox
(for healthcare related startups) and NuevoLabs
(for hispanic related startups).Here
too, new incubator and accelerator programs seem to be launching all the
time.In addition, many of the venture
capital firms in town, also house their startup portfolio companies in an
incubator type of setting, including Sandbox
Industries and Lightbank, if you
are lucky enough to secure both their capital and their office space.
numerous startup-friendly buildings in Chicago, so be sure to speak with your
broker for a then-current list of available space.But, according to Steve, and my own
experience in town, here is a sampling of startup-friendly buildings to
consider: 600 W. Chicago (home of Lightbank), 564 W. Randolph, 400 S. Jefferson, 626 W.
Jackson, 564 W. Randolph, 111 N. Canal, 55 W. Monroe, 111 W. Jackson, 20 N.
Wacker, 180 N. Lasalle and 29 N. Wacker.I especially
like a lot of the buildings managed by Urban Innovations, has they have
more of an open loft feel in key startup neighborhoods.I also like a lot of the buildings around
Greek Town, in the vicinity of 833 W. Jackson.There are also a few startup-friendly buildings that are currently under
development at 1000 W. Fulton, 111 N. Canal, 401 N. Morgan and 1000 W.
Fulton, which will be launching soon.