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What makes coworking work?

January 11, 2013 by

Innovation Cafe in Kansas City, Mo. is one of more than a dozen coworking spaces on the Silicon Prairie. 

For years, startup founders and entrepreneurs across the Silicon Prairie have sought to get out of basements and coffee shops and make the move to professional workspaces. Thus, a startup culture staple – coworking – emerged.

Coworking spaces in and nearby the region’s flagship cities of Omaha, Des Moines and Kansas City have been on the rise in the past couple of years, with desks to lease – at our last count – at 15 coworking spaces in a dozen cities.

While some coworking spaces across the region are flourishing, a few have closed in the past year. The different outcomes beg the question: What makes coworking work?

Build it, and they will come?

According to many coworking founders, the “Build it and they will come” attitude doesn’t necessarily work.

Megant Hunt (left), founder of Hello Holiday and Princess Lasertron, opened Omaha’s first coworking space, CAMP Coworking, in June 2010. Less than two years later, she closed the space due to a combination of issues, including finances and a lack of tenants.

“The biggest pitfall I had with CAMP was that the space came before the community,” Hunt said. “I tried to build a strong network of support around the few core tenants I started with. As is normal for a coworking space, they all eventually moved on, outgrew the space, found new gigs and moved into other offices, et cetera, and I wasn’t able to grow the membership roster beyond that.”

“Growing that community of people who not only needed a fun culture to work but needed physical space was my biggest challenge,” she added.

Alex Hillman, founder of Independents Hall (aka Indy Hall) in Philadelphia and a consultant for coworking space owners, agreed that community is the key when it comes to a successful coworking space.

“The number one trap that I see is the idea that many coworking spaces can skip over the community, or assume that by providing a place that it’ll magically happen on it’s own,” Hillman (right) said. “Unfortunately, there aren’t ‘community elves’ who are looking for new coworking spaces to make communities in – it’s an intentional process. Counterintuitively, it’s even harder to build community once you’ve got an empty space because now you’re doing the community building equivalent of food shopping on an empty stomach.”

Hillman now offers the “Community Builder Masterclass” for those interested in coworking and community building. He has also led the Global Coworking Community online since 2006. 

Founders of coworking spaces that remain open also cited the people who make up the coworking community as a core component of their success.

Jordan Running and Sheila Samuelson, who founded Busy Coworking in Iowa City in April, have found that simply subleasing space is not necessarily what coworking is all about.

“The business is yours but the space belongs to your members,” Running said. “If they don’t have a sense of ownership of the space and investment in the community then you’re not running a coworking space, you’re just renting desks.” 

Coworking: A business model

Less than two years after opening CAMP Coworking (above), Megan Hunt closed the space without ever recording a profitable month.

While community is an important factor of successful coworking spaces, many founders and owners noted that it’s a business venture, and needs to be treated as such.

Hillman of Indy Hall said it’s the second most common trap coworking founders fall into: They forget coworking is a business.

“The number two trap is forgetting that it needs to be a sustainable business, but one that doesn’t consume the community as they both grow. The two need to be complementary and symbiotic, not parasitic,” Hillman said. “Too many communities either place burden on the business, or the business ends up placing burden on the community members. Balance, as always, is the correct answer.”

One of the reasons CAMP was forced to close, according to Hunt, was the fact that she was funding the space out of pocket.

“Unfortunately, although I tried many different revenue models to keep the space open, CAMP never had a profitable month in the 22 months we were open,” Hunt said. “It ultimately closed because I couldn’t sustain it. I was losing my passion for community building because my bank account was in the red month after month and it was preventing me from having a stable life.”

Hunt noted there were things she could have done – like use a crowdfunding site, find a good mentor to refine her business plan or drop the rates – but when the time came that she had the chance to get out of the lease, she jumped at it.

“I just had to take the opportunity. It would have been foolish not to,” Hunt said.

Like Hunt, Shane Jones (left), who now runs the Kansas City Commons in Overland Park, Kan., said the business model of the space has morphed over time since Andrew Stanley founded it.

“When we first opened we rented desks by the day, 10 bucks a day, all the toner and coffee you could burn,” Jones (left) said. “We (now) have a minimum of 150 a month for a private desk.”

Jones said it’s also important for spaces to maintain vacant space in order to attract tenants.

“You’re gonna have to have some vacant space at all times otherwise you’re not going to be appealing to those companies who want to grow,” he said.

Jason Teeman, who started Innovation Café in Kansas City, Mo. in 2011, said one major part of owning a coworking space is marketing it.

“I feel that owning a coworking space, you really have to have an identity,” he said. “You must know your market you are targeting and how you will target them.”

Teeman said he also believes in low prices.

“Many of the people that would use a coffee shop for work do not have the money to afford long-term commercial leasing,” he said.

Alexander Grgurich, former director of Foundry Coworking in Des Moines, said he decided to close the space last year for a number of reasons, one being that it wasn’t creating any benefit economically and he wasn’t prepared to devote the amount of time necessary to make it sustainable. However, Grgurich said there were things he could have done to keep the space open.

“I don’t think the people like myself or others are afraid of work,” he said. “But it’s a very different type of work, a whole different skill set. If you’re not ready to be marketing your space all the time and taking time for a lot of the administrative tasks, then yeah, it’s gonna be tough to really blow it up and make it.”

Office sharing: A new kind of coworking

As laid out by many founders and directors, running a coworking environment isn’t as simple as subleasing space. However, some startups are taking on a new method of informal coworking by doing just that – leasing their vacant office space to friends.

Dan Shipton (left), founder of BitMethod and Change, currently rents out space to a few startups, including Hatchlings.

Shipton, who ran Impromptu Studio coworking space in Des Moines from 2008-2010, said the current setup isn’t much different except that BitMethod leases spaces to teams and startups rather than individuals.

“It all sort of happened after I shut down Impromptu Studio,” Shipton said. “We were moving into a new office and a few of our more established workers moved with us. They all moved in as individuals from each company, but as they grew and hired more people, they took over and rented our extra offices.”

The companies working out of BitMethod’s office share a kitchen, internet access and conference rooms, but are sectioned off into their own spaces.

“So far, it has worked really well. We’ve built an office that allows us to grow, but can still feed off everyone else’s energy and expertise,” he said. “The only real issue we’ve run into is companies outgrowing our space and needing to move elsewhere. But really, this isn’t much of an issue considering growth is what we want to see from our office mates.”

Grgurich (right) said he thinks Shipton’s is a more feasible method of coworking, rather than renting a space to sublease it.

“The better way to go about it is through having an office and if you have extra space rent it out. Then it’s almost like you’re the anchor tenant… Then there’s not so much pressure, where people feel like, ‘If I leave here this place is going to close up.’ It makes for a lot easier work environment,” Grgurich said.

He added that another thing that seems to be taking shape in Des Moines is the fact that space in the city is cheap enough that startups can aggregate in one building rather than one office.

“I think one thing people found out is you could go downtown to the Midland building and find a space with a couple hundred square feet,” he said. “Instead of sharing your office with people you’re sharing a building with people.”

Grgurich said he now shares an office with his business partner, but sometimes misses the flow of new people that coworking provided.

“You miss so many people flowing in and out, meeting lots of random new people and becoming friends with them. That is kind of unfortunate that we don’t have that anymore,” he said.

The startup community in Des Moines, however, seems to be thriving despite the lack of formal coworking spaces, Grgurich said. 

“I think that’s okay and I think the community is still thriving without them for sure.”


Credits: Innovation Cafe photo from Flickr. Hunt photo courtesy of Hunt. Hillman photo from dangerouslyawesome.com. Photo of Jones from thinkbigkansascity.com. Shipton photo from LinkedIn. Photo of Grgurich from Twitter

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