I Want My CIC! … The Benefits for Startups to Be Co-Located

Posted on Jul 11, 2010 | 84 comments


[if you're not old enough to get the reference between this image and the title you can click on the image for a prompter]

This past December I spent a week in Boston to try to get to know some of the local VC’s and entrepreneurs a bit better.  One of the meetings I had (organized by my good friend Jeff Yolen) was with New Atlantic Ventures held the at the CIC, aka the Cambridge Innovation Center (no prizes for guessing where it’s located).

As they showed me around the CIC I was instantly envious.  I recently wrote a blog post about why I believe that startup teams in close proximity perform better.  I believe that first-time entrepreneurs also benefit hugely from working in close proximity to other companies.  VCs constantly share cross fund information and are therefore always getting dialed into what is going on in the industry. We know prices of deals, compensation, who’s doing well / poorly, etc.  Entrepreneurs need to share more information with each other.  I’m surprised how few people talk about valuations, term sheet terms, how much to pay recruiters, etc.  A tech lab is a perfect hub for this kind of cross-company fertilization.

I once mentioned this idea to a fellow SoCal VC when I told him I wanted a CIC in LA and he said, “Co-location is dead. We don’t believe in it anymore.  These days we all use Skype and collaboration tools.  We’re recommending to our companies that they be distributed.”

Uh, I guess he won’t be co-sponsoring a technology lab in LA with me then?  I found it shocking that it didn’t seem like a worthy endeavor to him to have a central hub of tech companies on the Westside of LA.  I guess I shouldn’t be surprised – I got a similar lukewarm reaction when we started Launchpad LA and that seems to be going pretty well.

I’m 100% certain this would benefit our community and not just the entrepreneurs that work there.  VC’s and more experienced entrepreneurs would have a central hub in which to gather.  Now I gotta go and build it just to prove him wrong.

The CIC, founded in 1999, is located adjacent to MIT and has more than 100,000 sq ft of space for nearby startups that qualify to be housed there.  And you can tell that the founders have thought greatly about creating the right kind of space for startup companies.  You can start with as little as one person and sit in a shared space that sort of feels like a coffee house.  In this space you don’t have a pre-assigned space but rather book space like a hotel.  You will be surrounded by loads of like-minded people all looking for work space at an affordable price and all, presumably, interested in meeting and interacting with other startups.

You can pay a little bit more to have your own dedicated space and you can even rent a “pod” which is sort of like a small office at a more affordable price.  In fact, this is the set up Jeff had as he was between gigs.  You can also get traditional office space for your team but you still feel like you’re part of a bigger tech zone.  It’s sort of like Amazon AWS auto-scaling – you can scale up your office space as your team size grows (and vice versa, but let’s hope not).

But the real benefits of being somewhere like the CIC is this interaction between entrepreneurs.  It’s what Silicon Valley / San Fran entrepreneurs get for free.  If you live in SoMa all you have to do is walk to the nearest Philz Coffee (which totally rocks, by the way) and you’ll bump into somebody building on top of the Twitter API or integrating with Force.com.  Or you can have a debate with your neighbors and hear how their implementing Cassandra or Hadoop.  It’s true that being in a lab can also have distractions but I believe this is far outweighed by the knowledge sharing benefits.

These kinds of office space arrangement are often called “technology incubators” or “startup labs” or something similar.  These are not to be confused with incubators like YCombinator or IdeaLab which look to invest in your company and take equity positions.

Probably the best known tech center in NorCal is the PlugandPlay Technology Center owned by industry veteran and insider Saeed Amidi.  Like most centers PlugnPlay hosts industry events, brings in speakers & venture capitalists and gives companies more visibility than being on their own.  By being in a facility like this you have a ready made peer group to ask about things like recruiting, technology, PR, venture capitalists or banks.  You also have a steady stream of VC’s passing through looking for the next big thing.  It’s far easier to stroll through such a center and see 20 companies than to travel around to them all individually.

The latest technology lab that I came across was dogpatch labs run by Polaris Ventures.  Dogpatch was the brainchild of Mike Hirshland, partner at Polaris.  If you want to get to know him a little bit better you can check out this interview I did with Mike.  Dogpatch has offices in Cambridge, New York and San Francisco where it houses more than 35 companies (about 50 people per location if I remember correctly).  I spent a day at Dogpatch San Fran and loved the vibe.  We then held the Open Angel Forum there in the evening.  It has big wide open spaces for such events.  I also had lunch there which was served buffet style with the rest of the office, which apparently costs $5 / day and you just let the office manager know in advance so they can plan numbers.

As I said, I’m seriously bummed that we don’t have something like this on an industrial scale yet in LA.  I’ve been to the CoLoft in Santa Monica and it’s certainly a great start.  CoLoft has similar features in that it is managed office space with other tech firms and they run regular events in their offices.  But I now want something more industrial scale – the next size up.  And I’m going to put my brain (and maybe some dollars) into fixing this problem.  I don’t think having a few facilities in a city is competitive – hopefully we’ll find a way to make it collaborative.

If anyone has experience, advice or dollars and wants to help please be in touch.  Anyone have positive or negative experience in such an incubator? Do tell …

  • http://chrisdumler.com/ Chris Dumler

    Jascha, I think this is common. But it's really just “lucky” or “unlucky” in the way you describe it. Some people are much more productive when they are not around others – they like to be a part of a group initially, then go into a dark room, focus completely, and emerge to show others what they've done; they gain energy from that process. These kinds of people are *awesome* over Skype.

    Others gain energy from the group (or sometimes just being around other people). These kinds tend to hang out in coffee houses or coworking spaces or similar venues because they are energized by the interaction. These people are awesome in incubator settings.

    This is general, and there are loads of exceptions I'm sure. To make it more complicated, a typical team has a mixture. And to add complication to complication, many people don't really know what they prefer because they don't track personal work habits and productivity.

    Pathetic humans. ; P

  • http://www.linkedin.com/in/rajatsuri rajatsuri

    IM works really well for casual relationship building for busy people. There is no pressure involved – it's expected that both parties are working on something else. Thereby you can have a lot more contact with people who are normally too busy to schedule coffee or calls with (almost every serious founder)

    It's also a great way to get to know someone remotely. IM is the main tool I use to communicate with our partners in Asia – who don't feel as comfortable with spoken English as written English. This is because English is taught in a very academic fashion in most foreign countries, so they don't understand slang or fast speech well.

    Frankly I wish more people of older generations used IM, both customers and investors. Mark is a great user of it, and I bet he gets to know a lot more entrepreneurs that way. It becomes a platform for a solid relationship in real-life as well.

  • http://earnedmedia.wordpress.com/ Christian Brucculeri

    Agreed on the casual relationship building– I do use it often for conversation. I think the issue I take with IM is when people attempt to use it as part of a process– it's not a great way to get things accomplished beyond building a personal relationship.

  • http://twitter.com/wsul William Sulinski

    Mark, I completely agree re: value of startup cross-pollination, -especially- for a first time entrepreneur. We started our company in Maine and as much as we tried to connect ourselves, we didn't have peers in the consumer internet space there. Boston is only a 2 hour train ride, but it wasn't until we were part of the inaugural TechStars class that we built a meaningful network of peer entrepreneurs and mentors in Boston. TechStars is cross-pollination on crack — a consistent flow of mentors and investors are injected into a single office where ten teams work 24/7 for three months.

    After TechStars was over, we were set to completely relocate back to Maine, but I was challenged by Matt Galligan at SimpleGeo on whether a consumer startup could thrive without a presence in a startup hub. He had a point, so we leased a couple of desks from Conduit Labs, a startup headed by Nabeel Hyatt, a super smart CEO, along with another great startup, Shareaholic. Just below us is Laura Fitton w/ oneforty, and between Dogpatch, CIC, Betahouse, and a bunch of other startups close by, it'd be impossible NOT to form close ties to other startups with the opportunity to leverage the connections and support system that comes along with that. I don't regret the decision and I'm 100% certain we wouldn't have reached the milestones we have without these resources. The example of sensitive areas like compensation, valuations, terms, vendor costs, etc. is spot on; to gather data points on what is typical/acceptable requires a fairly healthy network.

    We've leveraged Skype, HipChat, and done multi-point standups with Oovoo, but inevitably there is friction in this kind of communication that just isn't there when you're face-to-face. The same bonds don't form over the internet that can form being in close proximity with others going through the same challenges, and working similarly hard. Distributed teams can't replace the same type cohesiveness or even just impromptu strategizing that a tight-knit team working together can. Semi-monthly 'sync' meetings are nice, but in the early-stage startup world, things change to often to even justify the overhead which isn't required working without shouting distance. Incidentally, Matt Galligan just wrote a blog about his decision to relocate (if but temporarily, in his mind) to SF from Boulder for this very reason here: http://mgalligan.com/post/803003647/moving

  • http://loomiclabs.com Jascha W.

    Chris, I agree there are a few types of people. The best thing about having a space at least is they can crawl into a corner and IM us from there if need be. ;) Plus liberal “in office” work hours lets the coders who like to get jacked up on Red Bull till 4am the ability to still do so.

  • http://www.missi.com/ Peter Beddows

    I suspect your contrasting experiences as described here are not that unusual Jascha but, in your good experience, you did have a significant advantage that many do not and could not.

    Certainly working as a close-knit group towards a common exciting goal in almost any office environ within Venice or even Santa Monica, CA, would be a very hard situation to beat if only for the sensory bene's that come with that deal: You have all of the amenities immediately at your office door, from surfing to beach activity to beer, etc., that any aspiring entrepreneur could wish to have as an adjunct to dutifully committing to many long hours to getting things done ~ working there it becomes relatively easy to still have a somewhat balanced life and build camaraderie with colleagues under such conditions.

    None the less, I am also inclined to agree that many times, for a lot of people working remotely, being self-disciplined becomes a real challenge and distractions can be hard to avoid: Psychologically, that isolation that exists between skyping can lead to those people to begin to feel very disconnected from the core activity and thus from the core objectives as time goers by because they are also remote from the moments of gratification that come in immediacy of sharing in colleagues success as each step of the development is completed and objectives are celebrated and camaraderie becomes almost impossible to achieve across the whole team.

    As to Matt's comments, I could not agree more with Mark's responses to the issues Matt raised.

  • http://www.missi.com/ Peter Beddows

    You might try asking @BrianTsuchiya that question since he is based in Boulder.

  • http://chrisdumler.com/ Chris Dumler

    Ha! Exactly : )

  • Rahul Chaudhary

    Since we are on the topic of co-working, I wanted to share with you guys about coworking visa . A coworking visa allows active members of one space, when traveling, to use another coworking space, gratis. Terms vary from space to space, with regard to hours of operation, reservation requirements, etc.

    Here is a link for further information, http://coworking.pbworks.com/CoworkingVisa

  • http://www.metamorphblog.com Matt Mireles

    Mark,

    LOL. Good points. And I'll freely admit that my opinion is based on many loose impressions and hearsay rather than hard data. As such I'm probably wrong on a few fronts.

    1) My assumption was that we were talking about pre-funded startups. If that's not we're talking about, then I'll concede most of the argument to you. My impression though, is that pre-funded, super-early stage companies are the ones that would benefit the most from being in an incubator. But yeah, once you have money, paying for office space in a shared space with other startups does seem like a decent idea. I guess, in some ways, I think that we're talking about different things here. (I also edited my original comment to reflect this.)
    2) You're 100% correct to state that I am not drawing from hard data. So I'll concede on that, but here's what I am drawing on: At one point, I started looking into Plug n'Play. It seemed cool and I floated it by a few friends that I trust. Their response: “Stay the fuck away!!!” These were founders deeply involved in the startup community. One of these people was a former Plug n' Play employee who left to start his own company, and he had the same reaction. Obviously this is not a comprehensive data set, and I'm no expert, but it's worth airing.
    From a marketing perspective, at least, I think it might be reasonable to say that might also be a problem afoot.
    3) Point taken. Word on the street, at least the received wisdom I've gotten, is the opposite. But I'll freely admit that I could be wrong here and I'm open to ideas.
    4) Ok, so maybe I should say that DPL has a *perceived* signaling problem. I know many startup founders who love the DogPatch community but fear the signaling risk, right or wrong.

    Seeing from the follow-up comments, I think there's two distinct questions that need to be separated out: A) whether it's better for teams to work separately in distributed locations vs together in one physical location, and B) whether teams should work together in CIC-like incubator spaces. With regards to A, I am 100% with Mark on this one. And if the choice is between working alone in your apartment vs in a co-working space, I think choosing the co-working space option is a great idea.

    Anywho, I'd love to see the Suster-Space in action. My feeling is that you'd do a better job of running, designing and marketing it than most.

    Cheers!
    -Matt

  • http://blog.jonpierce.com Jon Pierce

    Great post, Mark. Tim's a good friend, and I love what he has done with the CIC.

    I run another space in Cambridge called Betahouse, which I started over 3 years ago for just these reasons. As a hacker and aspiring entrepreneur, I wanted a place where I could work alongside others like myself. The coworking movement was nascent at the time, and I thought it'd be great to build a coworking space focused on a specific community: tech startups, hackers, designers and other creative folk — my community. So I pulled together a small group of like-minded friends and Betahouse was born — the first coworking space in Boston, and, as I sometimes joke with Mike Hirshland, the *original* “frat house for geeks” (of course, being down the street from MIT, I would never *really* make that claim). In fact, Betahouse and Dogpatch share many of the same values and goals. Of course, Betahouse is independently run and doesn't have deep pockets backing it. I guess you could call it the scrappy version. :)

    That said, we're about to expand, and one of my goals is to line up sponsorship to help subsidize space for startups and other people doing awesome stuff in the community. It's all about the community, after all. The space is the least interesting thing about it.

    If you'd like to learn more about Betahouse, here are some links:

    http://blog.jonpierce.com/post/705186605/betaho
    http://www.xconomy.com/boston/2010/06/29/fear-n
    http://bostinnovation.com/2010/07/11/in-betahou

    I'd love to have you stop by next time you're in town. Perhaps we could even pull together an event of some kind. I'd also love to have you as a speaker whenever we do the next Angel Boot Camp (an AngelConf-like event I put together last month).

    http://seedboston.com/angelbootcamp/
    http://blog.jonpierce.com/post/698262425/angel-

    Catch you on Twitter. I'm @jonpierce.

  • http://bothsidesofthetable.com msuster

    Perfectly written response. Thank you.

  • http://bothsidesofthetable.com msuster

    Cool. Great idea! Thanks for posting.

  • http://bothsidesofthetable.com msuster

    thanks, Jon. Great to know about Betahouse. I'll definitely stop by when I'm next in Boston and happy to plan a speaking event or similar. I have family outside of Boston so always happy to get out there (less so in the winter ;-)

  • http://twitter.com/jpaine jpaine

    yea, weekly demo day or pitch day is a cool idea

  • djdan85

    Great post, again, Mark. I would love to see another incubator or shared-work space in LA.

    Theres another great coworking community in NYC unaffiliated with any VC, called New York City (http://www.nwcny.com) which I've heard great thing about. They are currently expanding into a bigger location.

    As I look back to my time living in New York, I remember how great it was to be able to attend various speaker events and tech meetings and drinks all within a 20block radius around union square. This was invaluable to me as I tried to meet more people and learn more about the community. This is something that LA definitely needs!

    I hate hearing friends from the east coast lament moving to LA because of a lack of a “tech-scene”, and not knowing where to go. Would be awesome to see LaunchpadLA expand out as a tech-scene building brand and encourage more speaker events, tech drink events, and overall change the notion that there isnt a tech scene here.

  • Daniel Kim

    Mark, great timing on this post as I have been researching co-working location possibilities in SoCal (specifically OC). I read Nivi's quick post on VentureHacks on some co-location options in the Bay Area, but great to see some focus down south! If you do get something going and there are part time options available, I would definitely make the drive up the 405 to hang out and do some work with like minded folks in LA. I actually wanted to make a trip up to SF to spend a few days at a co-location spot but LA would obviously be better on the wallet. Looking forward to progression in this area Mark and if you decide on branching out, definitely consider Irvine!! =)

  • http://www.stealthmode.com hardaway

    Happy to help you start one. We have Gangplank in Chandler and I ran one in Mesa all spring.

  • Ian Graham

    Hi Mark,

    We have been in operation at http://www.thecodefactory.ca for just over two years. The facility is intended to be self sustaining (which IMHO is extremely important) and have plenty of incidents in organic and engineered collaboration. My experience is that it is really the sum of all little things really make all the difference in facilitating a great environment.

    In terms of stats we have had; 400+ events in 2 years, facilitated 20 jobs (2009), 3 connections per day, launched 2 start-ups and over 100 companies in residence full and part time.

    Please feel free to get in touch ian[at]thecodefactory[dot]ca

    Best,

    Ian Graham

  • http://www.thegolfrace.com thegolfrace

    Does anyone know of any tech labs in the UK?

  • http://twitter.com/timschulz Tim Schulz

    As I type this message, I'm skyping with three developers in the Ukraine before they leave for the day, finalizing a legal document with an attorney in Israel, and negotiating deal terms with three new business partners in Germany, Belarus and Spain.

    As much as I've learned to navigate the satellite ecosystem I work in, there is nothing like working in the same room with a team, getting ideas on a whiteboard, inviting outside observers to provide feedback, and iterating from there.

    Sure, there are plenty of tools to help close the gap for distributed teams, but I don't understand how anyone could argue that this should be the norm. Why introduce that much risk to a young company?

    Proximity and feedback are the lifeblood of great products. “That's the way you do it.”

  • http://twitter.com/eileentso Eileen Burbidge

    As mentioned above, there is newly opened @techhub (hurray!), and there is also @whitebearyard, @songkick offices, @overheardatmoo offices, @playfire offices, Talk Talk offices (http://bit.ly/c7bduS) and outside of London there is @DifferenceEngin — to name but a few

  • Derek Neighbors

    We have been doing something similar to CIC at http://gangplankhq.com for the last three years. We have a location in Chandler, AZ and one on the campus of University of Utah in Salt Lake City. We have been asked to open LA and SD locations and are working with someone on an Altlanta, GA location. If you are serious about LA drop us a line we'd love to help.

  • http://twitter.com/dugsong Dug Song

    In Ann Arbor, Michigan, we have the Tech Brewery http://techbrewery.org which features large, open bullpen areas, private offices, and conference rooms for over 30 startups – run effectively as a startup co-op (we're not funded by any organization, just our members).

    We've been successful in attracting folks from another event we organize, the Ann Arbor New Tech Meetup http://a2newtech.org which introduces 5 new startups to the community every month (we're sadly about 1/5 the size of Boulder's event). We also host a number of other events here (including our weekly Beer:30 mixer on Fridays), which helps provide a social hub for startup folks in the area.

    More on this and other related facilities (A2 Mech Shop, Workantile Exchange, etc.) here: http://www.slideshare.net/dugsong/ann-arbor-sta

  • CJ Westerberg

    Would LOVE to hear your comments on Brooks today:
    http://www.nytimes.com/2010/07/13/opinion/13bro

    CJ Westerberg
    Editor-in-Chief
    http://www.thedailyriff.com

  • http://www.victusspiritus.com/ Mark Essel

    Dogpatch sounds like an excellent work environment. If the SF move works out later this year/early '11 I'll give them a look. I assume apartment office for any year 1 to keep costs low, then move to a better space to meet up with folks.

  • http://bothsidesofthetable.com msuster

    I love Brooks. But today he is off base. His analogy doesn't hold. He's having an anti-administration soft rant. Many words of truth but the absence of “grinds” isn't the problem with the recovery. Thanks for pointing me to his post.

  • http://www.missi.com/ Peter Beddows

    With all due respect, to say “For jobs to recover, the grinds have to recover” is clearly over simplistic if not even a distraction from the root of the general malaise in which we find ourselves as a country yet Brooks surely has a point when he suggests “but it’s hard to see how that will happen so long as households are still so leveraged, government debt is still so unnerving and the business climate is still so terrible for entrepreneurs.”

    While Angel and VC funds may be available to worthy ventures, the fact is that many a small business is now close to no longer being in business because there is no money coming forth to support normal business activity from the banks and that has a great deal to do with the way Congress is, and has been, handling the situation.

    Of course, this is also a subject for another thread but since the topic was raised here, we answered here.

  • http://blog.dylansalisbury.com/ Dylan Salisbury

    I agree with the benefits to the community.. what's your vision of how this is funded and the return for investors? Seems like you have at least these options:

    1. Funded directly by tech industry insiders who receive additional value by extending their reach. This is great but it limits your investor pool and excludes professional real-estate investors, right? PNP may fall into this category.

    2. Profit-making enterprise: Attract traditional sources of capital and offer high returns. Higher overall rent per square foot, extra source of revenue such as remote NOC, hosting, legal referral, etc. Sounds too risky for real-estate investors, too low-growth for other investors?

    3. Non-profit: This opens up lots of funding options, and you can attract a management team of industry insiders who benefit from deeper industry involvement.

    4. Something closer to being a seed VC: Take a chunk of equity from each tenant? Screen their business plans? But then you might as well be a TechStars or Y Combinator?

    Which is these do you have in mind, or am I totally missing the business model?

  • http://twitter.com/gavindoughtie Gavin Doughtie

    As somebody who slogs the 30 miles from Pasadena to Santa Monica most days, I think the accretion of tech on the west side ignores some of the realities of Los Angeles geography. There are no convenient train lines there, and the traffic flow in and out is dreadful. That means that the rich technical expertise that falls out of Caltech, JPL and Harvey Mudd tends to stay in the Pasadena-Monrovia end of things (or rides the vanpool with me). Downtown LA is a lot more central and accessible, but it may be too late to fight the west LA momentum.

  • http://twitter.com/BrianQPham Brian Q Pham

    Mark,

    Recent UCLA grad here. There's actually an incubator on the UCLA campus in the CNSI building.

    http://www.cnsi.ucla.edu/staticpages/incubation

    It houses 8-10 startups and offers 2000 sq ft. of space each. Currently none of the startups are software companies and are all developing UCLA IP. However, UCLA doesn't take any equity in the companies.

    I've never been there, but from what I'm reading it seems that CIC is actually leasing an MIT owned building. I wonder if we could work something out with UCLA to do something similar or maybe expand their existing incubator. I think something in proximity to a university would be great for students (exposure to startups) and entrepreneurs (free interns) alike.

    It really is one of my dreams to see a thriving LA startup scene and I would love to work with you on this if you'd allow it. Although I don't have specific experience in starting incubators, I would be dedicated and could be your arms and legs since you do have a day job (blogging of course).

  • http://twitter.com/joeSMIgroup Joe Patrick

    Hi Mark,

    Sorry, I'm a bit late commenting on your post, but I have been to CoLoft for the TechCrunch MeetUp and had a great experience. I had the chance to talk with Cameron and some of the other companies that regularly work there and heard nothing but positive things. In fact, I'm lobbying to get a CoLoft here in Orange County (where I'm at.)

    However, I stumbled on this site the other day: http://www.blankspaces.com. I tried to read through all the comments but didn't see any mention. I have not had a chance to see it in person, but I wanted to share.

  • Katchison Atchison

    Hi Mark,

    I like your summary of the advantages of co-location. Our faculty are reporting those exact benefits for first entrepreneurs in the UCLA CNSI incubator. If you haven't been over to see our first step incubation strategies, please give me a call and come visit. We are also very interested in a next size up co-location set-up on the Westside, and several people are looking at the possibilities. If others are as well, let's discuss.

    Kathryn Atchison, UCLA

  • 165street

    @msuster – is 12,000sq ft in van nuys big enough and not too far out of the way? i know it's not weho (where i live) and it's not as glamorous as santa monica, but it's a fully wired building (t3) and built out for over 100 stations in multiple kinds of configurations. it's right off the 405 and near the orange line.