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Go It Alone or Join the Pack?

As the founder of a new startup, you will be faced with myriad decisions early on, many of them crucial. One of these is where to set up shop, and it is likely that you will be advised to go with one of four options: working at home, a coworking space, an accelerator/incubator, or moving directly to your own leased office space. Although you will need to choose one of these, it might be good to remember the old adage “always look before you leap” before making the move. Taking a realistic look at which stage your company is in, and what resources are needed to keep it afloat is a good beginning.

Who am I?

It may be that your startup is still largely a pipe dream. It’s the result of an “aha moment” you had upon waking one morning (an Uber service for seniors that features self-driving cars that take them to the doctor, shopping, or lunch with a friend). The idea has potential, but at present the only funding you have is the paycheck you get from your day job. The good news is that with a big idea like this, time is likely on your side and you can take a more pragmatic approach to moving forward. Although no one can shake your faith in where this dream will ultimately take you, it is obvious even to you that you are not ready for prime-time. The only sensible thing appears to be to work from home, at least for now.

Now envision another scenario. You have a startup where the concept has some real traction. You have a plan, a prototype that has taken shape, and you have begun outsourcing some of the work to contractors. Your funding is a bit more secure. You’ve been bankrolled by Mom and Dad, a rich college roommate who just sold his first startup, or a good friend who thinks you will make it big one day and can’t say no to any idea you have. At this point you have some momentum, and although working at home still makes sense, you may want to consider a coworking space or an accelerator as a next-step alternative.

Finally, let’s suppose you’re one of the lucky ones. You have a minimal viable product and you have convinced a team to join you. The company has closed its first “smart money” from a sophisticated group of angels or a seed-fund, and several later-stage venture capital firms are starting to show an interest. The pressure is mounting though, since you are late to the game in a full-on horse race and the competition is flush with cash. It’s a sprint to join the front of the pack and success requires you run like a three-year-old named American Pharoah. You’re doing well enough that you now have 12-15 permanent staffers. You need to continue growing the company quickly, but your size means that you may well have outgrown the benefits that come with a coworking space or an accelerator. At this juncture it could make sense to look for your own space to lease, especially if you can find something that is centrally located and has conference rooms and a quiet place for developers and salespeople to work.

What do I need?

Assuming you’ve analyzed your situation and are confident it’s the right time to move forward, the question then becomes which type of arrangement works best for your company. Taking a closer look at the options may help with that assessment.

Your first option, working from home, can have a number of benefits. Given it’s the right set-up, you have a quiet, distraction-free zone where you can save money, be fueled by free coffee, and work at your own pace. If you need a short break, you can go for a quick run or do a few chores before returning to the hundred-and-one items you have on your plate for that day. On the flip side, as your startup grows and your work intensifies, your family’s need for space may begin to conflict with your own. When this happens, it is often best to move out of your house or apartment and into a working space where you can take things to the next level.

Coworking Space

A second choice is a coworking space, where there are many venues to consider like WeWork, Impact Hub, or Techspace, some of which have locations in cities around the world. These companies will provide resources, inspiration, and collaboration to support your startup. There is a rental fee, but the trade-off is that there is a great opportunity for peer-to-peer mentoring. In this set-up you remain the sole decision-maker for your company, which may be as important to you as it is to many entrepreneurs.

Accelerator/Incubator

If the first two still don’t seem the right fit, you can take a look at a third option which is an accelerator/ incubator (as they are being referred to today). Here, too, there are many well-known companies from which to choose. Y Combinator, 500 Startups, Techstars, and Idealab are good examples. To be considered by one of these groups, you have to file an application, and the process is usually highly selective. If you make the cut, you are given a small amount of seed money to invest in exchange for anywhere from 3 to 8 percent of your company. Since the goal of the accelerator is just what its name implies---to help your company grow quickly---the time you are expected to spend with their team is, on average, about 90 days. During this period you are provided with resources, space, and the advice and guidance of mentors. In many cases you are also given access to reputable angels and venture capital firms that you probably wouldn’t have if you were on your own.

Leased Space

Finally, let’s say you’ve decided to sprint and your team desperately needs a more private and professional work environment. This is the time to look at the fourth option---leased space. This can be a very complicated and time-consuming process, so you would be well-advised to get professional advice before charging off to look on your own. Money-wise, a leased space can make good sense. The math shows that as you grow, the shared-space model, especially in places like Silicon Valley, is often more costly to you than having your own space. For example, “seats” in a shared space average about $500/person, so at the point in which you hit 15 full-time employees, you’re paying $7500/month for a work environment that may or may not be in sync with your team’s emerging needs. If you can lease a space for $5000/month---taking into account an additional $1500 for expenses such as internet connectivity, coffee and snacks, and basic insurance---you’ll still reduce your monthly burn-rate and have a better working environment for your team as well.

In the startup world, where and how you choose to work is crucial. In order to make an informed decision, it’s important to understand what space options are available. Even more essential though is to have a clear picture of your company---its stage, its resources, and its time-to-market considerations. Ask yourself: Do I have a pipe dream or do I have a promising business idea that’s ready to take to market? Am I relying on my paycheck or do I have outside funding? Must I sprint to the finish-line or can I “slow bake” the product or service idea? Once you have answered these questions thoroughly, you can feel much more confident that whatever decision you make about working space will be a good one.

Coming Up: The next article in this space series will profile several well- known companies that offer different space options, by giving you an insider’s look into the inner-workings of their respective organizations.