Vancouver's Workspace closes

[Sasha V]

I'm very saddened by the news that Workspace, an early adopter of
coworking, is closing its doors this week. Their blog gives some
explanation on the situation before the new owner took the place over
last year and what happened with the recession since then.

Any thoughts out there? Any positive "screw the economy" news out
there??

Sasha Vasilyuk
Sandbox Suites
www.sandboxsuites.com
@SandboxSuites

[Chad]

We're finding the "recession" has only heightened the need for low
cost office solutions. The biggest need is promotion and education.
Once the single worker understands the opportunities to start over
outside their home they will come. We're just getting going and
hoping to also tap into the City's initiative to invest in the
creative class.` Loking forward to hosting a JELLY this month and a
grand opening in the Fall along with a artist install. We're starting
small - creating the need and then grow with the ever increasing demand.

Chad
www.thecreativespace.ca
Barrie Ontario, Canada

[Patrick Tanguay]

Argh. That sucks, loved the Workspace :(

Where did you find info? Can't see a link to the blog anywhere. Or am
I blind?


Patrick
http://station-c.com

[Alex Hillman]

This is really, really sad news. I only visited workspace for the first time in this past year, but it's always been an inspiration from a space design/utilization standpoint for me. I met with Dane while I was there in February, and have the utmost respect for him, his approach, and his involvement over the years. 

I can echo that we've continued to grow despite (or thanks to) the recession. Great things are happening for many of our members, and we seem to be coming out of a slight summer "lull" of activity and our office has been teaming with people for the last 2 weeks. 

We, and transitively, the entire scene, has seen a rejuvenation underway for the fall. Barcamp planning is underway. New event ideas are springing up every day. Peoples' businesses are taking off. Things are *good* right now.

Now, the hard discussion. I hope nobody thinks that I'm crass in bringing this up so quickly, but I kept quiet after the last significant space closing hoping that someone else would bring up these issues, and they were not approached. This is where things get hard for coworking. Bad things will happen. My heart hopes that no bad things happen to anyone that any of us know, but it's inevitable, and healthy.

My thesis is that in order for coworking to be truly mainstream, it needs to fulfill both successes and failures. Like, massive successes. And colossal fuck ups. Coworking will *never* find its way into business textbooks until both sides of the scale have been tipped. We need case studies from both ends of the spectrum to study the longevity of this business concept, this movement, and this way of life. 

What strikes me as a valuable lesson with the Workspace closing comes from the e-mail they sent to their members:

http://www.techvibes.com/blog/vancouvers-workspace-to-close-doors-this-week

The new owner mentions that they took on workspace's pre-existing debt as a public service, and I have to imagine that even making it just past break even while sustaining any amount of debt is bad for the spirits of the management team, which trickles down to the membership.

This reinforces why we believe so strongly in bootstrapping. Spend money like you don't have any. One of my favorite lessons/stories from Geoff is how he runs his businesses as if there was a recession all the time, so when there actually is a recession, it's business as usual.

Taking on debt as a public service is a bad move. You're not helping anyone in the long run. There's an immense value in remaining introspective and purposeful with your coworking space. There is no value in a space that's packed full of amenities, but accrues more debt than members.

Furthermore, I think it's interesting that Workspace kept the problem from its' members. I won't speculate why because that's unproductive, but it certainly makes me think how I would approach things if we were in hot water for any amount of time. 

In recent months we've seen the fall of two longstanding coworking spaces: Cubespace, and now Workspace. Both were large spaces, with significant communities that called them home over a long period of time. Cubespace let their community know that there was a problem, but only after it seemed too late. The community's response was positive and supportive, but wouldn't support as more than a band-aide. Workspace shocked its members with an abrupt notice. Ripping of the band-aide, to continue the metaphor. 

I'm frankly not sure which I prefer, and while I hope that I'm never in the position to make the hard decision that those space owners made, I hope we can all learn from the things they've done during their time open. 

I hope that we can have this discussion out in the open, candidly and intelligently, and all turn this disappointing news into something we all can reflect on.

-Alex

--
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--
-----
Alex Hillman
im always developing something
digital: al...@weknowhtml.com
helpful: www.unstick.me
visual: www.dangerouslyawesome.com
local: www.indyhall.org

[Chad]

here's one
http://www.techvibes.com/blog/vancouvers-workspace-to-close-doors-this-week

[Susan Evans]

Alex, awesome breakdown, as always.

I'd add that there is a really interesting article posted here -
http://www.strangelyentangled.com/2009/08/19/vancouver-workspace-co-working-facility-closing-not-surprised/.

Most interesting to me was this little bit from the author:

"What does surprise me about Workspace’s closure is how it caught the
rest of the Vancouver tech community off-guard (at least, those
posting to Twitter about it). Did they not see this coming? I love the
tech community in this city, but I have to say that it reminds me of
the good ol’ pre-dot-com-crash days in Ottawa. Lots of parties &
networking events, but not much in the way of substance."

Having never been to WorkSpace I can't speak to the validity of this
statement as it applies to the Vancouver coworking spot in particular,
but it has been a really interesting point for me to stew over all
day. How can we be sure that, as a coworking space in Seattle, we are
providing more than just networking oppotunities and parties (which we
do, of course, provide) and can ensure substance for our members? So
many spaces are leading the way with events that contribute to the
health of members (we call 'em "quality of life" events at ON, though
we haven't held a ton of them just yet), but will this be enough to
provide the substance that independents need in order to grow, thrive,
and in turn support the coworking spaces that house them? How can we
be sure that we are contributing enough and in a sustainable enough
way to ensure our survival?

I think each space comes about this question in their own way, but the
closure of WorkSpace sure is spurring my mind even more about what
more Office Nomads can do each day to support and grow our membership
so it can support itself as well as Office Nomads staff. I am
reminding myself to continue engaging with the amazing community
partners we have here in Seattle and spreading the word about changing
the way work gets done in our city.

As always, my thoughts return to the simple saying I have posted to my
desk: "People support what they help to create." Alex I think this
just high-fives what you were saying about member involvement (even
when you're involving them in your challenges). That is, if you can
high-five with sentences. I'm hoping we can. ;)

Great discussion, great debates, and great sadness felt at the closure
of another coworking space. WorkSpace crew, our thoughts are with
you.

Best,
Susan
__
Office Nomads
http://www.officenomads.com



On Aug 20, 5:21 pm, Chad <c...@rhubarbmedia.ca> wrote:
> here's onehttp://www.techvibes.com/blog/vancouvers-workspace-to-close-doors-thi...

[Alex Hillman]

I love high fives.

>> here's onehttp://http://www.techvibes.com/blog/vancouvers-workspace-to-close-doors-thi...

>>
>> On 20-Aug-09, at 7:56 PM, Patrick Tanguay wrote:
>>
>>
>>
>> > Argh. That sucks, loved the Workspace :(
>>
>> > Where did you find info? Can't see a link to the blog anywhere. Or am
>> > I blind?
>>
>> > Patrick
>> >http://station-c.com
> >
>

--

[Tara Hunt]

That IS sad. :( But I wouldn't attribute it to a recession or a boom. Just a space that isn't continuing. And there could be all sorts of other reasons not talked about. 

Citizen Space has been through ups and downs over the years - and I've even had to personally bail it out multiple times, but I have the energy to do it. Perhaps the owners of Workspace moved onto other things?

T

--
tara 'missrogue' hunt

Book: The Whuffie Factor (http://www.thewhuffiefactor.com)
Blog: HorsePigCow: Marketing Uncommon (http://horsepigcow.com)
Twitter: http://www.twitter.com/missrogue
phone: 514-679-2951

[Patrick Tanguay]

To Alex's point about debt; bootstrap is certainly safer but in the
case of Workspace it wasn't dept, it was massive debt that did them
in. I don't know what the state of the debt was when Bill sold or when
they closed shop but if I remember correctly, the setup was in the
180K range. (From memory, seen in an article on the wall at Workspace
(interview with Bill))

For Station C we did get a loan but it was a minute fraction of what
Workspace was facing. We managed to pay it back in less than a year
and a half, it was planned for four years. However, we've done all the
work, like most coworking spaces, for free. Workspace was a business
with employees (great ones but still an expense). Dept + salaries;
those are two big charges.

If you can bootstrap, do. But small scale loans can help you work the
whole thing without dipping in your personal savings. SMALL scale
though. And try operating as long as possible as a hobby, get payed
help only when absolutely necessary and workable within budget.


Patrick

[Tara Hunt]

It's a good lesson, though. Build slowly. I never took out loans, but used my personal $$ to invest. Even so...over a 2.5 year period, there has been about $40k invested personally (from myself, Citizen Agency and now Hillary Hartley). 

T

[Alex Hillman]

Right. I'm not saying don't spend money, but work iteratively.

We (Geoff and I, specifically, but many of us on this group) take the concept of "agile" for granted, because many of us work in software. If you're not familiar with the iterative process as related to planning, check out this video Geoff and I shot at SXSW09:

http://www.indyhall.org/blog/2009/04/07/indyhall-201-the-iterative-process/

-Alex

 
--
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--
-----
Alex Hillman
im always developing something
digital: al...@weknowhtml.com
helpful: www.unstick.me
visual: www.dangerouslyawesome.com
local: www.indyhall.org

[Patrick Tanguay]

100% agreed. In many ways coworking is open source in meat space (the
real world). Iterations, collaboration and needs grassroots commitment.

[Jerome Chang]

I've been telling some people that it's open source real estate, or
wiki real estate.


Jerome
______________
BLANKSPACES
"work wide open"

www.blankspaces.com
5405 Wilshire Blvd (2 blocks west of La Brea)
Los Angeles, CA 90036
323.330.9505 (office)

[Cadu de Castro Alves]

Big companies close. Why not a little coworking space could?
Bad news, because I'm going to Vancouver in the next year and I'd like to visit their coworking spaces. =(

[]'s,

Cadu de Castro Alves
Web Developer
Blue Factory Solutions
Mobile: +55 21 7841-5020 / ID: 23*34315

[Alex Hillman]

I dig that. 

--
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--
-----
Alex Hillman
im always developing something
digital: al...@weknowhtml.com
helpful: www.unstick.me
visual: www.dangerouslyawesome.com
local: www.indyhall.org

[Sasha V]

Bootstrapping is great, but it's impossible to start a business
without putting in personal savings or taking out a loan. We did both
when we opened, but all the work was done ourselves like in many other
spaces

I'm glad to hear Alex's enthusiasm for the fall, but I wanted to share
that we've also been seeing an unprecendented amount of tough
financial situations our members are facing - whether it's losing
investor money, losing big projects or just being late on payments.
The recession is definitely a huge factor - I think while I'd normally
agree that there are more entrepreneurs in tough economic times, it's
just not the case this time around. In fact, I'm seeing more
entrepreneurs turning back toward stable jobs.

Anyway, don't want to be all 'gloom and doom' :) Our space has been
busy the last couple of weeks and I hope that's a good sign for the
fall!

[macewen]

Re. debt load etc.

When I opened workspace in 2006 the idea was to get some size, a large
member base and some economies of scale. I had hoped to expand to
other cities thin a year. It was definitely a risky go big or go home
move. At the time, co-working was very new and we had little to go
on. Queen Street Commons and some small spaces that could. I was
also quite young (25) and didn't have much experience with finance.
Since selling the business last year, I've been studying finance at
Babson, as you can imagine I've done a considerable amount of
reflection on how I could have set things up differently.

This is one of those businesses where you have to take on a
significant amount of operating leverage to make it work. Operating
leverage is not necessarily financial leverage, it just means that you
need significant amount of relatively fixed assets in order to open
the doors. In this case, space, furniture & likely some renovations.
Other businesses where the costs are more variable (make widget for
$5, sell for $6 & repeat) are lower risk and allow you to work your
way in much easier. You've mentioned that there are ways to
bootstrap, and I think that's an awesome approach. That said I didn't
fit our strategy, which was to get big fast.

If I were to launch again, with the same expectations for growth, this
is what I'd do differently:

1. Get an equity partner
Equity financing would have substantially reduced our need to service
debt in the short run. The day we opened our doors, we started
repaying the loan. Having someone onboard with patient money who was
in it for the long run would have freed up a lot of cash. That debt
to equity ratio was certainly my biggest mistake.

2. Extend the term of the loan
We were on a 5 year loan, which made monthly principal payments quite
substantial. Extending the term to 5 years would have made more
sense... particularly if we would have had an equity partner.

3. Partner with a landlord
The biggest expense in coworking is almost always going to be the
lease. Generally, lease payments are fixed, but sometimes your able
to negotiate a % of revenue instead. Doing this would drastically
reduce the degree of operating leverage by making your biggest costs
variable. It's tough to do this in a tight commercial space market
like we have in Vancouver, but if your timing is right you could make
it happen.

4. Manage, don't own
A hybrid of the partner with landlord and equity partner approach
would be to funnel all the revenue out to the land owner (who would
own the business) and to operate as a management company instead.
This is how most hotel operations are financed. It's extremely low
risk for the operator, high risk for the landlord. As a result the
potential returns are much lower... but it's stable. We looked
extensively at structuring a similar deal in a 5 story office building
downtown, but ultimately turned it down because we didn't feel the
market could support it.

In sum, these were great lessons to learn. On a personal level I did
just fine financially. Our loan was 90% guaranteed by the government,
so there was never too much exposure for me. We did take WorkSpace to
break even ~75 members and managed to find a buyer for the business.
I wish that buyer had invested more time into the business. Instead
he chose to move to another city and work on another project after a
few months, but that was his choice.

I believe that there is still huge demand for co-working, but any
business where buyers have so many substitutes is going to be a
difficult one. The only way it will work is if you succeed in
building not just a space, but a club. I think we were very close to
that.

Good Luck,

b.

On Aug 21, 9:35 am, Alex Hillman <dangerouslyawes...@gmail.com> wrote:
> I dig that.
> --
> -----
> --
> -----
> Alex Hillman
> im always developing something

> digital: a...@weknowhtml.com

[Jerome Chang]

a tweak: "open source real estate for techies" or "open source real estate for the tech community"

J

______________
BLANKSPACES
"work wide open"

www.blankspaces.com
5405 Wilshire Blvd (2 blocks west of La Brea)
Los Angeles, CA 90036
323.330.9505 (office)

[Erica Douglass]

I think coworking is at an interesting juncture. The commercial real estate
(CRE) market is about to tank, and it will take commercial rents with it.

Unfortunately, many of the current coworking spaces signed leases in the
middle of one of the largest CRE bubbles this country has ever seen (if not
*the* largest.) Deflation hit individuals much faster than it hit CRE; thus,
there is a disconnect.

A couple years down the road, some foragers are going to pick over the
commercial real estate market and buy-in (or lease-in) at fantastic rates
that will make coworking make sense. But right now, you have landlords in
total denial and entrepreneurs unable or unwilling to take on new financial
commitments. These recent failures won't be the last.

The day you hear of someone needing only 5 members or so to be profitable on
a large space, who already has 7-8 signed contracts from lessees before the
space opens, is the day you know CRE in that locale probably won't drop much
further. But Vancouver? San Francisco? Many of these places still have 50%
or more to fall.

Space owners should seriously consider renegotiating now, and not signing
any leases longer than a year or two. Leases should not contain any
provisions for "inflation" or rate hikes. Potential space owners should wait
it out until demand bubbles over.

My position: Lived in Silicon Valley from 1999-2009; leased two offices for
my company 2004-2007. Interested in starting a coworking space in N. County
San Diego in a few years.

Erica Douglass
Are you on a quest for financial freedom? Check out http://www.erica.biz/
for candid conversations about entrepreneurship, investments, and wealth.

[jasontg...@gmail.com]

Re: Open source real estate...

Jerome, can you tell us what percentage of Blankspaces members are
"techies"?
(Other space owners, please chime in as well.)

I find it's harder each year to delineate tech, media or green as the
concepts become more integrated into every enterprise. Obviously,
there are tech experts and/or consultants who do work for and
collaborate with others. But in a space full of developers, for
instance, there would be far fewer opportunities to network and
collaborate with others who need their services.

The issue I'm getting at is the necessity for diversity, like in any
thriving, sustainable community. (Or financial portfolio, for that
matter.) My view is that the only way for coworking to thrive and
gain mainstream awareness is for space owners to seek out the widest
variety of professions that could add value for their members. I
simply think the exclusive club concept has to become a little more
inclusive. That's not such a scary prospect once you look at the
immense opportunities. There is sustainability and growth in
diversity.

Jason

On Aug 21, 2:31 pm, Jerome Chang <jer...@blankspaces.com> wrote:
> a tweak: "open source real estate for techies" or "open source real  
> estate for the tech community"
>
> J
> ______________
> BLANKSPACES
> "work wide open"
>
> www.blankspaces.com
> 5405 Wilshire Blvd (2 blocks west of La Brea)
> Los Angeles, CA 90036
> 323.330.9505 (office)
>
> On Aug 21, 2009, at 9:35 AM, Alex Hillman wrote:
>
> > I dig that.
>
> > --
> > -----
> > --
> > -----
> > Alex Hillman
> > im always developing something

> > digital: a...@weknowhtml.com

[Chad]

This is a good discussion Jason -should you start a new post?

[Jerome Chang]

I'd say about 1/2, if you include web/interface designers and "online
marketing"/web 2.0. But even one of our entertainment production
firms is "multi-media" as in film, mobile, web, etc. I'm not counting
them in the 1/3, fyi.
Another 1/3 is entertainment, script writers, talent manager, filmmakers
Another 1/4 is other: law, biz mgmt, etc.

Jerome
______________
BLANKSPACES
"work wide open"

www.blankspaces.com
5405 Wilshire Blvd (2 blocks west of La Brea)
Los Angeles, CA 90036
323.330.9505 (office)

[Arron Lorenz]

Hello everyone. This is my first post so I hope i'm directing it in
the correct place.

I'll start off by saying that my name is Arron Lorenz, and I live and
work in Davenport, Iowa. I'm active in technology, I own a wireless
networking/general tech company, I'm an owner in an RV park, and and
working on launching a web design oriented branch. Recently I've been
a lot more interested in the Coworking as a concept and as a tool for
our 5 city community of about 300,000 to help retain local self
starters. I've been blogging about it, and am really hoping that in
the future I can help make it a reality.

As for what brought me here today. I read about this downfall on
Alex's blog, and two things really hit me from it. The first is that
it seems to me that keeping the community out of the management loop
would be a poor decision not reflecting a coworking philosophy. The
second is that I hope to learn something from this downfall. From what
I've read so far this facility had a fairly high level of initial debt
that fell onto a single investor. That investor then attempted to
carry that financial burden alone for too long. I'm not advocating
community control as I believe the buck has to stop somewhere, but too
some extent the facility needs to rely on it's Coworkers as much as
the Coworkers rely on the facility.

To quote Susan "People support what they help to create." For me it's
not even just helping support what they create but for what they live.
It was a bit saddening to read the last couple of paragraphs. Things
like "Work Home", "remove personal items", "empty rented lockers",
"mail forwarding", and "Close down membership." are just some words at
the end of an e-mail but in reality some people just got fired,
evicted, relocated, displaced or whatever you'd choose to call it.
It's hard to understand any justification for keeping this secret. It
would seem to me that if I were a Coworker in this facility I would do
anything I could to help keep my workplace alive.

One of the biggest topics of conversation around my professional group
in regards to Coworking is being able to facilitate a regular,
professional work space. Where someone whom otherwise would be working
from home, and a PO box can have a real stable office environment. Not
finding out you'll need a new place to work from in a week, and
finding out there is nothing you can do about it has to be the worst.
I would be very interested to hear about what the next step is for the
Coworkers who are looking for a new home.

Regards,
Arron
my blog: http://www.arronlorenz.com

> http://www.techvibes.com/blog/vancouvers-workspace-to-close-doors-thi...

>
> The new owner mentions that they took on workspace's pre-existing debt as a
> public service, and I have to imagine that even making it just past break
> even while sustaining any amount of debt is bad for the spirits of the
> management team, which trickles down to the membership.
>

> This reinforces why we believe so strongly in bootstrapping. *Spend money
> like you don't have any.* One of my favorite lessons/stories from Geoff is

> how he runs his businesses as if there was a recession all the time, so when
> there actually is a recession, it's business as usual.
>

> *Taking on debt as a public service is a bad move. *You're not helping

> digital: a...@weknowhtml.com