The new era of entrepreneurs enjoys a unique perk in startup incubators, office spaces that cater to new companies through open layouts and collaboration-inducing services and events. And, yeah, they’re cheap.
Peter Chee is sailing through Thinkspace, singing the virtues of his Redmond incubator. He has spent the past half hour preaching the value of entrepreneurs working in proximity to other entrepreneurs in a place where individuals and ideas commingle. It seems there’s nothing that disturbs Chee in his new-age office Shangri-La.
Until he sees the copy machine.
“I hate that thing,” Chee says of the $15,000 Ricoh he bought in 2007. “I had to sign a five-year lease on a copy machine, and I had to put down collateral because my business was less than 2 years old. I was like, you’re going to come after my house for a copy machine?”
Chee’s distaste for the hardware represents one driving force of the incubator craze: Buying a copy machine is a nuisance, so entrepreneurs are letting somebody else deal with the hassle and absorb the cost. The same goes for chairs, Wi-Fi, and desks. And startups are paying for them through low-priced short-term leases. But incubators are about more than walls or even what’s inside them — they’re about kicking down some of the traditional barriers to starting a business.
Cheap real estate is one reason a startup might make its home in an incubator. On average, a 1,000-square-foot Class A office on the Eastside rents for about $2,500 per month, whereas 24/7 access to either a private office or coworking space in an incubator costs around $150-$500 per month. Even so, the true strength of incubators lies in their cavalier ideology — the notion that all you need to start a company is a laptop, Wi-Fi, and a collection of intelligent people surrounding you.
“In the startup ecosystem, incubators are fundamental in terms of that early process of getting startups on their feet and going,” says John Sechrest of Impact Hub, which is renovating its Kirkland location. “All the people that build things like you are there, so it’s a richness of resources in one spot where you can try a bunch of small experiments and in a few weeks get farther than you would in six months in your garage.”
Incubators have been around since the ’60s, but their focus on startups is a relatively new phenomenon. According to the Commercial Real Estate Development Association, the number of startup-oriented incubators in the U.S. grew from one to 781 between 2005 and 2013. The trend was quick to catch on in Seattle, where there are 21 startup incubators, according to the CoworkingSeattle wiki.
The movement is taking hold on the Eastside, too. Thinkspace, the first Eastside startup incubator, has been joined in recent years by The White Board in Issaquah and Eastside Incubator in Redmond. Impact Hub is in the process of opening a Kirkland location, and area companies and cities also host incubators.
Solo contractors and remote employees use the coworking spaces offered by most incubators, but it’s startups that benefit most from their offerings. While traditional office leases are usually a year — a timeframe during which a startup can rapidly expand or fail — most incubator memberships are monthly, and many host events that feature area CEOs or other startup founders who discuss pertinent topics. Many have partnerships with accelerator programs that offer mentorship and/or funding for select companies.
More important than any event or service, though, is the proximity to like-minded individuals with similar goals. For example, there’s the Thinkspace office occupied by Trent Scott — a 24-year-old running a website analytics service — and Meetul Shah, a former Microsoft employee working on his third startup.
“Just watching other people in a similar boat as you do other things, you learn the recipe for success. That’s the value of coworking,” says Scott, who started Rainleader in a spare bedroom and moved to Thinkspace initially just to have a mailing address. “You can piggyback on each other and go through the same problems, the same successes. My company grew to $1 million in revenue, and it wouldn’t have happened if we didn’t get in an environment that is friendly to entrepreneurs, an environment where you can scream and yell and everybody will understand.”
That empathy is pervasive in incubators. Many tenants have started multiple companies with varying levels of success, and landlords often have tried their hand at a startup or are in some other way involved in the startup community. The result is a continuous flow of tested ideas and the opportunity for cash-strapped companies to receive pro bono advice.
“The problem you’re trying to solve with a startup might be unique, but the challenges you might go through are not unique,” says Shah, the founder of iDataLabs, which provides users with targeted marketing data. “Should you form an LLC or a C corp? How should you do your marketing? How do you do sales? Should you do a convertible note? Should you do a series A? All of these questions facing entrepreneurs have been answered before, and if it’s done right, a coworking space can answer these questions right away.”
All incubators share the same basic goal of assisting startups, but each Eastside location has found its own niche. In 2011, then-Microsoft employee Matt Dyor wanted a place to work on a software startup outside the Redmond campus. He didn’t have the know-how to go at it alone, and the industrial diversity of a traditional coworking space wasn’t appealing — a salesperson working remotely can’t help much with programming bugs — so he founded Eastside Incubator as a space devoted to early-stage software startups. He now works full-time managing Payboard, the startup he founded at Eastside Incubator.
“You’ve got the concept of college. There are people who are smart and can give you a different perspective, and you trust them,” Dyor says. “With a startup, it’s either you going at it alone or there’s somebody else with you, but that somebody else has a different skillset than you. So you lose a lot of your ability to get critical feedback on your thinking and your plans. Having a coworking space and people who are building similar projects gives you a chance to get some of that back.”
Eastside Incubator prioritizes the needs of the early-stage software startup. Its coworking space is a large, wide-open garage with utilitarian furniture. As a result, Eastside Incubator is cheap — $150 a month for a full membership — and offers the fluidity required to foster the collegiate atmosphere Dyor was looking for. But other incubators have taken different approaches. Thinkspace eliminated coworking space in its Redmond office, opting instead to fill private offices with startups that are deeper in their life cycles. It still offers events and services that foster interaction between members, but the atmosphere is decidedly less congenial than coworking spaces.
Though the character of each office differs, Eastside incubators share a demographic that is different from Seattle’s.
“In the Eastside, you’re basically competing with people’s garages and spare bedrooms,” says Adam Gering, Eastside Incubator’s managing director. “In Seattle, you have more young people living in apartments. Over here, we’re dominated by people coming from Microsoft who have kids.”
If the experience of Seattle and other cities is any indicator, incubators will quicken the pace of Eastside innovation. As more people — be they young, first-time entrepreneurs or mid-life Microsoft vets — partake in the advantageous friction of sharing desks, conference rooms, and kitchens, ideas will merge and businesses will form. Those businesses could grow into billion-dollar companies, or they could fail in a year or less.
But at least they didn’t have to buy the copier.
Editor’s note: An earlier version of this story misstated the company Trent Scott founded.