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While crawling the questions being asked here, I saw that the question of the office space seems to be very important for many founders.

As an investor (in the most global sense), I think that real estate is a good way to invest safely my money. But I also think that investing in startups is a risky but more profitable way to do it. So I think that I can maybe find the best of the two : investing in startups but lowering the risk with real-estate.

So now, my question is the following :

Are you (you=founders of a startup) ready to give some equity to someone that will give you a comfortable office space (let's say room for 10 persons), with internet access (fiber or high-speed access), printers, meeting room (shared with a few others startups) and reception service ? This would be only for a limited time (2 or 3 years typically).

And what will be the typical percentage of equity that you will be OK to give for that ?

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2 Answers

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I kinda agree with @tim, expensive rent on its own.

The times I would consider it:

  • If the rooms were very nice and made us look better than we otherwise could (and it was a face to face sort of business)
  • If the % you take is very low
  • If the rooms helped me attract good developers because of the cool working evnironment / location.

What you could consider however is doing a midway point.

Have a look at the business incubator concept, this would involve putting some more time into helping out the businesses but if you could offer this (or find someone who can play that role) then you might have something.

This way you would be adding value to the bueinsses something like:

  • Find an IT crew which can service them all as a single client (shared cost)
  • Find a legal, accountant, book keeper etc who is prepared to do the same. Long term its good for them as they will be the default choice as the businesses grow.
  • Find bsuiness advisors and financial planners who are wiling to help the businesses as group.

THEN, you could hope to "put something together" which would be of significant value.

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A lot of good ideas, thanks. – Sylvain Peyronnet May 3 '11 at 8:23
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I would not give equity but MIGHT treat it as a convertible note. That would be VERY expensive rent.

You are targeting the wrong size company - room for 10 people implies a substantial amount of burn rate/money already. Those folks would have the money to lease and highly unlikely they would be dumb enough to trade equity for something like space.

The 2-3 year limit is a red herring too - the business would likely fail or take off by the 3 year mark. Providing internet access is no great deal - one gets taht for free from any coffee house or library.

Most companies don't need printers or receptionists...

You have to think about this a little more - can you provide anything else aside from space?

If I were you I'd try to start something like an incubator ( TechStars )

Perhaps hold a business plan contest and provide free space for a year. Again, you really need to provide more than space though to make it worthwhile to people (and to attract the kind of company you actually want to be part owner of)

Keep working on the idea.

EDIT

One more idea

Contact sevice providers like grasshopper or RingCentral or WebEx or other services that have appeal to small businesses but cost some money they might not have - suggest that they bundle their services in a (free for now) package that you can offer with your incubator. Same thing with legal and accounting and banking services. Sell those service providers on the idea that giving free intros for a year or two while companies are in their infancy can result in years of loyal customers.

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Maybe I should consider giving the service as a bonus to a standard (=money) investment ? – Sylvain Peyronnet May 3 '11 at 4:31
What service? Again, you need to think this through more and make it something people will line up for - not just another commodity. Anyone can rent some class B office space - make it DESIRABLE and scarce. – TimJ♦ May 3 '11 at 13:54
when I say the service as a bonus, I mean for example investing 100k€ AND "giving" for free the office space. – Sylvain Peyronnet May 3 '11 at 20:40

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