Portland, Ore., has had more than its fair share of trouble from the current recession — it’s seen the biggest drop in employment of any metro area in the country, with jobless rates clocking in at a dismal 12.2 percent in June. But despite the gloomy picture, there are some sunny spots — notably the city’s coworking spaces.
While it remains to be seen whether coworking spaces can be profitable, the founders I spoke with in Portland say they’re up to the challenge. Many learned a valuable lesson from Portland’s first coworking space, Cubespace, which closed its doors last month. The company reportedly made several business missteps, including its monthly lease, said to have been an eye-popping 15-year, personally guaranteed agreement. Its successors, meanwhile, say that by balancing real estate costs, unearthing additional revenue streams, and feeding specific communities’ needs, their coworking spaces will be around for many years to come. Here’s a look at three of them:
Souk: Coworking Basics
While the now-defunct Cubespace was Portland’s first coworking spot, Souk wasn’t far behind. Opened by Julie Duryea in January 2007, the event- and meeting-friendly space caters to what Duryea describes as “varied and colorful a community” as the open-air markets from which Souk takes its name. This broad-market approach has slowly borne fruit: last year, the company broke even, with a revenue mix from memberships ($275/month, full-time), drop-in desk use ($35/day) and meetings. While the economic downturn has pinched meeting revenue to the point that the company will likely slip back into the red for 2009, Duryea says she’s seeing a slight rebound in meeting space use.
For workers, Souk offers the most standard services of its Portland peers. In addition to the coworking basics — power, Wi-Fi, water, coffee and snacks — Souk hosts events, workshops and classes for its members, and helps them access local resources. “I can see how it’s easier in this city to start up such a thing,” says Duryea. “It’s more manageable size-wise, and there’s a big community of creative class workers.”
NedSpace: Coworking as an Incubator
Futurist Anthony Townsend told BusinessWeek in June that the explosion in web working is creating new kinds of “knowledge ecosystems,” and an ecosystem is a good metaphor for the model being pursued by Josh Friedman and Mark Grimes. The founders of 6-month-old NedSpace aim to separate their coworking space from the Portland pack with a focus on fostering collaboration among high-growth, early-stage startups, rather than independent contractors and freelancers. Currently, NedSpace has 40 companies (encompassing 64 individuals) sharing one 7,500-square-foot space, with a mixture of open-area and dedicated desks ($275-$375/month), as well as open and closed-door offices ($575-$975/month).
In addition to memberships, NedSpace generates revenue from partnerships and sponsorships. As one example, Friedman says he’s currently negotiating with a wireless Internet provider to sponsor free bandwidth for NedSpace; when companies “graduate” out of the coworking space into offices of their own, the provider would offer discount services for their new location. The model is an ingenious way to attract companies that hope to someday graduate, while also appealing to sponsors who want early access to future paying customers (sort of a B2B version of advertising to children).
Friedman, who says access to investment capital is a major limitation of doing business in Portland, also hopes to attract investor partners to NedSpace. Both Friedman and Grimes have experience starting and raising funding for businesses, and Friedman says they have successfully connected four member startups with angel investors. “I know who works hard,” he says.
According to Friedman, the company has been profitable since its third month and will open its second Portland location in August. The company is also seeking to expand its efforts further, with plans to open a third Portland location and a Seattle space in the months ahead. In the future, Frideman envisions NedSpace as a YCombinator-meets-coworking arrangement, and is currently seeking an Entrepreneur-in-Residence to staff the Seattle location and provide advice to member companies.
The Hive: Coworking as Culture
The latest addition to the Portland coworking scene, the Hive, is set to open on Sept. 1, 2009. While other coworking spaces are independent businesses, the Hive is part of the Leftbank Project building in which it’s located. A new green building in Portland’s Rose Quarter district, it features a wide range of office spaces for sustainability-minded businesses, such as software startup FMYI, Upright Brewing Co., consulting firm Blue Tree Strategies and several green design firms. The building is a vertiable rabbit warren of likeminded businesses, and the Hive is an attempt to extend the philosophy down to the micro level, says small business consultant Christian Allen.
“It wasn’t started as a business idea; it was more of, how can we feed this vision? How can we create more community?” says Allen. “I think it will definitely be challenging.” Still, the Hive is well-positioned to compete in the Portland market. It provides the basic coworking amenities with a green twist and competitive rates: individual dedicated desks, which include access to community tables and conference rooms, go for $350/month.
Allen says the community will also play a large role in establishing a long-term business model for the Hive. As needs arise, Allen — who coordinates the Hive as part of her participation in it — says members will collaborate to create self-sustaining solutions for themselves.
This article also appeared in BusinessWeek.com.