After a decade working in the technology field in San Francisco, and five subsequent years selling commercial real estate there, Alan Bernier decided mesh his skills by starting a website to match small business owners with Bay Area office space.
"What I found in real estate was that it was not only difficult for a business that needed a smaller space, but more difficult for a broker or landlord to market a smaller space as well," he says.
Soon enough, Bernier also had to practice what he preached.
After starting Rofo.com out of a space he and his co-workers shared with eight other start-ups, Bernier decided Rofo needed a bigger, more official, home. Three months ago, the 10 staffers relocated from outlying San Francisco neighnorhood of Potrero Hill to the pricier – and more business-dense – Financial District.
"Yes, we are eating our own dog food," he says. "We made the site, but we are also using our site. We found a great space for 10 people super cheap in an area that might have been too expensive for us otherwise."
But Bernier will be the first to admit that the Financial District is hardly a good fit for most start-ups. Finding a first home in the promised land for start-ups, the Bay Area, can be daunting – and, experts say, should have as much to do with the nature and personality of your organization as pricing and space availability.
Locating a Bay Area Start-up: Know Thyself
Like the proverbial faith, hope, and charity, let's be real: most start-ups begin at home. Where that home is located might not seem to make a big difference, but proximity to the right influences – whether it's business incubators, inspiring peers, or great burritos and French cinema – can matter. A lot.
Garry Tan, a founder of blogging site Posterous (and a 2010 class member of the Inc. 30 Under 30) has worked from an array of San Francisco homes, shared working spaces, and currently, a formal office. Considering himself an expert on the subject, Tan posted a Google map rich with descriptions of start-up friendly neighborhoods around the Bay Area.
He admits he's posting to advise any "team of two or three startup founders looking for a nice two- or three-bedroom place to live and start the company of your dreams." The qualities he recommends one should look for in a neighborhood are: proximity to the start-up community, ease of access to food, and ease of transit. He also advocates avoiding distractions such as nightlife, friends, or, well, anything that might prevent you from coding all day and night.
"That's one of the reasons I really recommended the Mountain View area, is that you don't have any distractions," he says. "There are great grocery stores, great produce, but it's moreover a great place to shut the world out. And that's the most important thing when you're just two or three guys who just quit their jobs and need to focus."
And some business incubators and funders seem to agree. Tan suggests that Y Combinator has cautioned some start-ups it works with to stay away from San Francisco in favor of less urban – and less potentially distracting – pastures.
If peers who will motivate you to work harder, or stimulate your hacking creativity, are your need, think toward Stanford. Palo Alto is rich with start-ups ("literally buzzing," Tan writes), and creativity. It's also a place dense with street life, but tamed by academia. It's also home to lots of angel investors and venture capitalists.
There are exceptions. Tan's Posterous – after working out of an apartment building's conference room for months, and then a shared work space in the currently swanky former favorite neighborhood of San Francisco Beat culture, North Beach – in mid-2010 relocated to a 3,500 sq. ft. office in the hipper, more central, Mission District. So much for no distractions: their neighborhood is lined with bars, cafes, and late-night taquerias.
"For us, it's not that important for us to be right where other start-ups are. We are pretty freestanding," Tan says. The perks? "Most of us live less than a quarter mile from here. We all like the food and the neighborhood."
Posterous is also consciously bucking a start-up supposition by rooting in the Mission. Much of the social-media crowd is centered around the more industrial, less foot-traffic-friendly South of Market (SoMa) district. Tan figures, hey, if we're making social software, we should be at home in a social neighborhood.
Locating a Bay Area Start-up: Know The Neighborhoods
If you're not fresh to the start-up ground zero that is the Bay Area, you have the luxury of getting to know the neighborhoods of San Francisco and its surrounding areas. Just walking around as much ground as you can cover can acquaint you to the territory better than just online searching, Bernier recommends. But the actual property hunt isn't based on For Rent signs, it's very much on Craigslist and other property rental sites.
The start-up landscape, though carved out during the 90s dot-com boom, has vastly changed over the past decade. While San Francisco's Potrero Hill was a hub of start-up activity, its only now regaining strength as a tech center. Today, among warehouses, cafes, and artists' studios, Zynga is based in Potrero Hill. So is Tripit.
"These tend to be less traditional spaces. There are not high-rises," Bernier says. "They tend to be friendly to animals and pets, and have a very casual atmosphere. And there's actually a lot of parking there."
While real estate is easier to find affordably in Potrero Hill, the bulk of San Francisco start-ups seem to favor SoMa. With easy access to public transportation, including commuter trains BART and Caltrain, companies such as Twitter, Scribd, and Justin.tv call SoMa home. While SoMa is only growing in popularity, and is close to galleries and the San Francisco Museum of Modern Art and Yerba Buena Center, it's not exactly a booming social scene. With more high-end condos and fewer dive bars, the neighborhood is "of of the less human/cultural/social neighborhoods in San Francisco," according to Tan.
Burgeoning areas surrounding SoMa could be an option for start-ups on a tighter budget. Bernier suggests checking out the 2nd Street corridor, where a few media organizations, like CNET, and several design firms have large offices, but where small spaces are starting to pop up. It's a lot less expensive than SoMa proper, and sometimes closer to the Financial District or Mission District and local transit.
What's more fun? The Mission District. While its cultural amenities are obvious, what's not obvious (aside from higher real-estate prices) is that its one of the sunniest and warmest parts of the city due to drastic microclimates. Need a lunch break? Hang out in Dolores Park. Need an outing? Catch an indie film at the Roxie Theatre. Your start-up peers will include Typekit, Crowdflower, Rateitall, and Posterous.
Need fewer distractions and more space? Maybe the South Bay or peninsula is for you.
"Palo Alto is certainly very strong," Bernier says. "In Palo Alto there are a lot of start-up incubators, and there are a lot of great companies already based there, so you tend to see activity surrounding them." While downtown Palo Alto can be expensive, especially for commercial space and eating out, it puts you closer to investors. Peers nearby include Milo, Palantir, and Facebook.
Tan recommends the just-south-of San Francisco city of Milbrae for "cheap hackers who just wanna code and avoid owning a car," and suggests that there is Chinese food and a Trader Joe's nearby, but not much else. Consider Milbrae the un-hip middle ground between Palo Alto and San Francisco.
Mountain View, an area that was largely agricultural through the '60s, and is named for its views of the Santa Cruz mountains, is now known as a utopia of start-ups. Aside from being home to the Googleplex, Mountain View also has a pedestrian-friendly downtown, and is the first city in the country to be provided with free wireless (thank you, Google). It's home to Y Combinator, Loopt, and Mint.com.
If money's a big issue, but you need space, check out the East Bay. It's lesser known as a start-up hub, but, hey, why not start a trend and still be just a quick train ride away from San Francisco?
"In Oakland, it's interesting. You have less start-up activity, but there are neighborhoods where you have these brick-and-timber buildings near Jack London square. You see the small agencies, and creative firms. That's always been a good area for emerging companies," Bernier says. Forbes magazine once ranked Oakland the eighth-best place to start a business in the United States.
Pandora started in Oakland, and though the city has taken plenty of criticism lately for being dangerous enough at the street level to damage business, the city has carved out a niche for digital arts and design media, said Theo Oliphant, the executive director of the mayor's Office of Public-Private Partnerships.
"There's been some success there in terms of start-ups lately," Oliphant says. "The types of businesses that tend to thrive in Oakland that we see most often have success, are increasingly in the digital arts and digital media space, more of a tech-savvy digital community."
Just north of Oakland, Emeryville is just across the bay from San Francisco, and, though a smaller community, has had notable start-ups originate there, such as Pixar, Leap Frog, Companiesandme, and the biotech firm Chiron. Stretching from Emeryville north to Berkeley and up through Marin County, non-traditional work-spaces are becoming more popular, and the costs of renting both a home and commercial space are far less than they would be in San Francisco proper.
Tan recommends Berkeley for "foodie hackers who don't mind being far" from Silicon Valley. With UC-Berkeley in town, he suggests that finding smart, cheap labor is also a plus.
"There was a while where everyone was trying to be in soma and wherever else other companies were, but now they're realizing its not so much the legend of the location, but the strength of the business," Oliphant says.
Locating a Bay Area Start-up: Know The Stakes
The 2010 Silicon Valley Index, an annual study by Joint Venture: Silicon Valley Network, a local non-profit, found a significant rise in vacant commercial real estate in the area last year, up 33 percent. And the number of small companies is steadily increasing.
Don't let the numbers mislead you, though. Sure, the Bay Area is start-up friendly, but in general, office-space rentals are still expensive. Commerical real estate company CB Richard Ellis puts them at $27 to $33 per square foot. That alone explains why so many small companies and tech start-ups are run out of homes in the Bay Area. The start-up logic goes: if you're going to be paying some of the most expensive rent in the country, why not get the absolute most out of it? For bootstrapping and lean start-ups, it's just part of the game.
Just look at 10-person start-up AirBnB.com, began two years ago as an online space marketplace ("we rent anything from a couch to a castle," co-founder Brian Chesky tells Inc.com). The company has grown so quickly from its SoMa household that Chesky gave up his bedroom to a couple co-workers who needed an extra desk. Officially homeless, Chesky has pledged to use AirBnB to find lodgings for a year.
If you'd rather expand into an office space than couchsurfing, and you've identified the important bits of your company's culture a community could nourish, as well as the logistic necessities, it's time to get hunting for real estate.
"It gets to the point when you need to have meetings and you're using your kitchen table, it gets awkward," Bernier says. "If you are meeting with customers, or taking on employees, and want to work in the same place, the home office starts to break down."
When searching for office space, consult local business bureaus and small business associations to find out what sort of incentives, tax credits, or cash wage subsidies might be available if your business moves to the area or hires local talent.
For instance, along the peninsula, Tan notes that there's great community-based incentives to not be based around a highway or strip-mall. While Northern California certainly isn't free of suburban sprawl, Caltrain stops are appropriately placed in neighborhood hubs, not along the highway.
In the East Bay, hiring tax credits can give businesses a significant boost, Oliphant explains.
"Because much of Oakland is designated as an enterprise zone under the department of Housing and Urban Development, it authorizes businesses located here to get tax credits for many of their employees," he says. There are also employer subsidies, which can be throught of more like cash-wage subsidies, for hiring residents of Oakland.
And property in Oakland is both more readily available and far less expensive than commercial space in San Francisco or the South Bay. Why not just stay in Oakland? Well, there are times it might be willing to pay more for a location that might not even be ideal to your corporate culture or personality.
"The advice I would give is that it is about the visibility you have with your business," Bernier says. "If you are growing, and have that visibility, now is a great time to lock in a deal for a long-term lease."
As far as the lease is concenered, have a lawyer review it, and plan on committing to one or two years. Once you've found the location, start thinking about broadband.
Locating a Bay Area Start-up: Additional Resources
Rofo.com, a small-business and small commercial space search and listings site.
East Bay Small Business Development Center which does business consulting and business plan development assistance.
San Francisco's Small Business Administration provides a local start-up toolkit and plenty of other resources.
The City and County of San Francisco's Office of Small Business puts out bulletins and has resources on how to start a business in the city.
Oakland Metropolitan Chamber of Commerce, a membership organization that promotes commerce and industry.
Garry Tan's Google map of Bay Area start-up hot spots.