Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Landlords are trying not to rent to startups in San Francisco

42floors.com

Post reply on HN
Print view View original

101–110 of 308 posts

Re: Landlords are trying not to rent to startups in San Francisco

#101

Post by austenallred »

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

I'm good friends with a startup that was trying to raise money for their Utah-based company. Really strong growth rate, revenue coming in, etc.

They went up and down sandhill road/SF, and got a couple really lousy offers for funding, and were shocked at how harsh the VC community can be.

Their board member (one of our closest/best mentors) recommended they go back, but make the first slide in their pitch deck "We're moving to San Francisco." They got five term sheets in the first two days, ended up raising from a top-tier firm.

Yes, this is anecdotal, but no, this is not an exaggeration. You can raise money being unwilling to go to the bay area, but you have to have a really compelling vision/growth rate. People have to be fighting over you.

VCs are weird.

Oakland or something may be a different situation (not sure if doing the South Bay thing would even save you any money - Palo Alto ain't cheap), but anecdotally people in Utah get told the same thing again and again. You can stay in Utah, and costs will be way lower, but you'll probably pay for it. (Note: our company is remote with headquarters in Utah)

Re: Landlords are trying not to rent to startups in San Francisco

#102

Post by trjordan »

swehner wrote: post #83
mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

Like Oakland. Can get to SF by BART if needed.

Not this weekend, you can't!

Re: Landlords are trying not to rent to startups in San Francisco

#103

Post by mbillie1 »

stephengillie wrote: post #25
s73v3r wrote: post #15

Remote work and starting the company elsewhere are pretty easy solutions to this problem.

If all of your employees are remote, what do you show your investors, partners, board members, and creditors when they want a tour of your facility? How do you show them that you've got smart people working on hard problems? For some (bad?) startups, this is an even more valuable function of engineers than engineering.

> For some (bad?) startups, this is an even more valuable function of engineers than engineering.

How on earth is this healthy? If your "company" continues to exist by sucking up investment money gained by doing a song-and-dance with a group of folks in an office, but never churns out a product, this is success? Good lord.

Re: Landlords are trying not to rent to startups in San Francisco

#104

Post by ww520 »

fredkbloggs wrote: post #3

This is a great analysis and the argument makes perfect sense in every respect. The only thing I find dubious is the idea that the bust is 2-4 years out. I think if you polled most SF commercial landlords, they would tell you that they expect most of their startup tenants to start having difficulty paying the rent in no more than 18 months. It would be interesting to see some actual data on this. After all, there's n…

It's not that the bust is coming soon. Startups are notoriously bad tenants as a class, whose life cycle is too short. Signing long lease with them just doesn't make sense. By definition a startup is an experiment to build products and a business in a short amount of time, with one to two years of funding in most cases. 9 out of 10 these experiments fail, so 9 out 10 startup tenants will move out after a short time. Commercial landlords want long term tenants, not people going out of business in one or two years.

Commercial lease is really only applied to companies that can stay in business. A long lease is often not enforceable. The incorporated company simply declares bankruptcy and it's hard to collect the money on the full term of the lease. I remember in the Dot Com bust days some failing startups simply stopped paying rents but stayed on, to stretch that last dollar or to burn out that security deposit.

Re: Landlords are trying not to rent to startups in San Francisco

#105

Post by jtfairbank »

dataker wrote: post #39

While in SV, I couldn't understand the hate towards East Bay: it's fairly priced, close to the 'hub' and not as violent as otherwise portrayed. Could anyone elaborate?

I live in West Oakland and the favorite game is still "fireworks or gunshots". Its a great place to live if you're in your 20s, but I wouldn't want to move my family here. Maybe up by Berkeley is better?

Re: Landlords are trying not to rent to startups in San Francisco

#106

Post by mdeeks »

Obi_Juan_Kenobi wrote: post #58
dataker wrote: post #39

While in SV, I couldn't understand the hate towards East Bay: it's fairly priced, close to the 'hub' and not as violent as otherwise portrayed. Could anyone elaborate?

East Bay is great. Oakland is starting to look like a decent city. Doesn't mean there aren't real disadvantages, but it's something most people/startups should at least consider.

Oakland is HUGE. You can't generalize it that much. There are so many sub area in Oakland that range from insanely dangerous and crappy all the way up to incredibly safe and beautiful (Rockridge, Piedmont). Also areas near Oakland like Emeryville are getting much nicer.

Unfortunately the prices in these places are also skyrocketing. I started paying $3k/mo for 1400sqft in a not great part of Emeryville last year. The current price for my exact same unit is $3400.

Re: Landlords are trying not to rent to startups in San Francisco

#107

Post by timtadh »

Johnny555 wrote: post #88
briandear wrote: post #74

Earlier quoted context omitted.

I never understood why investors need to be 'close.' I also don't understand why most startups need an office. Basecamp is entirely remote with an office just for show. They only use it a few times a year. Unless you build hardware, an office is unnecessary. A dumb waste of money, especially early in a startup's life. I do some side work for a major international medical lab and their entire Dev team is remote -- and…

We've tried and found that remote engineers are less effective, they miss out a lot from group whiteboard discussions, overhearing office chatter "Hey bill, service XX crashed again because of YY (and Mike overhears and says "Oh yeah, I saw YY in service ZZ too and fixed it"), and just general team cohesiveness. In theory we could hire more people for less salary if we had a remote workforce, but we're still a small…

I have found that this says more about the ability of the management and less about the ideas underpinning remote work. Large companies figured out some time ago that they could have a large remote workforce. So it isn't just Basecamp or whoever that is doing remote work. Remote work has it challenges but (and here is the important point) they can be managed if the team knows how to manage.

FOSS proved over two decades ago that you can build complex competitive systems with people you have never met. The fact that you couldn't make it work doesn't mean that it doesn't work. It means your company could not figure out how to make it work for you.

Re: Landlords are trying not to rent to startups in San Francisco

#108

Post by rodgerd »

briandear wrote: post #74
meatysnapper wrote: post #13

Earlier quoted context omitted.

I think the advantage of a massive skilled labor pool and investors within walking distance is a nearly insurmountable advantage. For a small company, I'd say the time/cost of hiring a few good engineers is way more than a few months rent. You'll certainly pay a respectable headhunter quite a bit.

I never understood why investors need to be 'close.' I also don't understand why most startups need an office. Basecamp is entirely remote with an office just for show. They only use it a few times a year. Unless you build hardware, an office is unnecessary. A dumb waste of money, especially early in a startup's life. I do some side work for a major international medical lab and their entire Dev team is remote -- and…

> I never understood why investors need to be 'close.'

It's particularly jarring given how many of the same investors are arguing we should tear town universities and replace them with MOOCs, demolish shops for Amazon, and so on and so forth. Apparently face time and interpersonal interaction is an irrelevant artefact of the old world except when it comes to their own industry.

Re: Landlords are trying not to rent to startups in San Francisco

#109

Post by superuser2 »

ww520 wrote: post #104
fredkbloggs wrote: post #3

This is a great analysis and the argument makes perfect sense in every respect. The only thing I find dubious is the idea that the bust is 2-4 years out. I think if you polled most SF commercial landlords, they would tell you that they expect most of their startup tenants to start having difficulty paying the rent in no more than 18 months. It would be interesting to see some actual data on this. After all, there's n…

It's not that the bust is coming soon. Startups are notoriously bad tenants as a class, whose life cycle is too short. Signing long lease with them just doesn't make sense. By definition a startup is an experiment to build products and a business in a short amount of time, with one to two years of funding in most cases. 9 out of 10 these experiments fail, so 9 out 10 startup tenants will move out after a short time.…

Even if it doesn't fail and turns into a unicorn, its space needs will rapidly increase and it will still want to move on to bigger and better offices.

The entire point of a startup is to not stay its current size - either it will grow wildly or disappear altogether.

If you can comfortably occupy the same amount of space for 2+ years, you're not a startup, you're a small business.

Post reply on HN