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Landlords are trying not to rent to startups in San Francisco

42floors.com

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

#191

Post by joelrunyon »

jt2190 wrote: post #186
AlexeyMK wrote: post #158

One solution that is not being discussed is for VCs to offer office space for start-ups. VCs have longer time-horizons (a typical VC fund will be spent over 5 or so years) and appear more stable to landlords. In addition, one of the toughest problems for VCs as I understand is dealflow - when it comes to a super-competitive round, Andreessen or Sequoia will often push other VC firms out of the round by throwing their…

Wouldn't this distort the VC's portfolio? Institutional investors give VCs their money to put into high-risk, high-reward investments, not real estate leases. How would they justify this?

Higher percentage equity for less money.

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

#192

Post by SpaceManNabs »

s73v3r wrote: post #139
jerrac wrote: post #123

Earlier quoted context omitted.

I wish people would do that. I know when I see jobs that interest me, they're almost always in SF or NYC. Neither location is somewhere I'd flourish. Seriously, what is the actual appeal of SF? I just don't see it.

Huge tech community, almost perfect weather (it's not San Diego, but it's close), fairly liberal politics, diverse culture (means tons of interesting and fun cultural activities, and lots of interesting places to eat that you don't get somewhere that isn't a larger city). You may not agree with or value those things, but a lot of tech people do.

You don't think similar proportions of people in other fields would also like diverse culture?

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

#193

Post by DannoHung »

mooreds wrote: post #170
pkulak wrote: post #146

Earlier quoted context omitted.

That's how you do it. Rent a tiny space in SF for your token SF people, then open offices in Portland, Boulder, Austin, etc. You're still an SF company, but your runway is twice as long as everyone else's.

This strategy needs a name. Maybe "The SF funding tentacle"?

The East Texas Shuffle

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

#194

Post by chvid »

meatysnapper wrote: post #12
mooreds wrote: post #9

Earlier quoted context omitted.

Large landlords with experience are probably a better group to bet on (in terms of understanding long term economic trends) than startups. Just like the bond market is a better indicator of economic growth than the stock market. More money, more professionals, longer memories, not as much optimism. Edit: future economic growth expectations, rather.

As much as I'd like the US to crash to reality a bit so we can get our house together... a Chinese slowdown + European clusterfuck makes the US the best place to invest, still. That gives this boom a slightly longer lease on life.

In 2007 a lot of Europeans thought that EU and China would decouple themselves from the emerging debt/housing crisis in the USA.

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

#195

Post by danieltillett »

AlexeyMK wrote: post #158

One solution that is not being discussed is for VCs to offer office space for start-ups. VCs have longer time-horizons (a typical VC fund will be spent over 5 or so years) and appear more stable to landlords. In addition, one of the toughest problems for VCs as I understand is dealflow - when it comes to a super-competitive round, Andreessen or Sequoia will often push other VC firms out of the round by throwing their…

This makes sense especially since the limited partners are probably already significantly invested in commercial real estate. What would make more sense is just to get the limited partners involved.

On a related note there is no reason VC could not do the same with talent. The could be hiring talent and feeding that into their portfolio. They could also facilitate easy movement of people between companies in the portfolio so that you get better team fit. The only problem with all this is it takes effort.

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

#196

Post by _delirium »

setpatchaddress wrote: post #162
s73v3r wrote: post #145

Earlier quoted context omitted.

"overhearing office chatter " I honestly do not believe for one second that this is a thing, or that it's a significant thing.

This is definitely a thing that happens. Some teams also do a lot of work in hallway conversations, and this sort of accidental interaction is critical. I witness this all the time. I would much prefer that my company let me work remotely. The Bay Area is full, seriously, and I'd be happy to work from many other places. But denying reality doesn't help. I think there are potential technical solutions to this problem…

That kind of smalltalk definitely happens, but where it happens varies a lot. At some places probably 80% of the idle work-related chatter happens on the IRC/Slack, while at others it happens mostly in the coffee area or hallways. Seems to be a company-culture difference in large part. Both are ok for me, but the places that use IRC/Slack a lot are easier to be remote at (or even just on a trip) without being excluded from all the impromptu discussions.

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

#197

Post by nandemo »

rdl wrote: post #2

Obvious arbitrage possibility is obvious, and being exploited by new companies (WeWork for $10b valuation) themselves -- if you're better at evaluating startups than big dumb landlords, you can profit here. And there isn't a shortage of capital to play this game.

Landlords aren't dumb. Their payoff is pretty much binary: ($rent, 0). It doesn't matter how well a startup does, the landlord will get at most $rent.

If anything its the VCs who are dumb: why are they not investing in startups in Midwest US, or (say) Paris, Sao Paulo, Tokyo, etc?

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

#198

Post by kijin »

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…

According to the article, landlords expect economic cycles to last 7-10 years, and the last bust was in late 2008. So the next bust can be expected to occur somewhere between late 2015 and late 2018.

It's already close to late 2015, so the halfpoint of the predicted period is only 18-21 months away. That fits your observation that landlords expect the bust to be less than 18 months away.

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

#199

Post by cglace »

samstave wrote: post #165
superuser2 wrote: post #109

Earlier quoted context omitted.

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.

I picture Ron Conways game of life as a view of office space use in SF :)

Did you mean John Conway or were you making a joke?

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

#200

Post by czbond »

justinator wrote: post #171
czbond wrote: post #134

Earlier quoted context omitted.

Boulder is an incredibly difficult market to hire in. I was talkign to the head of Google Boulder when he mentioned they can't even get engineers hired there.

Living in Boulder, I'm curious as to why? I'm seeing the other side of the coin, where getting hired is proving very difficult. The joke here is even the dirtbag climbers have PHDs.

He mentioned a lot of things related to hiring - but specifically it was that there are a lot of engineers in the Denver Metro (in fact I think the highest grouping of software engineers in the US), but that many enterprise companies kept them employed. He mentioned that it was difficult to hire younger SW engineers out of school as they were going to startups. Also, that their average age is skewing older, which is driving up their benefits (healthcare, etc) costs.
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