Most SaaS startups start here. But they can only last so long.
Coworking has redefined how we think about “offices.” It’s provided a solution for companies with meeting space, speedy WiFi, audio/video tools, and trendy furniture without the upfront costs. It’s also closed the gap between lease terms and business forecasting; for example, most traditional leases in New York require a 10-15 year commitment. For many SaaS startups who can’t accurately predict the next few months, there’s a strong case for coworking.
But it’s limitations can present challenges, especially for SaaS teams who are beginning to scale. Here are some key ways coworking can be limiting for growing teams.
Identity & Company Culture
In your early days, bringing customers into a buzzing coworking space can add energy and culture before you’ve got it yourself. But as you work to shape your company’s identity, the “buzz” can hinder that process. When your customers come visit you, they may be taking in the space’s brand – not one you’ve created yourself.
Additionally, identity and culture play a vital role in the hiring process. Is the type of talent you’re recruiting for expecting to have their own space and amenities? Are they being shown an accurate read on how unique your company is when they walk into your space?
Privacy can become a major requirement for teams, especially for those dealing with compliance or vital IP. This is difficult in the coworking world. A huge plus about coworking is the interaction, collaboration and openness. These communities don’t just make privacy difficult, they actively need to steer companies away from it to stay on brand.
Many employees prefer privacy for the sake of productivity. Ipsos surveyed more than 10,000 workers across 14 countries, and 95% said working privately was important to them, but only 41% said they could do so. They also discovered workers in community spaces are losing 86 minutes a day due to distractions.
Coworking makes great financial sense – until it doesn’t. The model starts to break down primarily when there’s substantial revenue and hiring. These challenges can be both in productivity, and cost of the physical space.
According to the same study by Ipsos, people are at 85% productivity in a community work space. That 15% “productivity tax” starts to matter when you’ve got a team of 40 getting paid an average of 50K a year. That’s a potential $300,000 loss.
While some coworking spaces have decent financial options for bigger teams, there are always additional costs that add up quickly, meeting space being a common one. Many memberships have a number of free hours, and then an hourly rate if you use them up (often around $25/hr). As your team gets busier and requires meeting space any time, this can become a substantial burn.
Many companies leave coworking with a need to have an environment they can control. When a new customer comes to visit, they want to curate the experience in their own space. That sense of consistency and predictability is important in scaling the team and optimizing the business.
Additionally there’s an uncertainty around the future of coworking. One expert from International Workspace Group comments on a common coworking model. “Essentially, the space is a break-even business and the profit comes from the services,” he said. “It’s like running a hotel and giving away the room service and having a free bar. You will have a very popular hotel but you won’t make any money.” – Mark Dixon, International Workspace Group.
Coworking will remain a major resource for many growing businesses, but it’s clear in the coming months and years we can count on it changing shape.
Coworking spaces highlighted the need for less commitment and more collaboration. The real estate industry is catching up. With increased flexibility in beautiful custom spaces, transitioning to your own office can make a lot of sense for scaling SaaS companies. If you’re looking for help assessing if coworking or standard office space is the right choice for your team, let’s talk.