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Innovation Stations

December 6, 2013

Denver-based serial entrepreneur Jim Deters has been around the block (more than a few times) creating software companies from scratch.

Or as he puts it, “this isn’t my first rodeo.”

“I’m a tech entrepreneur who’s been building software firms since I was 20 years old, and that’s all I know how to do,” said Deters, 38.

Deters is the brains behind Galvanize, a 78,000-square-foot collaborative workspace community for startups in the Golden Triangle of Denver. He’s in the process of opening a second project in the Mile High City’s Lower Downtown, known locally as “LoDo.”

Galvanize is one of a number of new and creative work spaces popping up around the country that are re-inventing shared space where entrepreneurs have traditional office services and abundant internet bandwidth. Better yet, they also have access to office hours with seasoned mentors and seminars, and support each other with programs aimed at helping startups succeed. The first of these new office settings were on the coasts, but they have now spread to the Heartland. Deters said he was inspired by Rocketspace in San Francisco and 1871 in Chicago.

“I’ve personally gone through the whole evolution of starting a company, being one guy in my basement, then three guys in my basement and then trying to find a cheap place to expand,” said Deters, a Chicago native.

“I’ve lived this process of trying to find space. So I designed Galvanize to handle the life cycle of a startup. But I’m not a real estate guy. For me, the real estate is a means to an end. The real estate is a container. And I needed a special kind of container to create a density of human capital.”

Galvanize opened its doors in October of 2012 in a 1929 historic building at 1644 Platte St., just in time for the first-ever Denver Startup Week. It now has 400 entrepreneur members and 130 startups. He said he got the idea for Galvanize, in part, as a way to connect with Denver.

“I’ve lived in Denver for 15 years — though I like to say I spent 13 of them on airplanes,” he quipped. “I’ve been building tech companies all over the world, including my last one — Ascendant Technology — which was based in Austin, Texas, and sold to Avnet last year.

“After my third child was born three years ago, I wanted to figure out a way to be part of the local community and not travel 200,000 miles a year. So as I thought about the startup scene here, I wondered who was going to coalesce or galvanize things here? That was the start.”

Deters said Galvanize has a big open area where entrepreneurs can work wherever they please — and share ideas if they want, too. One of the first things people see when they enter is a coffee shop/restaurant dubbed “Gather.”

It’s open to the public and is an amenity that tenants often use for meetings.

Shared space at tables costs $299 a month, while two- to four-person reserved desks in the mezzanine run $449 monthly. Unlike some of the other new collaborative work spaces, Galvanize also includes suites for growing companies with as many 25 to 30 employees. They range in cost from $2,000 to $6,000 a month; parking is extra.

“One of the unique things that we’ve done compared to other facilities is having space for companies to grow on site,” he said. “So we have 15 suites. But once companies get over 30 employees, they’ve pretty much become the real deal and it’s time for them to flee the nest and get some infrastructure of their own.”

While they are in the nest, however, everyone from individuals with the next great idea to the folks in the suites can partake in major events that draw hundreds of people, to smaller gatherings and techie clubs like Women Who Do Code.

“Just this week, we had Guppy Tank, 1 Million Cups and who runs the Foundry Group in nearby Boulder; and other venture capitalists have also spoken at Galvanize. Some hold office hours to share their wisdom with tenants. Deters calls them “honoraries.”

“We have a whole team dedicated to running events and programming, all of which are free,” Deters said. “We have never charged. On average, we do 12 events a week here.”

To get into Galvanize, Deters said his team runs prospects through what he calls a “mild curation process.” People register online and answer a few questions such as “How can you add value to our community.”

“We are not making a judgment on their business,” he said. “I’d do that if I were going to put my own venture capital on it. But to be part of the community, though, we are looking for people who have a common theme.

“We are tech- and digital-centric, though we do have a coffee company here. For the most part, we want them to fit that tech baseline, and we are looking for companies that understand the value of being part of a community and helping shape an ecosystem. It’s really that basic. Most of the people we turn away, we send to more traditional co-working spaces.”

Deters said one of the facilities he modeled Galvanize after is Chicago’s 1871, named after the big fire that leveled much of the city. It’s located in the famed Merchandize Mart and has 50,000 square feet of mostly open space on the 12th floor of the building.

It opened in May of 2012 after a long series of discussions by senior Chicago business leaders and successful entrepreneurs who had done well in Chicago, said Melissa Lederer, 1871’s chief marketing officer.

“They recognized that there were incredible entrepreneurs who had gone to some of the top universities in and around Chicago, including Northwestern and the University of Chicago, who were leaving for the coasts to start and grow their businesses,” she said.

“They wanted to do something about that loss of talent. Take Steve Chen, for example, who went to the Illinois Math and Science Academy in suburban Chicago for high school, the University of Illinois for undergrad and then moved to the Bay Area where he started You Tube because he didn’t feel he had the resources here. And he certainly isn’t the only one.”

Lederer said Chicago has a vibrant economy — including several Fortune 500 companies — but did not have a unified startup community.

“People asked how we could stop brain drain and give entrepreneurs the connectedness to feel like they have the resources to be successful here. They did a lot of focus groups and looked at many of the best collaborative co-working spaces in places like Seattle, San Francisco, Boston, Philadelphia and New York. The result is 1871.”

She said the visionary behind 1871 is J.B. Pritzker, a venture capitalist and entrepreneur in his own right. He brought other private backers on board and helped convince the state of Illinois to give the facility a $2.3-million grant to get it off the ground.

She said 1871 is highly selective in how it chooses potential tenants, winnowing down more than 1,300 applicants to the 225 startups who’ve been chosen based on business models and interviews. Many focus on improving existing business services.

The startups tend to operate with one-to-three people who come in, grab a free table and work side by side with “someone traveling the same journey, so they often can learn from each other and get ideas.”

She called the programming at 1871 an “absolutely essential” ingredient.

“We have a robust monthly calendar led by various leaders in a variety of fields,” she said. “We also had a lot of success with office hours. We do 200 to 250 of office hours a month with CEO-level people who do free, 30-minute, one-on-one sessions that are a huge value.”

Frank Muscarello, who runs a year-old tech company called MarkITx, was an early tenant and is now a “graduate” of 1871. Before that, he started and ran a computer hardware information firm called Vision Point of Sale for 16 years before selling it two years ago.

“So I’m a seasoned, bloodied and bruised entrepreneur,” he said.

Muscarello, a 42-year-old native of Chicago who went to graduate school at Northwestern, said he heard from a friend about 1871. “There was a buzz going around. We were lucky to be one of the first 15 or so in. Now that we’ve built our company to 11 employees, we’ve moved on. But I have to give the folks who started 1871 a lot of credit because they’ve created a phenomenal community and ecosystem for startups.”

In the beginning, money at Muscarello’s firm was so tight, he couldn’t pay his co-founder because he had no access to capital. But his colleague liked the company plan as well as the idea that he’d be working in a collaborative environment around many other startups.

“He figured if this didn’t work, there would be other opportunities nearby and he could jump ship if needed,” Muscarello said. “That was fine with me.”

Muscarello — who has resisted investor suggestions to move to Silicon Valley — said he took advantage of office hours with mentors who schooled him on finance, sales and better understanding his customer bases.

“We filtered out what we didn’t need,” he said. “Sometimes, just walking down the hall or in our Intelligencia coffee shop, you’d run into people like Stuart Larkins, a partner at Chicago Ventures and an Internet entrepreneur in his own right.”

Muscarello called 1871 an “amazing hub of talent to really build innovation and a great environment to work in. But the reality is that for this to be the success we want, someone from here has to build a $1-billion company. I know we at MarkITx believe we have the potential to grow rapidly.”

In Washington, D.C., the 1776 collaborative work space has a focus on regulated industries such as health care, education, energy and smart cities, said facility manager Chris Silberman. It is the brainchild of Evan Burfield and Donna Harris. It opened in April with about 40 startups and by late September had grown to 150.

It is based just a few blocks from the White House on the 12th floor at 1133 15th St., close to Capitol Hill, embassies and not far from K Street, which is home to numerous lobbyists, think tanks and advocacy groups.

“We’re relatively new, so we haven’t had any ‘home runs’ yet, but we have some promising companies like Social Tables (makes cloud-based software for the hospitality industry) and Flat World Knowledge (offers textbooks on- and off-line) that have shown they have traction, gone beyond customer validation and are on the brink of scaling their companies.

“But the one thing that really separates us from incubators across the county is that we are in a city that has resources that aren’t anywhere else in the world. We really want to take advantage of and help connect members to all those organizations and global resources that are close by so they can scale up quickly,” Silberman explained.

The 1776 “campus” has an open floor plan broken up with furniture and white boards, three conference rooms and three private phone booths.

For startups or individuals to gain membership to 1776 — which has a completely open office plan — Silberman said they must convince a panel that their idea is a scalable service or product.

“We are looking for high-growth, for-profit startups,” he said. “We want to create a community of like-minded entrepreneurs that are all facing the same issues who are innovating within regulated industries. But at this early stage, that’s not a prerequisite to be a member of the campus right now.”

All members have 24/7 access to office space, a kitchen stocked with sodas and coffee, mail and package distribution, a receptionist and — perhaps more important for tech startups — a one-gigabit fiber pipe with a lot of bandwidth, so worker bees should not run into Internet access problems. Rates range from $300 a month for unreserved space to $600 for a reserved desk where you can put up signage, have a storage unit and leave monitors on your desk.

Like Galvanize and 1871, 1776 has a mentorship program that allows members to sit down for one-on-one sessions with seasoned entrepreneurs and subject-matter experts to get advice on problems or help them tease out answers to puzzles.

“In addition to office hours, we do weekly seminars and incubator workshops with mentors who host roundtable discussions,” he said. “The focus varies, but generally the process stays the same where we leave it open to any of our members on what subject might be helpful to them — could be financial, legal or user experience — to decide if they want to attend.

“We’re trying to tie everything together by creating a community of like-minded entrepreneurs,” he said.
“There is an incredible amount of experience and expertise just by bringing these people together for spontaneous collaboration. That part isn’t always organized, it just happens because they are working near each other in the same space.”

Phillip Auerswald, a George Mason University economist and senior fellow at the Kauffman Foundation, said “the nature of work is changing, so office spaces are changing and this is a disruption of commercial real estate.

“To some extent, this has been a rather peripheral phenomenon focused around universities and a few major tech cities, but it’s rapidly outgrowing that to become a model of how people are going to organize to work within large corporations or in companies wherever they are located.”

Auerswald, author of “The Coming Prosperity, How Entrepreneurs are Changing the Global Economy,” said people everywhere are discussing work and creativity.

“They are talking about how to arrange physical space and how to optimize whatever kind of technological physical assets they have so that people can find those new pathways for collaboration and not just stay stuck in the relationships and mindsets they were used to.”

He said entrepreneurs found ways to collaborate at their kitchen tables, in their garages and at coffee shops.

“But this new mode of work adds value to the whole entrepreneurial process,” he added. “It’s not just a new way of real estate, it’s stimulating more entrepreneurial ventures than you would have seen absent this new model. It seems like one of these incubator/accelerator spaces is opening up every six months here in Northern Virginia. Soon it will be mainstream.”

And it’s not just entrepreneurs or corporations who can benefit from this model, he said. “This could work well for Baby Boomers in transition who are thinking about the extension of worklife, what retirement means and staying creative. So I think there will be some kind of intergenerational inclusion in some of these spaces with more opportunities for intergenerational mentorship. Time will tell.”

Nor are collaborative workspaces limited to just techies, either.

Katy Chang is a former attorney turned chef who is starting EatsPlace, a Washington, D.C., “pop-uppery,” and food incubator that also will be home to Baba’s Cooking School. She said she got the idea for this shared kitchen after she had trouble finding space to make her artisan kimchi, a traditional fermented Korean side dish made of vegetables with a variety of seasonings.

“I tried to find a commercial kitchen to make it in, but it was just really hard to find space to keep up with the demand,” she said. “That’s a good problem to have because I kept selling out of my kimchi really fast.”

She said she wanted to expand, but always “kept hitting that same wall. I also knew there was a community of other food makers, especially caterers, who had a similar problem. So I thought, why don’t I open sort of a soup-to-nuts food incubator where people can use the commercial kitchen to make their food and also serve it upstairs in the dining room or sell in the marketplace.”

Chang, whose father (or baba in Mandarin) owned and ran two D.C. restaurants, said she plans to open her shared kitchen/restaurant this spring on Georgia Ave. in the up-and-coming Parkview neighborhood. She is working with Studio Upwall architects and said EatsPlace will have half a dozen modular workspaces.

She said she expects collaboration to “ferment” organically as food makers work side by side. “And there will be talks, mentoring and technique classes geared towards both food professionals and home cooks. For the pros, this will include sessions on the business side of food production — food packaging and labeling, business formation, intellectual property and food, training for front of the house and back of the house staff positions, etc.”

Chang is also going to curate guest chef residencies, with each residency lasting about six weeks. “That chef will use the kitchen and serve his or her food in the dining room, but when the restaurant’s not open, the food producers will be able to come and use the space,” she explained.

She said her background as an attorney helps with regulations, food labeling and different sanitation requirements, all that red tape you have to go through to open a commercial kitchen or restaurant. “That way, food makers and the guest chef can focus on what they do best, which is cooking,” she said. “They don’t have to deal with trying to get permitted and licensed because I will handle all that.”