What are the differences between Office Rental Facilities, Startup Incubators, and Coworking Spaces?
Post Author: Tony Bacigalupo.
The world of work is changing, and that means times of transition. We’re in just such a time now when it comes to places that independents work, with old models being repurposed, new ideas coming online, and mishmoshes galore.
To help navigate this tumult, I am going to describe three basic categories into which any given space might likely fall. Some places fit pretty purely into one category, while some very deliberately attempt to cross all of the categories.
Generally speaking, however, every place has a primary reason for existing, and those can usually be pretty easy to spot. This constitutes my best attempt at helping clarify the core differences between these things.
Office Rental Facilities
Primary reason for existence: Rent space at a profit
These are organizations whose business models are primarily based around taking a piece or several pieces of real estate, cutting it up into smaller pieces, adding services, and sub-leasing the space out at a profit.
The market is made up of businesses that, for one reason or another, require the privacy and services of an office without necessarily wanting to lease an office of their own. That might mean one-man operations or large teams.
This industry is useful because it makes office space accessible to smaller businesses whose founders are not in a position to take on spaces of their own. These kinds of facilities have been around in New York in various forms for decades.
They compete on location, price, and services. Some are more full-service than others. Sunshine Suites positions themselves as offering lots of basic business services for an extremely affordable price, while something like eEmerge caters to an audience interested in prime midtown location and higher end services.
They generally do not have a formal application process, but may have long-term obligations, sign up fees, criminal background checks, and upcharge for additional services. The relationship is one of landlord-tenant.
Primary reason for existence: Stimulate high-growth venture-backed startups
These are places whose models are a little less straightforward, as their success is defined by the growth of the companies they house. They are often subsidized by an entity whose interest is in economic development, like government agencies, or investment firms who hope to discover promising young companies to add to their portfolio.
The market is specifically people with ambitions to build high-growth companies, who do not already have access to what they would need to build their businesses.
In theory, they are useful because they take talented new entrepreneurs and provide them guidance, education, resources, and connections to propel them forward as growing businesses.
They compete to attract and develop talented and ambitious startup founders. Since incubators are subsidized, they provide services at a value higher than whatever it may cost to participate. In some cases, the programs are free.
They always have an application process of some kind. You must fulfill some basic criteria which may include the number of principals, the age of the company, the amount of existing funding, the existence of a prototype, and the industry the company operates within.
Primary reason for existence: Facilitate a healthy community of independents
The newest entrants into the arena, these are organizations that offer membership to a community of like-minded people in a central gathering space. While some may treat these memberships as effectively the same thing as what one might find in an office rental facility, a coworking space does not compete as one.
Uniquely, coworking spaces are often organized organically as a community first before a business entity is formed. They tend to be part of a global movement that generally subscribes to core values of community, openness, collaboration, sustainability, and accessibility.
The market is focused on people who don’t need office space or incubator programs, but access to a place and community to plug into on their own terms. That could mean individuals or small teams whose work doesn’t require much more than a desk and an internet connection. This appeals to groups that the other two industries do not cater to, including: freelancers, contractors, telecommuters, and travelers.
Coworking spaces are open to all who play nicely. They almost always offer a drop-in option, so you need not even be a member to participate. Membership options generally range from single days to 24×7 access, with part-time options offered in between.
Coworking spaces distinguish themselves by their communities. Every coworking community has a different culture, so finding the best personal fit is paramount.
Similarities and Differences
Each area has its merits and drawbacks, but more importantly, it’s important to understand what is most useful to you and your needs. You’re less likely to bump into a potential investor at an office rental facility than you are at an incubator, for example, but you’re far more likely to find a customer or a cofounder in a coworking community than anywhere else.
New Work City, the space I help to run, is a coworking space. It is not an office rental facility, though membership does include basic office services. It is not a startup incubator, though we do house and nurture many successful startups.
We don’t exist to maximize return on our real estate; we simply want to cover the costs we incur and maintain a sustainable model. We empower individuals to get out of the community as much as they put in. Your application process is your own participation, and nothing more. People who don’t fit in weed themselves out.
Most importantly, the office rental facilities and startup incubators service the needs of businesspeople. These people have more or less existed forever. Coworking spaces service the needs of people who do something they care about, while their business entity, if any, may act more as a means to an end. They are communities of practice, where people go to work on their craft.
It is that latter group of people I find the most interesting. In light of everything that is happening in the world right now, the notion of making a living doing something you believe in on your own terms is a liberating one. In it may lie answers to repairing our economy.
By building services and doing things to help people start and maintain healthy independent careers, we have an opportunity to make a really fantastic opportunity to make a long-lasting positive impact on the world.