Why VCs Love Agile Workplaces – Part II
The reality of startup growth is that it ebbs and flows. Scaling up headcount is usually the long term goal, but scaling down certain teams can be helpful, should a company need to pivot. Scaling across regions is important to build sales, but closing a remote office is necessary if that market proves not to be a good fit. That’s just one of the reasons why the agile mindset aligns with the realities of growing a startup.
Vinod Khosla, founder of Khosla Ventures, one of the top venture capital firms in the country, talks a lot about the importance of smart company building. In Khosla’s presentations, he often refers to the “Nine Deadliest Startup Sins,” a list originally compiled by Steve Blank, the noted entrepreneur who helped launch the Lean Startup movement.
On this list are two sins that traditional office leases negatively contribute to:
- − Following a business plan that doesn’t allow for trial and error
- − Prematurely scaling a company
Under traditional lease agreements, CEOs and COOs are required to predict how much space they’ll need for the next decade—and to start paying for all of that space today. And, regardless of how the business plan evolves over time (as it surely will), the terms of the lease rigidly limit the organization’s ability to restructure.
“Growing tenants desire shorter, more flexible lease terms, usually two to four years, to coincide with their funding raises—and thus headcount additions,” says Peter Conte, vice president in the San Francisco office of real estate services firm Transwestern. Meanwhile, landlords still prefer standardized five- to 10-year terms.” – National Real Estate Investor
As a result, companies like Knotel have deconstructed the leasing model and reshaped it to fit the needs of today’s workforce. Agile terms are designed to support the inevitable surges and shifts in a startup’s growth by making it easier for them to quickly move into new space, customize it, and rearrange or expand it.
These flexible arrangements are often based on a subscription model that includes finding space, fitting it out and providing ongoing maintenance services.
Agile office agreements are much more desirable for VC-backed startups because they’re short term, often lasting only a few years. Startups can grow and reposition according to their needs and those of their customers instead of being tied to a landlord’s preferred terms.
Read the last of our three-part series on how successful startups leverage agility here.