Ramblings on my MBA thesis: Framework for creating a successful dot com with minimal capital

Workspace

A main point of error for many entrepreneurs is the undesirable desire to have an office. A space where they feel they are masters of their universe and from where anything and everything is possible. Albeit the feeling is right on track in a startup, the cost of having a steady cash burn rate of maintaining an office highly outshines the benefits it brings. Don’t get me wrong, there are cases where having a private space is a necessity, but in most cases in the early stage it is absolutely not needed, it will just be burn holes in your pockets. For instance, Auttomatic the parent company of WordPress, has been valued at over $150 million[i] with more than 3 billion pageviews a month with only 20 employees and no offices[ii].

Now if you feel that you need a place to embrace your ideas and spend all day with the force, the following are cheap recommendations:

CoWork

“Coworking is an emerging trend for a new pattern for working. Typically work-at-home professionals or independent contractors or people who travel frequently end up working in an isolated way. Coworking is the social gathering of a group of people, who are still working independently, but who share values and who are are interested in the synergy that can happen from working with talented people in the same space.”[iii] (Wikipedia 2008)

The coworking spaces usually provide an individual workplace, web access, meeting room and a kitchen. The cost is relatively low compared to the other options. The following is a list expressed in dollars of full time access per month[iv]:

· Argentina $165

· Australia $450

· Belgium $300

· China $150

· England $600

· Spain $487

· USA $160

Alternative Space

An extremely popular practice among startups is to work in alternative spaces, such as garages, attics, basements or any other place that would not have many other uses and thus are very cheap.

The garage startup story has been most popular by Sergey Brin and Larry Paige, Google’s founder, who eventually ended up buying the garage and the house it came in, as memories of the company’s roots.

Office

The most common, albeit not the cheapest, is to rent a conventional office for the startup. Having an office will usually become a quick cash burner for the startup, but if you must cave into the corporate devils, try to avoid the typical neighborhoods that will overcharge and go look for the unconventional neighborhoods were rent will be cheaper.

In the above cases, one must equip the office with chairs, tables, computers and the typical infrastructure. The following are cheap alternatives:

Chairs, tables and furniture can be found at very low prices in firesales of bankrupt companies. Not to worry, this practice won’t bring bad karma; it will just save you a few good bucks while providing adequate furniture. If you are in a town that does not have much of a startup scene, second best option is the Do It Yourselves stores such as Ikea or simply buy the materials and get hands for a few hours with your co-founders.

Computers are, of course, an absolute must and not a point to trade quality for a few cents. For cheap but acceptable options you can look at striking deals with resellers in exchange of all possible future purchases or simply buy from one of the online refurbished sellers such as dells refurbished computers, but remember, don’t save on this. Another option, is if the founders can use their personal computers.

Communication wise, there are great cheap options for telephony, especially in the VoIP arena. It might take you a little extra time to setup, but using an Asterisk BPX will provide a lot of savings very quickly. A second option is to use a service such as Skype that for a low monthly cost can provide a phone number that people can reach you at, this way avoiding all hardphones (hardware based phones) and you can switch straight to softphones (software based phones). Another option, which is used as well, is for each person in management (and in some cases employees as well) to use their regular cellular phones, where they each pay their bills separately from their own pockets as they were used to.

[i] “Automattic Spurns $200 Million Acquisition Offer”, Michael Arrington, October 2007, http://www.techcrunch.com/2007/10/29/automattic-spurns-200-million-acquisition-offer/

[ii] “Acto Two”, Matt Mullenwag, January 2007, http://ma.tt/2008/01/act-two/

[iii] “CoWorking”, Wikipedia, 2008, http://en.wikipedia.org/wiki/Coworking

[iv] Prices taken from websites derived from http://coworking.pbwiki.com