One of the most common recurring questions that shows up in my inbox from prospective coworking space catalysts is rarely asked directly.
When people write in, if they’re looking for something specific, they’re almost always looking for business models, plans, pro-formas, etc. When I dig a bit beyond their request, it turns out that what they’re really interested in is figuring out how, or who, to fund their new operation.
We’re big proponents of bootstrapping at Indy Hall. Apart from industry cliches like, “It’s easier to spend somebody else’s money than it is to have to make your own”, there are very practical and pragmatic reasons for bootstrapping a coworking space.
At the top of that list of reasons is – because you can.
There are industries that exist where start-up costs are prohibitively high, and starting a new venture requires outside capital to get off the ground.
But coworking isn’t one of those businesses. Rather than needing intensive financial capital to get started, you get to start by building social capital.
Focus on Your First 10
People jumping straight into coworking calculating square footage & sizing up furniture, or obsessing over branding and their website, are skipping over the important and crucial step to developing a healthy community: finding your first 10 coworkers. Everything else can come after that.
Where you find them will vary. What they’ll look like will vary. But these first 10 people are the human seeds of your coworking space to be. They will be the #1 reason that other people want to come work with you at your coworking space.
Rather than inventing pro-formas or making complex decisions about your new business, you can turn directly to your first 10 and work with them to make decisions, and calculate actual financial viability.
But perhaps the most overlooked opportunity is:
your members are your funders.
Where Might Your First 10 Come From?
Our first Indpendents Hall member meetup in early 2007 was the first formal invitation for the people I’d been talking about coworking with to come together. We talked about coworking, but we didn’t exchange any money just yet (other than paying for our beers). There might’ve been 20 people at that first meetup, a number of whom I never saw again (or didn’t see until many months later).
Not wanting to lose momentum, we continued those meetups at least once a month. They sometimes involved direct discussions about a coworking space, but more often than not they were just opportunities for us to get to know each other. The prospective members got to bond with me, but also got to bond with each other. We also made it a point to attend other peoples’ events together. It might just be 2-4 people at a time, but we were starting to hang out more often.
We started our own “Jelly” casual coworking meetup every couple of weeks to work outside of the house together – sometimes from a cafe, sometimes a bar, sometimes just gathering in somebody else’s living room for the day. This was a crucial step past talking about the idea of coworking, and into the realm of introducing people to the act of coworking. These events grew from 6-8 people to 15-25 people over the course of a few months.
It turns out that working with people who aren’t your coworkers (in a traditional arrangement, anyway) is habit forming. People began to ask to do these meetups more often. And they continued to invite their friends.
On A Budget of $0.00
It wasn’t until this point that we started thinking about money, business plans, membership models, square footage, desks, or any of the things that people tend to be overwhelmed and concerned about. We spent at least 6 months spending ZERO dollars. And we’d built up a core group of around 10 people who’d formed deep, strong relationships with each other – all in the context of a coworking space that didn’t even exist yet.
And those people wanted nothing more than to have a place where they could get together as often as they wanted and invite more people over. The club was ready for a clubhouse.
On a budget of $0, we’d formed the very first stages of our working community. With no office, no infrastructure, no business license, no bank account.
Back To Funding
We opened our first budget with two funding sources:
- my meager savings account (<$10,000, earned from web development consulting)
- ★★★ membership dues, prepaid
Since we had this group of potential members who said they wanted coworking, we asked them to say it again – with their signature at the bottom of a check. We ended up signing up 2 full time members, 4 lite members, and a whopping 23 basic members because of the time we’d spent building a strong core of 10 people BEFORE we needed the money.
We gave our “charter members” the opportunity to sign up for their preferred membership level for up to 6 months prepaid, with a bonus month of free membership for the prepaid memberships. We brought in another $4700, nearly 50% of my personal investment, before we’d even signed a lease. This was not only the funding needed to get the office opened – but it was the vote of confidence that I needed from the community to empty my personal savings into this venture.
Our Members Are Our Funders
Without members, Indy Hall has no reason to exist. Our members get to vote – with their dollars and their participation – if and how we continue to exist. It’s up to us to listen and learn from what they tell us.
Every minute you’re spending looking for funding is a minute you’re not looking for members.
Ask anybody who runs a coworking space today – they don’t need investors to grow and be sustainable as much as they need members.
Consider the Alternatives
- Develop your business plan
- Find Investor(s) and convince them that coworking is the new hotness and they should invest
- Investor(s) buy in, and now own a piece of your hard work
- Find a location to open your coworking space in
- Move in. Build furniture. Paint walls. Install network.
- Grand opening! Celebrate!
- Celebration over! You need to find members!
- Hunt for members
- Develop your business plan based on the members you’ve found
- Work with your membership to find a location to open your coworking space in
- Members buy in, now share a piece in the hard work
- Move in. Build Furniture. Paint Walls. Install Network. Together.
- Grand opening! Celebrate with your members!
Going the route of option one is a great route – if you’re into delaying the inevitable. No matter what, you’ll need to do the hard work of finding your members. In this case, you’re waiting to do that and asking somebody else to fund your stalling.
Option two, however, gets the hard part out of the way early and puts you in a remarkable position – most notably having member buy in – for your ongoing community development.
When you open your space at the end of option one, you open with a shitload of hard work (much harder than assembling Ikea furniture) ahead of you and a debt to an investor.
When you open at the end of option two, you open with revenue, momentum, and buy-in. Not to mention a lot of the hardest work behind you, complete ownership of your business, and the ability to answer to your community instead of an investor – because the community IS your investor.
So start with your first 10.
They’ll answer all of your hardest questions, including ones that are much harder than “How do I fund my coworking space”.