one of the doomsayers about the current tech boom.
“I think we’re still at the tip of the iceberg, really,” Logan says.
But any innovative company may need to flex and re-assess as conditions change, he says. And RocketSpace is not immune, just because it houses tech innovators rather than competing with them. The business has gone through its own evolution.
Hundreds of coworking spaces, incubators, and accelerators have sprung up to nurture early- stage tech companies in the Bay Area, each with its distinctive stamp. A coworking space boom often follows a tech boom, as Xconomy has chronicled in Boston, Wisconsin, and the New York metropolitan area. Competition gives startups the power of choice, so a coworking space that offers no more than “people storage” may not be able to command adequate rents, Logan says.
Rates at RocketSpace are at the higher end of the scale, at about $850 per desk per month. Larger companies can rent small private suites, or even a whole floor, at $1,050 per desk. Tech companies initially used RocketSpace as a temporary arrangement until they were ready to set up their own offices, but now they often grow in place there, Logan says. Average stays keep getting longer—it’s now about 14 to 18 months. RocketSpace gets 25 to 35 new applications a week, he says.
Even with such robust signs, though, operating a coworking space is not a high-margin business, Logan says.
“I would love to say that the real estate component of our business is highly profitable. It’s not,” Logan says.
In fact, Logan doesn’t see coworking space rentals alone as a strong long-term model for the company. RocketSpace is already trying other things. The company makes higher profit margins on a related aspect of the business that’s still evolving—helping corporations figure out how to stay alive by innovating like startups.
RocketSpace’s consulting arm, RocketSpace Corporate Services, has more than 75 customers, from government agencies and educational institutions to businesses in fields such as banking, airlines, and health care, Logan says. They include Accenture, Converse, and British Airways. The consulting business brings in about the same amount of revenue as the real estate component, but it accounts for a greater percentage of RocketSpace’s profits. RocketSpace doesn’t disclose its revenue numbers.
The consulting service offers to educate older corporations about emerging technology trends that could disrupt their fields, and teach them how to innovate like startups from within. That’s easier said than done, of course.
But the RocketSpace unit is also playing matchmaker for corporations looking to rejuvenate their business models by working with existing startups. For example, RocketSpace helped Nifty, an Internet service provider in Japan, search for a digital health startup to set up an online diet-coaching app for the Japanese market. RocketSpace introduced Nifty to New York-based startup Noom, and the two companies formed a partnership.
RocketSpace’s curated startup workspace is now making houseroom for corporate innovation specialists and talent scouts, as well as startups. Nifty’s scout, Azusa Kawahara, has an office at RocketSpace.
RocketSpace is using that proximity to big company representatives as a selling point for potential startup members. This comes back to Logan’s core thesis: The scale of a startup’s success depends on the company it keeps.
“The best thing is just hanging around with other people at RocketSpace,” Logan says. “You may have just raised $4 million, but you’re sitting next to someone who’s negotiating $30 million from Andreessen Horowitz. At RocketSpace, $4 million is table stakes.”
