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Spending that much on rent for a starting company, is just completely ludicrous.

Office space is usually the 2nd biggest expense for any business, startup or not. but prices certainly get inflated with vc funding and high demand. aside from the price, office space is really, really important for attracting talent and creating a productive work environment. but I agree, it's so expensive and we try desperately to find the best options for the startups we work with in order to achieve these things but also be cost effective. another issue is the cost of living, which makes it hard on employees. We really want to see more housing (both market and affordable) and more office space developed to bring down the prices and let more people work and live in SF.

Really? That blows my mind. We are small granted but for us office space is a little under 3% of our burn.

Of course we're in SoCal and use an economical coworking space. Are there no such things in the Bay or do they cost way more?

You can get coworking spaces for ~$300-500+/month per desk, sometimes more for dedicated space. For a funded startup, I've heard that you should budget ~100+ square feet per employee, and rents in SF are in the $50 (very low) to $100 / square foot/year range.

How much are you paying your engineers? 3% of burn sounds pretty low, but it's not completely out of the range of what I just penciled in here. (I was prepared to disagree... but the numbers aren't crazy on either side.)

We pay our engineers near or maybe a bit below the average for the Los Angeles metro area. Our coworking space is a bit cheaper than what you quoted, but not radically so. We pay about $800/month for three desks, storage space, and amenities.

Our #1 expense by a massive margin is employees and associated benefits. #2 is probably the combined cost of hosting and SaaS services we use (AWS/OVH/DO/Vultr, Gusto, Xero, Slack, Zendesk, etc.). #3 is probably a tie between travel and other incidentals like accounting and computer hardware, and our coworking space. The rest is change.

I guess some people just splurge on office space. I don't know what kind of office you'd have to be getting for it to even approach labor cost for a startup. Personally if I were an investor I'd do everything I could to veto that since it's insane and wasteful.

Does it help with recruitment? Maybe, but personally I'd rather work for a hip company in a garage than a boring company in a posh office. Maybe that's the problem.

> Office space is usually the 2nd biggest expense for any business, startup or not

Our #2 is definitely AWS, not rent. (We're in Houston)

I've said for a long time that if investors insist on only funding Bay Area companies they should just skip the middleman and cut checks directly to real estate owners and speculators.

To be a little pedantic here, the numbers quoted here are San Francisco numbers, not "Bay Area" numbers. With just a quick check, I found considerably cheaper commercial lease rates in Mountain View.

You are totally right. It was heavily focused on SF. there are great options outside of SF, but all along the Caltrain stops there is really expensive space because they are more accessible. Castro Street in MV can be very expensive. It matters a lot where the founding team lives and also where you want to recruit from and at what scale. there is a ton of talent in SV as well as East Bay to pull from. Good luck on your startup! thanks so much for your comment.

Seriously, they should just become real estate investors. They get paid in all the funds funneled into startups, and the circle of life is complete.

A lot of them are also real estate investors.

So is it just the right hand paying the left hand but "funneling" it through a mechanism that's inefficient but may be profitable on it's own?

No the idea is that you invest on the real estate with your own money, and invest on start up with LPs' money.

I agree, it often seems like money flows from the investor right to the landlord, bypassing the startup. we talked about this in the article. aside from the value of office space and its cost, to your point about the role of the broker, there are very good reasons for brokers to be involved, as it is such a big expense and there are a lot of factors to think about when finding and negotiating a deal that we help with. In my last company, 42Floors, we made (and they continue to make) listings available on a website, and even when founders find a great space themselves, it turned out they still wanted to have a broker on their side to help with the process. In any case, I totally respect your opinion and appreciate you joining the conversation.

For a lot of companies it is worth it because it gives you access to the talent in SF.

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