Hey Heather,
Let’s start by putting my bias out front: I’ll do almost anything to avoid having an “investor” involved, because I place a very high value on control. And not because I’m a control freak…but because I’ve learned the value/importance of being able to make long term decisions in this business. Investors are essentially business partners that don’t work on the business every day.
With that in mind, I also view business partnerships like marriages - in fact, they’re often more difficult to undo than a marriage. Bringing on an investor is like marrying for money. It happens, but it usually doesn’t end well.
I’ve been where you are, though. Nearly no cash. Banks didn’t want to talk to me. Here’s what we have done, and had a lot of success with:
1 - Membership drives. Turn “early signups” into an event. Get your on-board members in the same room as your prospective members and make THAT the day that people sign up. Taking checks in person helps you avoid payment fees (which add up!) but also the collective energy of people signing up can be contagious. Make it a celebration.
**2 - “IRL” crowdfunding. **The biggest mistake I see people make with crowdfunding is getting caught up in the “crowd” and forgetting what each individual is actually contributing towards, and why.
Stuff like Indiegogo and such makes it easier for a wider audience to discover a project but coworking spaces are generally hyperlocal efforts, so the amount of work that goes into a typical crowdfund campaign (which is a LOT) spreads that effort thin. One of the most important lessons I’ve learned from all of the funding work I’ve done is that the more specific of a “thing” you can offer people to contribute towards helping, the better.
For example…break that $50k into its component parts. *“We need $5k for chairs” *can turn into “become our official chair sponsor” for a local business who wants to contribute or, even better, “buy one chair and we’ll dedicate it to you” and offer it to members, supporters, and other local businesses.
3 - Member loans. The first time we expanded we needed a similar ~$50,000. We shared exactly what we needed it for, and our current potential options for closing that shortfall. After the meeting, a member approached helping us - their business had been doing very well (largely in part because of our community) and they saw this as a way to give back. In fact, they really wanted to buy in as an investor.
But again, even though I had a good relationship with this person, I had to ask myself if I wanted them to be my PARTNER if the money wasn’t involved, and it wasn’t a hell yes.
So I said “what about a loan?” and he said yes. We put together terms where we had 12 months before we had to start paying back the loan. He gave me a rate that was better than I could get with a bank, and I had the flexibility down the road if needed. The only challenge we ran into with this deal was a sense of entitlement that came with one person loaning us such a large amount of money, he tried to occasionally hold it over our heads. It took a lot to keep that from affecting my decisions (and imagine if he was an actual PARTNER).
The next time we needed an influx of cash, we went back to the community and said “before we go to other sources we’re wondering if anybody would be willing/able to offer us a small loan? We’re looking for a few people who can loan us $5k-10k each.” This approach meant that no single person could hold the loan over our heads, and in a worst case scenario we could accelerate paying that person back if they did (so they had nothing left to hold over us).
The best part about these smaller loans was that we were able to turn these into zero interest loans. They had the same “1 year before payback begins” term, but we also talked with each member about the actual interest they were going to earn at market rate on such a relatively small loan. We said “here’s the dollar amount - but maybe there is something else that’s similarly or more valuable to you than the interest?” and in every instance we were able to offer something with nearly no cost (membership credits, consulting/support, public gratitude, etc) instead of paying the interest.
4 - Don’t buy everything at once. This one is the most often overlooked.
Your job isn’t to fill a space with stuff. It’s not even to fill a space with people. Your job is to bring people together.
SO YOU DON’T NEED TO BUY EVERYTHING AT ONCE.
When we opened we didn’t have…
-
a coffee machine
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a couch
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whiteboards
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a printer
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a projector and screen
-
dishes or mugs
Since we’ve never competed on “having stuff” we made it clear that we’d buy stuff that was a) most important, b) as soon as we could afford it. Want Indy Hall to have something faster? Help us recruit more members! Help us find or negotiate a deal!
we didn’t have chairs for every desk. we didn’t even have the number of desks that our space could hold…we just had enough for the people who were there, and a few to grow into!
I think because a lot of people who want to open coworking spaces spend a TON of time looking at what other coworking spaces do, there’s this misconception that you have to have it all on the day your doors open.
And if you think “yeah Alex that worked in 2006 when you didn’t have any competition…” guess what we’ve done every time we’ve moved, or expanded? the exact same thing.
I’d take a good hard look at the things you think you need that $50k and decide what you REALLY need…and what you can buy down the road once you’ve built up your membership.
**LASTLY…INVESTORS ARE YOUR LAST RESORT. **
I’d rather not open a coworking space than give up control over how I serve my community. It’s one of the biggest things that’s allowed us to thrive for over a decade, and I wouldn’t trade it for anything.
-Alex
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The #1 mistake in community building is doing it by yourself.
Better Coworkers: http://indyhall.org
Weekly Coworking Tips: http://coworkingweekly.com
My Audiobook: https://theindyhallway.com/ten
On Wed, Jul 18, 2018 at 8:20 AM Heather Miller [email protected] wrote:
Hey all! I am in the process of opening a coworking space specifically designed for uplifting and sustaining creative professionals’ careers. I’m so glad I found this channel, as it’s a great sounding board for some consistent questions I’ve been having. Plus, I can see that a lot of our ideas have already been replicated elsewhere, so I’m excited to learn how others have done it before us!
We have a fantastic space ready to go, and everyone is on board with it, however we are going to need some starting capital to finish up some of the construction. Our landlord (the building owner) has already worked out a deal with us to finish 1/3 of 5000sq ft space, with the last 1/3 being our responsibility. We are estimating the construction costs to be around $15k-$20k, and then we’ll have to pay for the furnishing after that as well. Overall, we’re looking at needing probably $50,000 or more to furnish all of that area… We’re planning on doing a crowdfund, but are still expecting to be short. 
Does anyone have any experience in asking investors or companies for sponsorships of any kind? I have no idea where to start, what to ask, or where to find people that would be interested in investing money of that kind.
Any good resources or advice?
Much appreciated!
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