PivotDesk cuts the ribbon on its office-sharing marketplace in New York, San Francisco, Denver, and Boulder

By Michael Carney , written on April 16, 2013

From The News Desk

Finding real estate to meet your companies needs can be a frustrating task. Doing so for a rapidly growing startup, whose headcount, and thus space needs, are constantly changing can be nearly impossible. The problem is that the commercial real estate market in most cities is setup to require long term leases, a concept that is fundamentally at odds with the realities of a growth stage business.

PivotDesk, which is launching out of public beta today in New York, San Francisco, Denver, and Boulder has a unique solution to this problem in its startup office-sharing marketplace. The model focuses on connecting mid- to late-stage companies, who have typically signed leases that they plan to grow into, with small early stage teams looking for flexible office arrangements. In other words, it’s bringing transparency and order to a process that has long taken place on a smaller scale and behind closed doors.

The host, which in this case is the growth stage company, benefits by offsetting some of the cost of its typically larger than necessary space. These companies also get to surround themselves with small, dynamic teams who can contribute energy and potentially talent to their host. The smaller guest company gets access to a month to month lease, often in a nicer space than they could ever afford, and gets to surround itself with the example of a larger, more established company.

“The traditional real estate model is a static structure that just doesn’t work for the early-stage dynamic growth businesses driving today’s economy,” PivotDesk founder and CEO David Mandell says. “Risking your future on a multi-year lease when you’re still trying to get your product off the ground is a scary commitment. PivotDesk gives these companies a chance to get into a great space without a laundry list of daunting terms.”

PivotDesk is big on culture matching, and takes every precaution possible to make sure that it matches companies that will thrive while working in close proximity. This means everything from considering the noise level and style of the working environment, to even the industry. For example, a team of quiet engineers all working with headphones on may not mesh well with a team of content creators that is constantly shouting ideas back and forth, shooting video, and playing ping pong.

To flush out these deal-breakers before matching two companies, the platform includes detailed descriptions of the working environment and corporate culture of both hosts and guests, and also deep communication tools for connecting both parties. In other words, it’s like a traditional online dating site, but for space-challenged startups.

The service has been popular in Denver, Boulder, and New York where it soft launched last fall and has since matched over 100 companies and currently supports over 200 active listings. One early client was Cheezburger, a Seattle-based growth-stage company that used the platform to find flexible startup space in New York.

Available office spaces are listed based on their location, vibe, amenities, the size of team they can accommodate, and their prices per person, per month. Listings provide no mention of square footage, and rarely list the name of the host company. Once a match is approved by both parties, PivotDesk provides all documentation and billing, taking 10 percent commission each time a monthly lease is renewed.

“Our biggest barrier is ‘stranger danger,’” Mandell says. “You’re inviting someone into your business home, more so than is the case in instances of co-working spaces.”

PivotDesk does everything in its power to alleviate this issue, including verifying insurance coverage, confirming sublease rights within existing leases, and focusing throughout the matching process on delivering good cultural fit. But the risk of a disruptive match, or even fraudulent behavior remains.

The other big challenge facing the company is circumvention. The PivotDesk platform provides a tremendous matchmaking service, and also alleviates the need to manage subleases and billing. While this is likely enough value in a short-term arrangement to justify the 10 percent commission, if an office-sharing arrangement becomes longer term, it’s likely that the parties would choose to contract directly, cutting PivotDesk out of the deal.

Finally, while the PivotDesk concept is a smart one, there’s nothing defensible about its model, which its CEO is quick to admit. Rather, the company will succeed by offering the most comprehensive and user-friendly marketplace, regardless of where and when competition arises. Notably, this competition is unlikely to come from the world of traditional real estate, as the company is addressing a market that is too small and unprofitable to attract broker attention.

PivotDesk is looking to expand its marketplace model beyond New York, San Francisco, and its home cities in Colorado. In what it calls its Spaced Out Cities initiative, the company’s website asks entrepreneurs in other cities to suggest markets that they open up next, with the notion that it will focus on the sources of the greatest demand. Eventually, as its model matures, the company may see increased interest from more established businesses like law firms and consulting practices that have unmet office needs, but at present, the company is focused on solving these problems for the startup crowd.

PivotDesk announced $3 million in Series A funding in September from Foundry Group, Draper Associates, David G. Cohen, Chase Fraser, and Jason Seats, and is using this capital to expand its geographic operations, and grow its team.

Building a growing business is an incredibly difficult task. There’s no need to complicate this process by adding in the pain and pressure of dealing with lease terms that don’t match your company’s ever-changing needs. PivotDesk offers a solution to both the hosts and the guests in its marketplace model. In a world where the real estate market makes less sense than the weather, this is sure to be a welcome reprieve.