Traditionally focused in Midtown South, the tech and startup scene in New York is expanding beyond its traditional borders. Both WeWork (WE) and Alley NYC have opened or are opening in areas not generally considered hotbeds for the startup community. Grind has also expanded its presence, taking 14,436 square feet at 1412 Broadway in Midtown.
“I have to say that the boundaries as we understood them five years ago have shifted in a very unpredictable way, and the shifting is not done yet,” Mr. Cohen said of the expansion. “Silicon Alley in New York is spilling over into the Financial District and Midtown, and the co-working spaces are looking at a variety of geographies—they’re not as particular.”
WeWork has largely dominated the national co-working market, with 8,000 members across its locations in New York, San Francisco and Los Angeles. Its popularity is so great that at the time of writing, WeWork is 100 percent full, with an extensive wait list.
Unique among the space providers, WeWork has an in-house real estate team that looks nationally for potential spaces and new locations.
“Figuring out where we want to go is our ‘secret sauce,’” said Ben Kessler, director of marketing at WeWork. He added that the company is looking at other cities but would not elaborate on where, though possibilities could include Austin and Las Vegas, which have growing startup and tech communities. “Hopefully international will happen in our lifetime,” he noted.
No matter where individual spaces are located, co-working spaces are consistently a boon for the local economy and submarkets, because once startups outgrow their co-working spaces, they almost always stay in the area they were previously working in.
Both IDoneThis, a progress and productivity software provider, and Material Wrld, a high-end fashion startup, which were born out of WeWork Labs, have moved on to their own office spaces but have remained nearby, according to Mr. Zandieh.
Generally, co-working spaces limit the number of people a company can have in its space to around five or six. Once that number is reached, companies begin looking for office space.
“Is it beneficial for a startup to pay $500 per person at a co-working space when they’re planning on expanding by five additional employees?” asked Mr. Zandieh. “You’re looking at 1,500 square feet. No co-working space is going to accommodate that.”
It is also important for companies to leave the co-working scene to form their own identities, according to Mr. Zandieh. “If you want your own identity, you’re going to have to eventually leave,” he said.
Though the number of startups in New York has grown significantly over the past half-decade, it is too simplistic to assume that companies have stayed in New York rather than bolting to the traditional hotbed of California’s Bay Area.
“It depends on the type of tech you are; everything is location based,” Mr. Zandieh noted. “Particular types of startups are going to come here.”
Those startups that are in New York focus on revenue-driven models, rather than the traditional user-based formulas popular in San Francisco.
“New York business-to-business start-ups focus their efforts on revenue not investment,” Mr. Zanidieh wrote in his Tech Starter report issued earlier this year. “In addition, some start-ups might not need funding or additional funding beyond the seed or Series A stage.”
Startups can even use co-working space as a reliable source of clients and funding. Some venture capital firms even operate small offices out of co-working spaces.
“It’s a way for them to keep ears low to the ground, where they can see what sort of startups are coming out of the spaces,” Mr. Zandieh said.
Before he started Shindig, Mr. Raymond operated a digital strategy consultancy called East Village Digital. In his first year of business, 50 percent of paid clients came directly from people met in co-working communities.
“If that’s not reason enough to stop working at Starbucks, I don’t know what is,” he said.
