Frugal startups get creative in leasing office space

Shaped by a DIY ethos and the economic realities of a lingering recession, local startups are finding ways to inexpensively outfit their offices and lab space as they ramp up their operations. Some of the tactics local entrepreneurs are using to help get their businesses off the ground on a short dollar: hunting for bargains on Craigslist.org, negotiating free furnishings from landlords, buying secondhand lab equipment, even sharing work space with other emerging companies. “People are trying to be as efficient as possible,” said Jon Frisch, an associate with T3 Advisors, a real estate brokerage and consulting firm that represents technology business tenants. One of the best scenarios for an early-stage startup looking for office space is a sublease that comes furnished and is wired with Internet and phone connections, Frisch said. “It’s plug-and-play for backpack entrepreneurs,” he said, referring to people who can tote around everything they need for work in their laptop carry bags. Subleases typically last for 12 months to two years and often include access to amenities such as conference rooms or kitchens, Frisch said. In addition to supplying relatively inexpensive space, a sublease can help early-stage companies focus on growing their business.

“Startups should be worrying about developing their products, not worrying about office space,” Frisch said. OfficeDrop, a document-scanning and management firm that recently completed a move from Waltham to Cambridge and changed its name from Pixily, hopes that subleasing some excess office space at its new headquarters will help defray the cost of its rent. “A number of companies are looking for temporary office space,” said Healy Jones, vice president of marketing for the newly named startup. “We got it written into our lease that we can sublease space.” The offices will be rented out for a few hundred dollars a month to other startups and include desks, chairs and Internet connection and access to a shared kitchen. OfficeDrop, which has raised about $1 million in investment funding to date, has taken a frugal approach to furnishing its digs. It snagged some used Herman Miller office chairs from Craigslist and bought desks from Ikea. The refrigerator in the company’s kitchen is a cast-off from an employee’s home. To decorate the walls, the company is buying blank canvases and paint, and some employees are going to create artwork, Jones said. And lifting a page from Amazon’s startup days, company executives are planning to build some low-cost desks from wooden doors and other materials purchased at a hardware store. Borrowing a table from home and scooping up used chairs and other equipment from downsizing businesses are some of the things Jules Pieri did when she set up her company, Daily Grommet, an online marketplace headquartered in Lexington. Daily Grommet rents space with two other small businesses in an old house that’s been converted to offices. Pieri raised an initial $1 million from a group of 12 angel investors, which funded the company’s first 18 months. Launching a business in October 2008 as the economy was tanking, Pieri has had to be frugal. Along with some of the other founding employees, Pieri washed and painted the walls before moving into the offices. Some of the company’s 10 employees use their own laptops and cell phones for work, and they share desks. Space is tight and little is wasted. “We have economized,” Pieri said. OfficeDrop was also tightfisted when it came to spending on office equipment. For instance, the company bought a voice-over-Internet-protocol (VoIP) phone system at Costco for $250, which included eight phones. With its most expensive purchase — high-end scanners —the company took advantage of a month-long free trial period to test the equipment, and it leveraged the engineering and custom software development that vendors offered while the products were being evaluated. The company is also recycling an old computer to use as a router, and executives are wiring the workspace themselves. Wiring its own offices rather than hiring someone to do it was also a way that OwnerIQ, an online advertising and media startup in Boston, saved money.  “You have to be incredibly scrappy,” said Jay Habegger, OwnerIQ’s CEO. “It stems from a philosophy of ‘Every dollar I spend I have to either raise or sell.’ That changes how you think.” Founded in 2006, OwnerIQ rented shared space in two different locations before moving into its current headquarters at 320 Congress St. 15 months ago. OwnerIQ has raised about $14 million in venture capital funding to date and has taken a no-frills approach to spending on furnishings and equipment: Most of the desks, chairs and other office gear were bought secondhand from office suppliers. Employees use low-cost netbooks as their computers and an inexpensive VoIP system for phone calls. The company has augmented its 25-person staff with offshore developers and part-time workers, which cuts down on the amount of office space and equipment required, said Eric Mabley, executive vice president. John Meadows, owner of Used Office and Warehouse Equipment in Framingham, said customers are doing a lot of comparison-shopping these days and are buying only what they need. “They are shopping for the minimal amount of pieces and not buying anything extra,” he said. The company, which has been in business 31 years, sells new and used items, including everything from desks to filing cabinets to artificial plants. With the economic downturn, some customers who never considered used furniture before are giving it a second look, Meadows said. Bargain benches It can be more challenging for biotech and life sciences startups to set up lab space inexpensively because of the specialized equipment needed and the space requirements. Still, some companies have saved money by buying used equipment. For instance, at American Instrument Exchange in Haverhill everything from used lab benches to water-purification equipment and microscopes can be purchased for about half the cost of new gear. Customers include a lot of startups and universities, says Marion Long, a sales representative with the company. For some startups, the cost of renting and setting up lab space is out of reach and long-term leases are unrealistic, said William Brah, executive director of the Venture Development Center, an incubator for high-tech and life sciences startups at the University of Massachusetts Boston. Launched last May, the VDC has 18,000 feet of lab, office and common space for startups. Its tenants include several software companies and two life sciences firms, Pressure BioSciences Inc. and GeoMed Analytical LLC. Dana-Farber Cancer Institute researchers are expected to take the third lab, and several prospective tenants are now looking at the remaining empty lab, Brah said. Interest in lab space has picked up recently from early-stage biotech companies that need only a single bench or a portion of a lab to conduct research on a particular project, he added. “Investors are saying to startups ‘We want you to keep your costs to a minimum,’ ” Brah said.