Can versus Should

Sometimes the space you can charge for is not the space you should charge for

It’s counterintuitive. But sometimes — actually more often than one would think — the people you can charge for things are not the people you should charge for things. And sometimes your return on an investment is anything but a financial return. What’s more, that non-financial return is often way more valuable than a few more dollars in the bank.

At PIE, we’ve tried any number of coworking models: paid desks, free desks, desks in trade for services, as well as any number of other permutations, therein. But along that line of experiments, what has turned out to work best for us has been the concept of free desks for “mentors in residence.”

The “mentor in residence” designation is usually reserved for people who have been through the PIE program — which means they are companies in which we hold a vested interest. So asking them for rent would just be us asking for our own money back. But it’s also been used for interesting companies and contributors who happen to be in Portland, have the potential to provide some amazingly valuable insights to our startups, and who are looking for a work environment that is, well, chaotic at best. Or sometimes, it’s just for folks who happen to be visiting. It’s a malleable title.

As part of this program, we’ve been lucky to have companies like Automattic (WordPress), Creative Market, Digital Ocean, Google, Facebook, Kato, Keen, Kickstarter, Pinterest, SendGrid, Simple, Sprintly, Techstars, Twitter, Upworthy, and Wieden+Kennedy, among others, hang out with us at PIE.

Someone from Instagram was even in the space for a few days as they were transitioning away from the Burbn concept into the insanely popular app we all know today. Short lived as it was, even that 72 hour period was interesting and informative.

Quid pro quo

In terms of the quid pro quo for the free desks, we established a soft baseline for participation. It was pretty simple. If we gave you a desk for free, your obligation was “to be actively engaged in mentoring startups in the space.” That was it. Nothing more.

We assessed and judged that participation anecdotally. There were no hard metrics or milestones. No quantitative results. There was just an qualitative assessment. Those not meeting our expectations were counseled to up their mentoring game or were encouraged to leave the space. And even in those rare cases, we gave them a few warnings.

But wait, you say, some of those companies were going concerns. They had revenue. They weren’t early stage startups. Couldn’t PIE have charged these folks for desks? Absolutely. Did we? No.

Because while we like revenue as much as the next startup, we believe that we get far more value out of their presence than a few bucks every month.

So why — especially for coworking spaces and accelerators who are often scraping by — do we believe forgoing revenue is an effective model? Because first and foremost, at the core, accelerators should always be focused on knowledge transfer. And there is no more efficient knowledge transfer than having people who have been there and done that around.

We believe there are three particular flavors of “mentors in residence”:

1) Permanent residence for PIE alums. Retaining class participants beyond their cohort allows us to more efficiently transfer that knowledge from one class of PIE to another. (“You shouldn’t miss that mentor talk,” “You definitely need to connect with so and so,” and “I couldn’t help hearing you were having an issue with x. Here’s how we dealt with that.”)

2) Permanent residence for interesting startups. Going through an accelerator is one way to help build a company. And going through PIE is a very specific path for doing so. But it’s not the only way. And it’s not necessarily the right way. So it’s important that we have differing viewpoints for our startups. People who have built companies independently. People who have been in the Portland startup scene for years. People who have just moved here. People who have been through other accelerators. What we need and what our startups need, in a word, is variety. With diverse viewpoints. And vantage points that diverge from our homogenous existence.

3) Temporary residence for visiting startup types. This could be a desk, a group of desks, a conference room, or even a phone booth. It could be the use of our event space for a gathering. It could be any number of things for which we could charge money. But were we to be purely mercenary about these resources, we would run the risk losing out on conversations, missing interesting connections outside of Portland with interesting startups and investors, and potentially alienating someone who could be hugely valuable to one of our startups. So we just offer up space for free. And in so doing, we expand the Portland startup community exponentially. What’s more, we’re happily the home away from home for these folks, every time they visit Portland.

Perhaps the most important learning from this part of the PIE experiment — while painful on the bottom line from time to time — has been debunking the whole “people only value what they pay money for” bullshit.

It seems counterintuitive, but we’ve learned that giving startup types desks for free often creates a tighter bond and stronger commitment to give back than simply charging them for the use of our space — whether they live in Portland or not.

That is, they tend to perceive more value in the offering than it simply being a roof over their heads and a place to rest their laptop. It’s a community. It’s something to which they are connected. By bonds stronger than financial bonds. What’s more, they feel like a valued — and contributing — part of the community. And since a very important part of our role is strengthening community, we feel this emotional tie has far more value than the rent check.

For us, we feel we’ve gotten exponentially more value out of giving desks away than we ever would have by adding a few more dollars to the revenue stream. And we feel lucky to have had the wherewithal to even engage in this experiment.

Of course we’re only talking about desks here. This could apply to any number of offerings. Or services. Or products. Sometimes you simply shouldn’t charge for what you can charge for. Because then, instead of gaining something, you’re actually losing far more.

Rick Turoczy (@turoczy) has been working in high-tech startups in the Portland area for more than 20 years. As founder and editor of Silicon Florist, he has blogged about the Portland startup scene for nearly a decade — even though numerous people have begged him to stop. That side project led Rick to cofound PIE (the Portland Incubator Experiment), a startup accelerator formed in partnership with global advertising firm Wieden+Kennedy. Those efforts led to the founding of Oregon Story Board, a project that is using learnings from the PIE experiment to accelerate the companies in the services industry.

All because of a blog. Weird.