New Life for Co-Working Spaces?
Today’s Highlights: Meet the Stripe Mafia. Do startups need offices? And the problem with Subway’s constantly returning $5-footlong promotion.
OPPORTUNITIES
Co-working companies are hoping to attract pandemic-weary workers: “Around the corner from the historic Pike Place Market’s idle fishmongers [in Seattle], Chris Hoyt was overseeing a construction crew taping and muddling drywall on the ground level of a century-old red-brick building that would soon take the form of small private offices and meeting rooms. The site is slated to be a new location for Hoyt’s co-working business, The Pioneer Collective, and the center of his bet that pandemic-weary workers will need a refuge after spending nearly a year in makeshift home offices. ‘A massive group of people has been thrust into remote work against their will,’ said Hoyt. ‘Once the honeymoon phase ends, the majority would prefer somewhere other than the kitchen table or even home office, whether at an individual or team level.’”
“At least 226 co-working locations closed permanently in 2020, accounting for 6 percent of the sites tracked in North America by Upsuite, a co-work matching service.”
“WeWork closed its launch location, housed in a high-rise in Manhattan’s SoHo neighborhood, and 70 others across the country.”
“‘We know that most people don’t like or aren’t suited to work from home five days per week,’ said Sander. ‘The sweet spot is 2½ days per week.’” READ MORE
MARKETING
Brands are trying to figure out how to market on Clubhouse: “In the app, these moderators — or influencers — are put on a virtual stage and can control who speaks, when, and on what topic. Their conversations are then promoted on the app’s main feed — and potentially touted to users via push alert. ‘With this model, an advertiser can view a particular room as a very dedicated audience ripe for ads and brand activations released to the room’s subject matter, knowing that everyone in the room has a vested interest in the topic and was chosen to participate in the discourse,’ said Justin Kline, co-founder of influencer marketing agency Markerly.”
“‘The watch time is so incredibly large — people are spending upwards of eight hours on the app,’ said Yu, who has hosted rooms that have lasted as long as 50 hours.”
“Pernod Ricard cognac Martell partnered with global marketing content creator Karen Civil to celebrate black female entrepreneurs during Black History Month.” READ MORE
Subway can’t resist its $5-footlong promotion: “Within a year [of the promotion’s introduction], foot traffic skyrocketed across the franchise’s thousands of locations. Revenue from $5 footlongs alone topped $3.8B. It was, according to many industry analysts, one of the most successful promotions in the history of American cuisine. But the deal wasn’t so hot for Subway’s franchisees. Eager to grow at all costs, Subway refused to let the promotion die. As inflation drove up the cost of doing business, the $5 footlong became financially unsustainable for many of the independent entrepreneurs who owned the company’s eateries.”
“For franchisees, Subway is appealing in that it boasts the lowest relative entry cost of any major franchise: The average total investment to launch one only runs $140,000 to $342,000, compared to $1.3 million to $2.2 million for a McDonald’s.
“In return, Subway makes money from taking an industry-leading 12.5 percent cut of its franchisees’ weekly gross sales.”
“During a time when many franchisees saw a 40-80 percent decrease in sales due to COVID-19, the promo was reinvented again — this time, as a $10 deal for 2 footlongs. Though Subway didn’t force its franchisees to participate, many felt pressured to do so, since the chain’s contract stipulates that an agreement can be terminated for nearly any reason.” READ MORE
GOVERNMENT SUPPORT
If you’re a sole proprietor, independent contractor, or self-employed entrepreneur, now’s the time to apply for a PPP loan: “On Monday, the Small Business Administration is expected to release an update to the sole proprietor version of the PPP loan application, accounting for a rule change that allows companies with no employees to get more money from the PPP than they were previously allotted. Companies with fewer than 20 employees also now have an exclusive window in which to apply for funds, through March 9th. The changes are part of a spate of revisions requested by the Biden administration aimed at making the $284.5 billion forgivable loan program more equitable and accessible to the smallest businesses.”
“Starting as soon as Monday, sole proprietors, independent contractors, and self-employed individuals may apply for a PPP loan equivalent to the figure listed on line 7 of their Schedule C tax form--that is, their gross income.”
“Previously, businesses needed to list their net income, or line 31 on the form, which removes taxes and other expenses from the calculation.” READ MORE
REGULATION
New York’s City Council is considering legislation that would refund fees and lighten the regulatory burden on businesses: “The two-bill package would also allow for-hire pedicabs with electric-assist motor systems back on city streets for the first time since they were banned more than a decade ago. It would also repeal other regulations that have historically hurt small-business operators’ profit margins. The council’s committee on small business will hold a hearing on the bills on Monday. ‘This legislation will fundamentally reshape the way New York City interacts with small businesses—giving them a chance to survive, save jobs and allowing them to thrive in the future,’ said Councilman Mark Gjonaj, a Bronx Democrat who is chairman of the committee and helped draft the bills.”
“One bill, whose lead sponsor is Bronx Democrat Vanessa Gibson, would update more than 180 sanitation, health, noise-control and other code violations on the books at city agencies to provide civil-penalty relief for restaurants, laundromats, pawn shops and other small businesses.”
The other bill, authored by Mr. Gjonaj, would waive or refund thousands of low-level penalties small businesses have been issued for city code violations dating back to March 12, when Mayor Bill de Blasio declared a state of emergency in the city because of the pandemic.” READ MORE
HUMAN RESOURCES
With another year of remote work looming, companies are reconsidering compensation issues: “Discussions about the future of work, such as whether to reduce the salaries of employees who have left high-cost cities, are priority items in board meetings and senior executive sessions across industries, according to chief executives, board members and corporate advisers. Among the questions companies are trying to resolve: Who should shoulder tax costs as employees move to new locations while working remotely?”
“The prolonged remote spell is putting pressure on companies to give parents more help with child care—while being careful not to rankle workers without dependents.”
“Some companies have offered Covid-related stipends that workers can use for anything from child care to workout equipment.”
“For workers who were accustomed to frequent business travel before the Covid-19 era, another question is emerging: Will their clients want visitors when the pandemic ends?” READ MORE
More startups are asking whether they need an office: “The crash course in remote work over the past year has shown some tech entrepreneurs that their ability to collaborate online is strong—and that they might be better off building their businesses entirely in the cloud. Founders could save money on rent and hire employees wherever they want to live. Going cloud-only may not be for all companies. Even in the software sector, where the work doesn’t generally involve designing and building tangible objects, there are a host of challenges to dispensing entirely with offices.”
“But some startup founders, like Alan d’Escragnolle, aren’t struggling with trade-offs and are finding the benefits of remote work worth it: He said his team brainstorms just as well remotely and that employee productivity hasn’t suffered.”
A year ago, Mr. d’Escragnolle was set to join his co-founder at Filmhub, an online film-distribution startup, in Los Angeles to sign an office lease and start hiring. Instead, he ended up renting a ski house in Lake Tahoe, and has been running the company from there since March.”
“‘We are saving at least $5,000 a month right now’ on salaries and rent, said Mr. d’Escragnolle, 32 years old.” READ MORE
THE COVID ECONOMY
For some , it is now cheaper to rent in San Francisco than in Oakland: “The rent declines are a direct result of the pandemic. More than half the city’s employees are able to work remotely, according to the Bay Area Council Economic Institute, and tech firms like Twitter and Salesforce — the city’s largest private employer with more than 9,000 workers — have said employees can stay away from the office even after the pandemic ends. Additionally, the pandemic has closed restaurants, bars and museums, while putting a premium on locales that offer people more space to work or their kids to attend school virtually. For San Francisco, a dense city that long has had some of the nation’s highest rents, all the changes have taken away many of the amenities that make city life vibrant.”
“Data from the U.S. Postal Service show that 56,000 more people requested address changes out of San Francisco in 2020 than those moving in.”
“‘Every man, woman and their dog is saying there’s no point living in downtown San Francisco if you’re not going into work,’ said Nicholas Bloom, an economics professor at Stanford University who is studying remote work during the pandemic.”
“At a new, upscale apartment building across from Twitter’s headquarters on Market Street, the sales office is offering up to three months of free rent. If that’s not enough incentive, new arrivals can also get a year of free cable and internet, several personal training and massage sessions or have the landlord donate $1,000 to a local charity on the tenant’s behalf.” READ MORE
STARTUPS
Meet the Stripe mafia: “They paid their dues building Stripe into a fintech darling that investors are valuing as high as $115 billion in the secondary market (where private investors can sell their shares to other approved investors). That's more than three times its valuation from April. Now, some of Stripe's earliest employees are not only starting their own businesses but also becoming angel investors backing a growing Stripe ecosystem of founders. While some started these companies years ago, others are new and still in stealth mode. The most famous one is the artificial intelligence research lab OpenAI. But there's also Quill, a competitor to Slack, and newly launched Watershed.”
“Watershed is a software platform founded by 3 former Stripe employees to help companies reduce their carbon footprint.”
“Accord is a Stripe and Y Combinator-backed startup that provides a customer collaboration platform for B2B sales.
Assembled, a startup that wants to build the operating system for support teams founded by three former Stripe employees.” READ MORE
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THE 21 HATS PODCAST
Episode 50: So You Bet the House? This week, Stephanie Stuckey tells Paul Downs and Jay Goltz about her decision to buy a manufacturing plant and bring production of Stuckey’s snacks in-house. We talk about her conflicted concerns about a minimum wage hike, what it takes to build a strong culture in a repetitive-task environment, why she paid above book value for the company she bought, and how she managed to finance the purchase of a business that is four times the size of Stuckey’s: “I had to take out an additional life insurance policy and list the bank. I was just waiting for them to call me and tell me my firstborn son has to be collateral as well.”
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