Movin’ on up, to the east side

by Mark Davis, CEO

Posted Thursday, September 03, 2009 in News          5 comments

Tags: humor, startups

…of highway 101.  (You had to be living in the US in the late 1970s or early 1980s to appreciate the title of this email.)

Our first real office – after having worked out of my dining room, Serge's garage, and (briefly) Canaan Partners' office – was in Mountain View CA across the freeway from historic Moffett Field dirigible hangar and walking distance to the Veritas/Symantec campus.  It was a great home for Virsto in our post-seed, pre-series A phase, when a tiny cadre built our core technology.  Collegial, efficient workspace, appropriately shabby and quirky:  the bathrooms were outside, and our lab was an old telephone closet with insufficient power and air conditioning.  We worked closely together and accomplished an amazing amount of progress.

However, by June we were bursting at the seams.  With plans to grow a good bit more, we had to get more space.

Real estate market strangeness

Unlike previous recessions, Silicon Valley has been hit harder than the rest of the country.  You can still see offices sitting empty since the .com bust, yet the last mini-boom caused developers to get their shovels out and build even more.  There seems to be more available office space within a 40 mile radius of where I sit than in all of Texas.

Despite all the empty space, listed price per square foot hasn't come down much.  Arguably the best indicator of future space absorption around here is VC funding, and heaven knows that's not a good story these days – Virsto's significant up round of financing a couple months ago is a rarity.  Despite the huge imbalance between supply and demand, most landlords would rather list a space at $2 per square foot per month even though that means a 95% chance of sitting empty for the next year, rather than price it at $1 and get someone in it paying rent.  Some of the reasons for this are understandable, some are just economic suicide.  But hey, plenty of that happens in high tech (note my alma mater Sun Microsystems, RIP whether the Oracle deal clears or not) so why shouldn't the real estate market be allowed to shoot themselves in the foot if not the head?

Fortunately, we chanced upon a landlord a short walk from NetApp in nearby Sunnyvale with their economic hats on straight, and they wanted the space filled at a price that is significantly above their marginal cost, but way below the artificially-high market asking price.  So we snagged it before someone else did.  We're fortunate to have the space, and our landlord is lucky to have us as tenants.

The new home

The space is big enough to last a couple years, for a great price.  It's a good bit nicer than our old place.  Fully furnished, larger cubes, huge lab with plenty of power & cooling, ample conference rooms, a small kitchen, etc.  The team works incredibly hard, and the least we can do is provide a reasonably comfortable place to work all those hours (although the air conditioning has been out today and boy does it get hot in here on a warm summer day).

This is not class A space by any definition.  There is nothing impressive or luxurious about it.  But it feels like the quality and size of place we shouldn't be in until after our first million dollars of sales.

I fear what Steve Blank calls the curse of the new building.  For that reason I was biased towards staying in the old building.  It was more run down, felt more “right” for a pre-revenue startup.  I don't want anyone in my company to think that banking millions of VC dollars means we've arrived.  Economically, the move was a no-brainer because it is very low cost, fully furnished, gives us growth room, and is presentable to partners and customers.  The next best alternative was 60% less space at a higher cost, and we would have had to buy furniture then move once again in a year.  Only an idiot would have passed up this deal.

Yet the place still feels too good for a company that hasn't shipped a product.  Fortunately, our team is inherently frugal, and culturally we keep our noses to the grindstone.  Just so everyone remembers to keep that scrappy mode of thinking, we moved the same way fresh college graduates move out of the dorm and into their first apartment.  I rented a U-Haul truck, asked the employees to take the morning off from being software developers and become manual laborers instead, and everyone pitched in to do the move to our new office 2 miles away.  Over the weekend, the CEO (that's me) and his teenage sons cleaned the 9900 square feet of dirty carpeting.  The whole move cost a few hundred dollars.  As it should be.

Having said all that, there are two messages I want to leave you with.

First, we're hiring! We've got a fantastic technology platform, a huge market opportunity, and a great team.  If you're really good and you know a lot about virtualization and storage and how they're all screwed up, you should be working here.  We've now got plenty of space for you.

Second, we're subleasing! If you're an early stage startup (not in a competitive space) and need some really inexpensive, nice, move-in-ready space to park for a few months up to a year, we've got the best real estate deal in Silicon Valley just for you.