Preston Pesek, CEO and cofounder, Spacious

Stacy Shoemaker Rauen: As the CEO and founder of Spacious, Preston Pesek is rethinking not only technology but hospitality, equating his business more to a coffee shop than a traditional coworking space. It all started when he noticed that restaurants were missing out on lucrative business during the day and turned those empty eateries and to make shift coworking spaces. With that in mind, his longterm plan is to rehabilitate vacant storefronts into dedicated Spacious locations.

SSR: I am here with Preston Pesek, coounder and CEO of Spacious. Preston, thank you so much for joining us today.

Preston Pesek: Thanks for having me.

SSR: We’re excited to delve into the technology side of the hospitality business a bit with you. So can you start off by telling us a little bit about your background, where you grew up, maybe where you went to school and how you got your start?

PP: I grew up in the suburbs of Houston, Texas, which is a big, sprawling city. And then I went to [University of Texas] Austin, undergrad. I studied two years of aerospace engineering and then I graduated with an English degree, which was a little unusual but I’m fascinated by languages. I studied abroad in Spain, came back and worked for an architect, worked for a developer, and then came to NYU for graduate school in real estate, actually. So they have a master of sScience in real estate program at the NYU Schack Institute and that’s what I graduated with. Then I started working in commercial real estate, so I worked for SL Green and then Fortress for about six years, and then I founded Spacious after that. So, mostly in the built environment. I have a lot of idealism around how we can make life better based upon how we design it and how we build it, including anything from the smallest interior to the largest building in a city scale.

SSR: Growing up, was there any inclination that you had any love for architecture, or real estate, or any influences that maybe led you to where you got to today?

PP: My grandmother and my mother are both artists, and I think they have a natural eye for design that I probably inherited or kind of was aware of at a younger age. And then, I was always just fascinated by design, generally. Not really having a language for it as a young person, but always very adept at drawing and very tuned into how things make you feel even though they’re these physical objects, they can actually evoke a sense of wellbeing or a sense of alienation, depending upon how well it’s designed.

SSR: And so, what did you love about the real estate industry, and how did that lead you to founding Spacious?

PP: The interesting thing about the real estate industry is I didn’t really love it. I came into it with this kind of perspective around how can we build a better world, basically. And there are those who design, and then there are those who are developers and property owners. And the ones who actually hold the keys for what gets built are really the ones who own the property and can command the capital, in terms of where it goes and what buildings get financed, what projects get financed. And so, at a certain point, I worked for an architect for a year thinking that I might want to do architecture, but the economic prospects for me, personally, were not sustainable as an architect, as kind of a pure design career. I know that a lot of designers probably have that kind of conflict between doing something that you love but not really being able to make it as a designer and architect. And so, for me, at a young enough age, I decided, ‘Okay, I’d like to figure out how things happen on the other side of the table,’ which are those who are calling the shots for what gets built and why, how we actually get financing for a project that we envision to put into the world, rather than just designing it. And so I really kind of immersed myself into the world of real estate and finance as a way to learn how things actually get built.

SSR: Were there any eye-opening moments throughout those couple years that you worked in real estate?

PP: Yeah, more than a couple, and more than a couple years. Real estate for better and worse, mostly worse, is still kind of an old boy’s club of these boys behaving badly. They’re running the real estate industry still in many ways, though, we’ve got a long way to go in terms of how that culture can become more inclusive and tolerant and just generally more gender neutral. There need to be more women in real estate. But getting a kind of a rude wake up call coming from an idealist perspective into the world of finance, and specifically real estate finance. I think that culture and the values that it holds are they get the job done from the perspective of getting things built, but sometimes at great cost to the humanity around it. So those wake-up calls for me were a kind of a further inspiration even though I was kind of very interested to learn how it worked, I always wanted to use it as a platform of learning to do something good and do something better than we’ve done before. So I think having the rude wake-up call of what the culture of real estate finance is like and then using that as a driver or a motivator for saying, ‘Let’s actually build a different kind of company.’

SSR: So you have that thought, and then how did you get to forming Spacious? What were the next steps and can you tell people a little bit about what Spacious is?

PP: The simplest way to describe it is that we are taking a lens on the world that says: Where is the space that isn’t being used to its maximum potential, and how can we make that space more available to the marketplace, but also make the underlying asset more valuable at the same time? So for example, if you have a restaurant tenant who leases a space, but only opens in the evening, Spacious can activate the daytime of that operation, and make that otherwise nighttime-only operation available in the daytime to our customers, who come in and use it as a shared workspace or a drop-in workspace.

The most recent evolution of the company has kind of taken a look at entirely vacant retail storefronts, and now we’re activating those with a kind of a pop-up solution, with some design attributes that we can talk about if you’d like. But the underpinning idea is that we’re almost like a recycling layer on the city that says, ‘Where’s the inefficiently used space, and how can we take these predictable gaps in occupancy and use and activate them, and make them available, and actually deliver a product to the marketplace that is accessible, affordable, and delivers a sense of inspiration when you’re in these spaces?’

SSR: Did it come from the idea that you saw these vacant spaces that you saw under-used retail, and then the whole influx of coworking spaces today?

PP: There are some incumbents that were there before we were there, obviously, and they created these new categories and this new language around how we use space in the city. So coworking is still a relatively fresh word, and still pretty poorly defined with clarity. We talk about this a lot: What is Spacious, is it coworking or is it something else? The first kind of way that I looked at how to create more value was I kind of have an underwriting background for how to value a commercial asset. So looking at an entire building and saying, ‘Okay, there’s vacancy gaps, either in the kind of daytime/nighttime pattern of usage for the primary occupant or in the kind of gaps between longterm tenants.’ And so, I started to underwrite a hotel building, then I said ‘Okay, if you have a hotel where the guests that are out all day, which they are in a hotel. If you come to New York City and you rent a hotel room, and you’re there all day, you’ve wasted your time in New York. People are going to be out of that room for most of the day. So, what can you do with that same square footage, given the fact that New York is a place where the space, itself, is highly valuable and can be monetized readily? So how can you program either a building or a space to be, basically, transformable between daytime and nighttime use, so that you effectively get two buildings for the price of one?

And so I underwrote and kind of created a business plan around this standalone building that we called a coworking hotel, and I think these are actually starting to emerge now, it’s in different concepts around, but this was in 2012. And I kind of started to look at, how can we program an entire building that really captures revenue daytime/nighttime, creates a lower cost of occupancy for the person who uses it, and at the same time, it creates a higher value for the underlying asset owner? So, it was this really kind of innovative approach.

Now, to finance that building was very difficult because real estate funds look at it and they say, ‘Too weird.’ Real estate LPs say, ‘Just invest my money and don’t lose it.’ VCs or technology funds look at it and say, ‘That doesn’t scale fast enough.’ And so it was in this no man’s land of a highly innovative solution and a very clear vision for how the world, I think, will inevitably evolve into in the built environment, but a little bit too early in terms of where the capital markets are.

So I started to kind of continue to scan for different concepts of how you can activate these different downtimes around the city. And then it just occurred to me: restaurants are beautiful, already built, and closed for lunch. And so if you’ve got a coffee shop with people who are piled on top of each other trying to find an outlet and trying to use the bathroom, and then you’ve got these beautiful restaurants that, at night, are amazing works of art, really, but they’re just unused during the day. So, we really are matching the use case of a coffee shop or the kind of drop-in workspace of people trying to use a coffee shop as a workspace and saying ‘There’s a better way to do that.’ That was the first way that we started the business, was activating these nighttime restaurants as daytime shared workspaces. From there, we kind of started to see that the customer needed something after 5 p.m. because it’s a little bit annoying to have to leave work at 5. And so the easiest way to do that was to take advantage of what we are seeing as this enormous trend of vacant retail storefronts.

The last cycle of development in the economy has delivered a tremendous amount of vacancy in traditional retail, because people don’t shop like they used to. Everything is purchased through a screen and transacted through a screen. So what that results in the city and in the built environment and the places that we all have to live is a weird kind of blight. Meanwhile, everyone still wants to come to the city. So you’ve got housing costs still going up, and we’re in a little bit of a lull, but ultimately it’s really expensive to live here. Meanwhile, the retail street is increasingly vacant and blighted, and it’s like this kind of strange, new feeling when you walk in some of these traditionally vibrant retail corridors of these very special New York neighborhoods that all of a sudden are just vacant. And you’re, like, ‘Okay, well, this is a problem.’ So Spacious comes to the world today and says ‘We have a solution. We can recycle and activate this vacant storefront layer, and deliver something that the customer actually needs and do so in a way that feels hospitable, accessible, affordable, etc.’ So that’s what we’re doing now. That was a long answer your question.

SSR: We like long answers, so that’s good. So a couple questions over this. How are you designing? You mentioned about designing these pop-ups space, so can you talk a little bit about how you go about that and what you see members needing, too, what are they asking for. Are you working with designers to do that or are you also using in-house help?

PP: Yeah, it’s a combination of both. And we’re getting better at it as we go. So the most recent space that we launched was the one at Union Square, which is the formerly TGIF on Union Square East. The bones of it are perfect for a Spacious operation, but we needed to, basically, just give it a cosmetic overhaul, and then insert the things that make the user experience for the Spacious product actually work. The things that people need, generally, today as they are moving point to point throughout the city, and they’re trying to stay productive and connected (because we’re always connected today), you need a solid wifi connection, which we install in every location. You need a comfortable ergonomic place to sit down for more than five minutes. A lot of coffee shops are designed to kind of get you in and get you out; Spacious is really designed to have something that’s a little bit more comfortable to sit in for hours at a time.

There needs to be a bathroom on site. You need to have a place to plug in your device, so we integrate power cables into the furniture and underneath the furniture. And then we have a self-serve coffee and water station, and a hospitality greeting when you come in, so kind of tying this into the hospitality design, our first product and our first kind of entrance into the marketplace was in these spaces where there’s a lot of cultural inertia around the notion of what it means to walk into a hospitality experience.

When you come into a very well designed nighttime restaurant, there’s a host stand, there’s a natural pattern to walk up and talk to the host and have a friendly greeting and come in and be welcomed into the space. We decided that would be a core feature of any space that we operate, so the host and the kind of the human interface of what it means to walk into a Spacious location is as important as anything else we might do to the physical space.

So delivering the eye contact and the smile and a friendly word when you walk in, there’s just a very basic human connection that needs to happen when you walk into a space in order for it not to feel alienated. That’s a key feature of all of our operations and can’t be removed from the equation. Even if we talked about things like furniture and lighting and the things that most designers think about, we consider our product to be (even though we have pretty interesting technology as well), it’s a human-interface product. We really spend a lot of time thinking about the host culture or the hospitality culture, how it feels, what the script is, what you hear when you walk in, how welcoming or not it might feel based upon that initial point of human contact when you walk in, so that’s really critical to success in any hospitality operation.

I think anybody who comes from the field of design can get very much fixated on colors, textures, shapes, and what’s in style, and what’s hip, and what’s new. Almost all of that goes away if you have a bad experience with the first person that you talk. And almost all of it goes away if you have a great experience with the first person you talk to. So investing in that hospitality layer and making sure that not only the person but also the technology, the furniture, and the way that it flows just gives and evokes, at all levels, this kind of feeling of welcome hospitality is really critical to what we do. So another long answer to your question.

SSR: So experience, yes, is everything we talk about. It’s so much in the magazine. So, how do you translate that hospitality experience through the design? Are you creating different areas of seating? Kind of walk us through, especially, the TGIF space, what did it look like, what did it feel like, how do you kind of design it? And again, are you using outside designers to help you?

PP:  Yeah, I mean, the best spaces for us—and we can use TGIF as an example—whenever you have a variety of different contexts of places for people to find the right modality for that moment for them. So, for example, sometimes you may want to do a standing bar seating; bars and cocktail tables are actually perfect as a kind of standing desk. So we kind of take advantage of this raised surface standing solution, and we’ll add to that these shared table solutions. Then scattered throughout the space, there will also be two tops where you can have a private meeting with somebody across the table from you. We’ll also insert, which is less common in a restaurant, but common in every Spacious, some sort of soft lounge seating scattered throughout the space as well.

At certain times, you may want to sit down and have a phone call on the sofa, you may want to walk around a bit, you go use the restroom and come back. There’s also the fact that there’s a host there, being comfortable you can leave your laptop and not have it walk away while you’re gone is a really key design feature. And how can you invoke that sense of security with how the space is laid out and how the host greets you. Those are key features of it as well.

I think the shortest way to distill it into a simple idea is to say that you want to give the person enough optionality within the space to adapt to whatever mood that they’re in that moment. And I think, if we’re honest with ourselves, there is no one type of work. Occasionally you need to screen time that’s focused, occasionally you need to move point to point, occasionally you need to have a conversation with somebody across from you, sometimes you want to sit down, sometimes you want to stand up. This is the same person that goes through those different kind of phases throughout the single day. There is no one single design that we say, ‘Okay, this is for the Spacious customer.’ Because the Spacious customer is as diverse as the spaces themselves. Who you are on one day is different from who you are in another day, and what you need out of your workspace is different from what you needed out of your workspace on a different day.

And so we offer, not only this within the space, we also offer this variety of spaces throughout the city so you can pick your neighborhood, pick your context, pick your location. Each one has a slightly different vibe, a slightly different feel, and you can kind of pick your modality and allow yourself to context switch to suit whatever your particular needs are that day.

SSR: Oh, that’s pretty cool. So you don’t have to stay in one spot all day, you can move around?

PP: You can move around. So we sell memberships and we also sell a day pass and either one of them allows you all-network access. So you’re not just paying for one space in one day, you’re paying an unlimited subscription to the whole network. And so if you walk down the street to your local Spacious location because it’s in a restaurant that you love and you are familiar with, you can also meet somebody across town and say, ‘Okay let’s meet it’s Spacious over there.’ And then what we’ve done with the curation of the spaces that we select, we like to pick spaces that actually evoke somehow the unique characteristics of that particular neighborhood.

So something on the Upper East Side of Manhattan is very different from the Lower East Side of Manhattan, for the reasons why the people in those neighborhoods are different and the modalities of social interaction are different in those neighborhoods. So, the spaces should reflect that. And one of the best parts about living in the city is, and I think most people would relate to this who choose to live in cities, is a kind of ADD or a kind of interest in variety and context switching where you have, ‘Yes, I ate at an Indonesian restaurant this night, and I ate at a Japanese restaurant this other night.’ So having this variety of flavors and interest it ultimately creates a better kind of tolerant humanity when you have these vastly different things next to each other and these very different cultures juxtaposed right up against one another. And the spaces that we walk by, and the spaces that we enter into also have that same kind of feature and that same idea, or that same ideal that you kind of walk in and you say, ‘Okay, this is a FiDi location, and this is an Upper West Side Location, and this is a Williamsburg location.’ Each one of those locations should speak to its natural context.

And when building a network of retail services, you can go really one of two routes. Well, historically, most people have only gone one route, which is the franchise model where you try to just make everything look the same everywhere so that the customer has some moments of familiarity and touch points of comfort that they know are reliable. The touch points of comfort for a Spacious member come in the form of a hospitable greeting with the host culture that we’ve developed, the technology that’s there to kind of check in and make sure that you know that you’re walking the Spacious experience, and then the self-serve coffee and water station are generally the same everywhere. But other than that, the whole design and the whole building and every space really responds to its context where it is in the city on the planet, etc. That’s how we think about the thing from top to bottom, as opposed to trying to do a cookie-cutter franchise of every space the same. There’s trouble with scaling something like this, obviously, because once you have one design, it’s easy to kind of stamp out copies of it. But we have our own versions of that in our new retail spaces, but these things still change in terms of the textures and finishes on top of a base framework that does scale and is scalable.

SSR: That was going to be my next question. How do you pick these restaurants? I get it that they have to have a little bit context, but are you out there kind of pounding the pavement or people starting to come to you? I mean, how do you find these partners?

PP: It’s both. We have our own team of people who are out there scouting new spaces. We also have an inbox that’s consistently full of a constant stream of people who are saying, ‘Hey, I’m interested at potentially having Spacious come and activate my location.’ Increasingly, we are using the data that we’re gathering around how the customer uses the network, and using that as a guide to where we need to be on the map and what spaces really have the right attributes. So we could easily spin up any space that’s closed until 5 p.m., but some of those spaces are subterranean or they’re a little bit too club-y, or they’ve got lounge seating everywhere, which really isn’t ergonomic. So selecting the right kind of interior, the right vibe in the right location is a key criteria for making sure that we’ve got the right product to deliver. It’s a combination of both. So we’re getting better at kind of curating, but there’s a constant inbox flow of people that are like, ‘Hey, I’ve heard your concept, I would be interested to talk to you guys about spinning it up here.’

SSR: That’s great. And so what’s kind of your growth strategy? You’re in New York, obviously, how many locations do you have, how many members do you have, and what’s the hope for Spacious?

PP: We have about 20 locations in New York, today, and we have six in San Francisco, and we’re kind of growing the network there. The leading edge of our business right now is really spinning up these dedicated retail storefronts in addition to the restaurants. We’re still adding restaurants. As a business strategy, restaurants are very useful in that they allow us to very quickly spin up a location in a new neighborhood with minimal cost and then test whether or not there’s a real consumer demand in those particular neighborhoods.

Where we see positive signals in the data, then we can come back and make an investment in a dedicated space, which is slightly more expensive, but we’re still not doing a traditional lease, we’re still doing kind of a temporary occupancy pop-up in these dedicated storefronts. So our real estate model is significantly different from a lot of other traditional retailers or even coworking. It’s just this radical approach to how we’re activating a vacant space.

And so with that, we’ve got the ability to really kind of test new marketplaces, new neighborhoods, new cities with a very minimal amount of capital provided that the base infrastructure is there. And at this point, we’ve kind of built out that infrastructure for scaling, and we’re picking our spots and picking our cities based around what the customer needs. So learning more and more about who the customer is and what they want out of it. I can’t share with you how many members we have, because you can do the back of the envelope math for what our revenue is, which is private at this moment, but generally speaking, we’re targeting those who want the product and what we’re finding is that it’s a very diverse set of cohorts that find the product useful. If you can imagine at any stage of your life, and even any stage of your week, you could probably use a wifi connection in a place to plug in your device, go to the bathroom, get a cup of coffee, and host a meeting. So given that that’s becoming more and more distributed with the Spacious network as we grow more and more locations, the more density we have in a given city, the most valuable proposition becomes for the customer. Density and network effects is a key goal for the company to grow and scale. When we do scale, it’s more difficult for us to just launch a single location, we need multiple locations whenever we launch a new city, so it needs to kind of start with maybe half a dozen or at least 10 or 20, ideally, to kind of get things going. And then it really starts to kind of produce results, both in terms of revenue, but also in terms of meaningful data that you can read and respond to.

SSR: Is there anything surprising that you found out about your members that they want or that they’re looking for that you never thought about that?

PP: So, it’s funny, I mentioned at the beginning, people find it annoying that you have to leave at 5 o’clock in a restaurant location. There are some numbers, though, however, that say ‘I’m a freelancer, and there is no other signal in my life that tells me to stop working aside from the five o’clock shut off at Spacious,’ which I found really interesting, where I think it kind of speaks to how we’re constantly connected through our digital devices and mobile infrastructure where it’s almost hard to turn it off.

There used to be, I guess, back in the day, there was a factory whistle that blew and then everybody went home. And there was school, and then there’s this kind of 9-to-5 work pattern, which is really kind of a leftover from the factory days. Now that everything is distributed mobile and connected, and you can literally talk to your boss, your spouse, your kids, everything all the time through the phone, how do you know when shut it off and where are the kind of healthy touch points of balance in your life? And for some people, Spacious shut down at 5 p.m. was that version of that for them, which was a surprise to me and one of the interesting benefits for those who like that particular signal. Others want to stay late, so we have late locations, but that was a really fun discovery.

SSR: It’s kind of interesting, it’s almost like they’re revolting against how connected they are.

PP: While also staying connected. There’s an irony there. It’s really interesting.

SSR: Do you think any of these temporary pop-up spaces might turn into something more permanent as you continue down the line?

PP: Yeah, I mean, going back to the real estate angle, we’re activating spaces now. We’ve got a price point for the customer that really sets a ceiling to how much we can afford to pay for a retail space in a city like New York. And so how we spin these spaces out with this pop-up model that allows us to pay something lower than market rent. In some markets and in some places, what we can afford to pay for a retail space actually starts to meet where the retail rents are for a traditional lease. And so, in some cases, we probably will start to make a bigger investment or a more longterm investment in occupying a space with a traditional longterm lease. And in those cases, we could probably afford to do a little bit more capital improvements, a little bit more tenant build outs, invest a little bit more in the design to deliver a better product. But it’s a function of the real estate environment in terms of how permanent or how temporary we end up being. It’s also a function of the regulatory environment too. There’s things that you can do as a pop-up, that you can’t do if you’re signing a longterm lease with permanent occupancy.

SSR: You said you’re in New York and San Francisco, do see it kind of the secondary markets that might have great communities that need something like this?

PP: Absolutely. There’s kind of two parts to that conversation. What we’re doing in the very highly priced cities in the dense, fully mature markets like New York is we’re making it more accessible by creating this release valve on the cost of real estate and the cost of access to coming into New York and actually getting something done. At the same time, we want there to be a connection to the suburbs and to the kind of extensions away from those cities. There’s a kind of a hub and spoke model where, let’s say, we see this in a micro scale in Manhattan, where you have people who live on the Upper West Side, and potentially have meetings or host, or need to be in Midtown or Downtown for work consistently, but they have the option to be in their own home neighborhood. In the context of Manhattan, the Upper West Side is the closest thing we have to suburb. It’s like a residential neighborhood that’s mostly residential. That exists in other cities and, obviously, the kind of the commuter rail connections to the whole metro area, those can absolutely be activated with a Spacious product. I think the key there is connecting it to the urban center, while still offering it in your local suburban context.

This is something that certainly speaks to me as someone who grew up in a suburb of Houston and literally had to uproot my life and move it New York to get some of the things that are accessible here and only accessible here. I think people who grew up in the suburbs or secondary cities want to be able to access New York, occasionally. Not necessarily live here, but have what’s here through some sort of entry point that may be where they are. That’s how we think about it, so when you are a Spacious member or if you have access to the Spacious network, that same access is not only an all-network access within your city, it’s a multi-city and multipoint of connection. So people who live out in Westchester or Palo Alto or whatever, they’ll be able to access Spacious where they live, and then also connect in the peninsula of San Francisco or the island of Manhattan and it kind of looks like that.

This answers your question of, ‘what’s the vision for growth in the company?’ It’s really a multi-city network that gives you this layer of connectivity between cities. And by default, gives you a great sense of freedom of movement between those different contexts. Because no matter how diehard New Yorker you are, you got to get out sometimes. No one should live here all 12 months of the year. You should get out sometimes and even just for the occasional weekend jaunt away from the concrete jungle. The human being needs these different contexts. And so, Spacious will have places that are hospitable and accessible in those other contexts, not just the city, but really with a vision to tie it all together to say, when you need this particular thing, it should be there where you are.

SSR: Is there ever an idea to create the Spacious community online as well? Are you allowing members to talk to each other and meet each other? Is that something that’s in the works?

PP: Yeah some of it emerges organically. It’s a little bit more of a challenge for us because of the distributed network nature. There’s a lot of, let’s say, coworking communities, which I think have built their brand and built their experience around a very specific type of person. The Wing is one example. They’ve really kind of honed in and it’s this incredible beacon to empower women, or however you want to define that community. Spacious can’t necessarily limit itself by saying, ‘We are only for this type of person or this type of community.’

We are going to be popping up in neighborhoods and in contexts that are radically different from one another. And so Spacious needs to be a more agnostic platform for whatever local community is already there to engage with itself and with one another. Now what we have a unique advantage and the ability to do as we grow is to start to kind of be almost like a moderator and a curator of how we mix these communities together. So for example, in Brooklyn right now, there’s a small cohort of designers and artists. Then in Chelsea, there are engineers that are in that community. Spacious can host and orchestrate a mixer between designers and engineers and see if that produces something interesting. But otherwise, we don’t try to put a box around it or hit you over the head with, ‘This is the Spacious community,’ because it’s as agnostic and as tolerant and as open and accessible as the city itself.

SSR: And that model that you came up with in 2012, that coworking hotel, do you think that’s something you might try to do at some point?

PP:  I toured a building that might work for that yesterday. It may be awhile before we actually get there. We’ve got a few different priorities. I mean, one of the challenges as an entrepreneur building a business is how do you focus on the best opportunity that you should be scaling now versus later? And getting distracted by these other opportunities is a real temptation. The short answer, though, is I think that type of building is inevitable, and I think we’ve already started to see some concepts that are out there that start to kind of approach that. What is the prerequisite for having the ready made marketplace for that to immediately become something that the consumer recognizes? There’s this education layer that needs to happen with some of these new products and these new programs for real estate where before the advent of coworking, how would you even describe what Spacious was?

Even though I would say that we’re not even coworking, we’re something totally different, but if you say, ‘We’re coworking restaurants,’ you’re, like, ‘I know what that means.’ Even though that’s not really what we are, so we’re this kind of distributed drop-in retail workspace connectivity slash communal meeting space. It’s like a third space; it’s not really a coffee shop, it’s not really retail store, it’s not really an office. What is it? It’s hospitality something.

The language and the education for the consumer is important to establish for you before you try to communicate with a new brand or a new concept that people can recognize. Everyone needs kind of a skeuomorph. And for anybody who’s unfamiliar with the skeuomorph, it’s this idea that when you design something new, you have to have some sort of relatable thing to what used to be there. I think with the clock on your iPhone still has this analog face with hands, and you don’t need that, but people recognize it as a clock. So it’s the same kind of thing: [These products] really gives people these anchors and familiarity that says, ‘Oh, it’s this.’ Otherwise if you just put it into the world, you’re like, ‘Walk in and figure it out.’ They’re like, ‘This is confusing.’ There will be prerequisites for things that are highly innovative that need to be kind of absorbed and assimilated in the culture before you’re ready to really just hit the world with it and have it immediately pop as profitable or interesting.

SSR: Well I love that you’re basically a tech company that’s disrupting the built space, almost like an Airbnb did with home rentals. You said once that Starbucks was almost your bigger competitor than a coworking space. So you’re in this kind of middle ground that I think has a lot of potential.

PP:  The way that we see it, people are trying to use coffee shops as a workspace because that’s really the only option in a lot of their neighborhoods. If you have a flexible work lifestyle or if your employer allows you to work from home occasionally or all the time, what are your options today in the absence of Spacious? You either try to find your local coffee shop, and if you do that, it’s kind of a terrible experience. If you’re trying to either host a professional meeting or really sit down for work for any long period of time, and the coffee shop doesn’t want you to be there for that long. Their business model was based on selling coffee as fast as possible and getting the line and the space cleared out, so kind of a turn and burn type model. Spacious is a little bit different. We’re saying, if you are buying coffee to get the space, why not just flip that and say, buy the space and you just get the copy for free. There’s just a different approach to really recognizing what people are seeking to achieve: what is the goal of the person and can you anticipate what that goal is and meet them exactly where they are today?

SSR: Do you think you’ll ever, since you’re in a lot of restaurants, ever add kind of more of a full food program throughout the day?

PP: Yeah, I think there’s a real opportunity to do that at some point. I mean, as soon as you cross the line into becoming a vendor of food and beverage, you enter a regulatory environment that’s quite cumbersome. I think it’s a reason why there’s a high barrier to entry for what it costs to get a restaurant into the world. It creates a lot of these inefficiencies and creates a lot of this failure that you see in the marketplace.

I do think that the world can stand to have a little bit of a relaxation on regulation, generally. But also, we need to protect the people that work there and do other things too. There’s there’s a balance to be struck there. At the moment, Spacious is the best neighbor of other retail services that sell food and by virtue of being a good neighbor, we have an easier time getting buy-in for the communities that have a say in whether or not they want us there.

And so if we say, this is a space where people can come and frequent as a neighborhood resident and kind of come and spend time as kind of a third place, but we don’t sell food, they’re going to walk out of our space, go buy food at your restaurant and then bring it back into our space and eat it there, if that’s what they choose to do. That’s a much better proposition if you’re trying to get buy-in from, let’s say, a neighborhood community association, which is much more common in places like San Francisco than it would be a New Yorker, for example.

So we seek to be a good neighbor and to find the natural alignment with the rest of the street that’s around us. And it’s really interesting, there was a whole phase of commercial mall development that was curating the tenant mix of a commercial mall where you try to put tenants across from one another that will actually increase sales because you’ve got some sort of complimentary use adjacent to one another.

Spacious, in the context of an otherwise vibrant retail corridor in a city, is a great compliment to these other businesses that are around it. If you create a reason for people to walk by the same location frequently, which Spacious gives you that reason if you’re a local resident because it’s now kind of a multiple times per week option to sit down and be productive or meet with others, you’re passing by these other retailers more consistently and more frequently then you would be if you were commuting all the way downtown and going to your office there and then coming back.

So there is a very real kind of win-win synergy around not selling food and being in the neighborhood as this one very specific kind of service that provides this tangential benefit and can increase sales to those around us. And all of a sudden, any developer or any neighborhood association, or any city planning organization, for that matter, should take a second look and say, ‘Actually, if there’s a Spacious on every retail high street, it makes the high street better and it’s good that they don’t try to compete with these other retailers or other food sellers.’

SSR: No it’s smart, that’s a good way to look at it. And so to wrap this up, what lessons have you learned along the way? We talked about some of them, but what have been some of your biggest takeaways that might or might not have surprised you?

PP:  I don’t know how relevant this would be to your audience but as an entrepreneur building a fast-growing company, the people layer of building a business is always the most important piece. And it’s something that I think you can hear as someone who’s thinking about building a business, but until you actually get into the business of building a culture and building a company as very distinct from putting a product into the world. There’s there’s two phases of building a business: there’s putting a product into the world and then there’s building an organization that scales.

And that organization is trying to get different people who come from all walks of life to work together on a single mission and to feel good about what they walk into your workplace and do every day. When you have to inspire people, and keep them inspired and keep them coordinated and cooperative and all focused in the same direction, this is the real challenge of entrepreneurship, I think. And this is one of the bigger lessons that anybody who considers building a business should almost consider first, which is: How do I design a people culture that really delivers results? And you can be agnostic to whatever the product is. If you fail at that, you will fail in your business.

SSR: And you launched in 2016, how fast have you grown in terms of your number of people that work with you?

PP: Our total headcount today is just over 100 employees. Most of those are part-time hosts who work behind the host end at that the retail locations. The core HQ team, if you want to call it that, is about 25 full-time employees, so that’s one vertical of growth. There’s others like how many locations we have and how many customers do we have. We already kind of talked about that a little bit. But we can choose to do restaurants only and grow super fast. What we discovered is that it’s an incomplete product without the dedicated locations, and so now we’re really kind of making a slight shift. While we’re still activating restaurants for all the reasons described, we’re also adding this new layer in this new retail operation for dedicated spaces. And so that has caused us to kind of pause, refocus, and then parallel process both of those networks at the same time and that takes a little time to build. But at the same time, in just over two years time, to have 20 retail locations in New York City and then half a dozen in San Francisco and growing, I think it’s been reasonably quick.

SSR: Yeah and exciting, though?

PP: Yeah, for sure.

SSR:  Well, thank you so much for being here, we really loved having you here and can’t wait to see what you do next.

PP: Thanks for the opportunity. Nice to meet you.