Naganand Murty was sitting at one of our tables in Menlo Park working on a phase-changing polymer technology. As part of a class at Stanford’s d.school (Hasso Plattner Institute of Design), Naganand, Jane Chen, and their team had identified a problem they thought they could tackle. Millions of children die each year in the developing world because they are born too early and don’t have access to a life-saving incubator. One of the reasons is that incubators cost upwards of $20,000, even in the developing world. Another reason is that many villages are simply too far away from a hospital.
Through his engineering training, Naganand knew that there were materials that could be designed to retain heat for a long time, could be designed such that they would tend toward staying within a particular temperature range, and could be developed cheaply.
As part of the d.school, he had access to sewing machines, but the team was up against some deadlines and needed more than what was available at the school. So he joined TechShop.
Here was a person trying to save babies in the third world. Our community was pretty interested in what he was doing. And that is where the power of the community comes in. At some point in the development of the infant warmer, a polymer chemist with years of experience introduced himself to Naganand and over a short time helped him to redevelop the core chemistry to extend its use.
The largest untapped resource on the planet is the spare time, creativity, and disposable income of the “creative class.” As enumerated in Richard Florida’s instant classic The Rise of the Creative Class, there are 40 million Americans in the creative class. They represent 50 percent of those employed and control $474 billion in disposable income (in 2010). This “class” is an amalgamation of engineers, artists, lawyers, programmers, designers, and others who have the educational or professional propensity to “create.” They tend to congregate in “creative cities” that Dr. Florida has rank ordered. This has created a nice consulting practice around helping municipalities do a better job in developing programs and incentives to retain and attract this group of people. The cities at the top of the list are fairly obvious: San Francisco, Austin, and Boston.
The key questions with regard to this group within the context of this book are these: What is the creative class doing to help drive the coming innovation boom? What are the current patterns of interaction we are seeing? And, most important, how can we support and encourage the development of robust creative networks and systems?
First, their day jobs, if they still have them, are likely to be creative by their definition. They may not be focused on breakthroughs, but this group is focused on pushing current products and services, refining them, positioning them, and delivering them. These people are on the front lines of the economy, working to make life happen. Many are focused on making it better, faster, and cheaper. That is what work is about. In a competitive economy, few get to rest on last year’s accomplishments for long. They may be attorneys, analysts, or, more obviously, artists and engineers, but the nature of their training and roles in the economy is about creating something, whether it is a great legal brief, fabulous advertising copy, or the left-turn blinker on next year’s pickup truck. I’m particularly interested in their “spare time,” whether it’s actually spare time or, having been recently laid off, between-jobs “spare time.”
I recently gave a tour of one of our spaces. In addition to seeing the tools, my guest wanted to meet a few of the members. So we got to do one of my favorite things, namely, wander around the shop asking people what they are making. Stopping at a worktable, we spoke with a thirty-something young woman who was working with felt and what turned out to be a laser jig.
“What are you making?” I asked.
“Oh,” she replied, “These are high-end, designer iPhone covers for my female friends.”
“Really?”
“Yeah, I don’t like the covers I find at the stores. They’re too masculine, made of plastic, and too sterile for my tastes. So I’ve found this beautiful red and black felt made with organic dyes that I’m cutting on the laser cutter and then embellishing with various designs. My girlfriends love them; I’ve started to sell them at some nice boutiques in San Francisco.”
“They’re gorgeous. What’s your background? Have you ever done this before?” I asked.
“Thank you,” she said. “I’m working on a jig to try to make it easier and faster to make them. And no, I’ve never done anything like this before. I was recently laid off from an analysis job where I studied and reported on commercial real estate for a large independent rating agency. I have two master’s degrees in business and government but haven’t been able to find a job.” She smiled, adding, “I’ve taken a couple of laser cutter classes, become a member, and have started to sell iPhone covers as a way to make some money on the side.”
We wished her luck with the iPhone covers and moved on.
I then talked to my guest about the Creative Class as we walked to the back of the shop where a young man was running the ShopBot, a CNC woodworking machine. This machine can cut extremely elaborate patterns into four-by eight-foot sheets of wood up to five inches thick, and it’s attached to a computer where one creates the elaborate designs. You see them primarily in high-end cabinet shops.
“Hi, do you mind if we ask what you are making?”
He was working with a very large sheet of stunningly beautiful Plyboo that was lying on the bed of the machine. Plyboo is a green-friendly material made out of bamboo, a rapid-growth hardwood that is more sustainable and “greener” than many woods. It is also beautiful.
“Sure. I’m making Plyboo boxes,” the young man replied. “You can see my design here.” He pulled up a 3D model on the computer that was controlling the cutting.
“Very nice,” I said. “You’re making a lot of them.” Around 30 box tops were being cut out by the machine as we were watching.
“Yes, I’m working on a 1,000 unit lot right now.”
“1,000?” my guest asked.
“Yes. I lost my job a couple of months ago as a lighting engineer, so while I’m looking for a new job, I decided to take a couple of classes and learn how to use this machine. I designed these boxes and sold my first batch to a chain. They liked them and ordered 1,000 at 16 bucks each.”
Here was a random sampling of TechShop members, both of whom were unemployed creative class members launching their own jobs. Both of them had leveraged their familiarity with computer tools to expand their experience base and, by using the power of computer-controlled machines to perfectly replicate their designs, had begun to supplement or replace their previous job income.
Another one of my favorite stories is that of Karen Styles, owner of Karetsticks.com. When Karen’s husband retired, Karen wanted to be able to work from home rather than be away from the house 40 hours a week. An avid knitter, she decided that what the world needed was bamboo needle gauges.
Pause for a moment. Chris Anderson, Wired magazine’s former chief editor, wrote The Long Tail, where he describes the emergence of small, niche markets that are being enabled by the Internet, search engines, and eBay-like retailers. This is important to think about when you read stories like Karen’s.
Karen believed that if she could make these bamboo needle gauges, she could sell them on the Internet. So she started to look into how to make short runs of them. She looked at woodworking tools, outsourcing, and other options and came up blank. She discovered laser cutters and felt that they were the perfect tool for making the needle gauges, as she could cut and etch them in one pass. She could design them in a simple graphics program and finish them with simple tole-painted designs and varnish. Perfect—except the laser cutter cost $25,000.
Karen put her dream of working from home on the shelf for a few months. Eventually, she found us, a place where she could access the laser cutter for a $100-a-month membership fee. She joined, took a few classes, and launched her part-time business. Within months, she was driving across the Bay two or three times a week to try to keep up with all her orders. Within the year, she had quit her job as a program analyst at a major software company, bought her own laser cutter, and was working a thriving U.S.-based manufacturing business out of her garage. Karen launched her new business in her spare time. She used her disposable income to create a new market for a new product. She did it by leveraging her computer skills, a couple of new classes, and computer-controlled manufacturing machines. Her investment to get started was a few hundred dollars.
Coworking spaces are the new office, the new community. The best place to work these days is not at work. It’s not at home, either. There has been an explosion in telecommuting over the last few decades, and its benefits and pitfalls are well documented. One of the features of the home office is its isolation. It can be incredibly productive. It can also be stifling.
The new arrangement combines the best of both worlds. A coworking space ranges from 1,500 square feet to 25,000 square feet of an open floor plan with desks, tables, and chairs spread throughout the space. Typically, there are quiet areas (no phone calls and limited, hushed conversations), phone booths, and more collaborative areas. Often a startup can rent a “full office” with a shared printer, secretarial support, mailbox privileges, and the ability to schedule the conference room. There are lots of whiteboards, community events, evening wine and cheese or pizza and beer parties, wireless Internet, and a thriving and intellectually curious cadre of members. Book signings, art events, and classes are common.
General Assembly out of New York has morphed from a coworking space into a twenty-first–century educational institute and coworking space hybrid. Its classes (including web design, social, mobile, programming, database design, and start-up basics) became so popular that within a couple of years it had to scramble to find more space. Venture capital showed up, and General Assembly is now spawning locations across the United States.
One of my favorite coworking spaces—because it is also part of the 5M Project with TechShop (more on 5M later)—is The HUB, a social entrepreneurial coworking space. It is part of the larger network of The HUB Global, with thirty-some locations and growing around the world. You must apply to join and must be working on some kind of project that is making the world a better place. It doesn’t matter whether the project is for profit, nonprofit, governmental, nongovernmental (NGO), or personal. As result of this filter—though The HUB attracts some of the most thoughtful, energetic, and interesting people who need not just space and a desk, but ideas, collaborators, and a social network—The HUB is one of the major nodes in the social impact ecosystem globally.
The HUB has hundreds of members at its San Francisco location, holds numerous weekly events, and has launched dozens of companies. A number of nonprofits have moved in, and they have successfully created one of the busiest and most exciting coworking spaces in San Francisco. I’m glad The HUB is in the 5M project and is our neighbor.
Another form of coworking space, one that is focused on the start-up process, is the start-up accelerator. These accelerators bring together all the resources a fledgling start-up needs into one place. They have the physical space like a coworking space, but unlike a coworking space they only accept startups. They then provide mentorships, classes, and money to help get the start-up on the path to success. They usually take a small percentage of the company in exchange for the money and other services.
Plug and Play Tech Center is one example of an accelerator that came out of the Silicon Valley and now has half a dozen locations spread around the world. Again, you need to apply to get space at the accelerator, and you can apply with just an idea. The accelerator brings investors into the mix so that a firm that gets in its door also has the potential to tap an angel investment network. The accelerator is focused on early stage start-ups, almost exclusively software based. Other advantages here are that there are service providers within easy reach. Lawyers, marketing, social, HR, and accounting support have been vetted, often provide discounts, and are used to working with start-ups, thus allowing the start-up to focus on its core technology development. Plug and Play Tech Center also offers lots of classes focused on all the issues that start-ups face, from how to fund an angel round to the more esoteric but critical discussions around deal points that founders need to be concerned about like “collars,” “ratchets,” “409a valuations,” and “liquidity preferences.”
I like Plug and Play’s position in the ecosystem in that it will take in existing start-ups and plug them into its system. Other accelerators only accept the earliest stage and want to be there at the start of the development of the idea. Y-Combinator exemplifies this approach—it is also an accelerator but plays an earlier role. I like its position in the ecosystem because it is something of a boot camp for start-ups. You don’t just show up with a team and current funding and ask for space to work out of. Y-Combinator’s approach to coworking is to run an entire cohort of start-ups through the entire start-up process at the same time. Twice a year Y-Combinator holds a competition to see who can get in. It has hundreds of applicants, invites many of the start-ups to pitch days, and then selects upwards of 80 of the applicants to receive a very small seed round of funding, around $20,000 for 6 percent of their company. Y-Combinator then runs these start-ups through an intense training, mentoring, preparation, and pitch practice process that leads up to a demo day. Y-Combinator pitch days now attract top angel and venture capitalists from the Bay Area and around the world.
Start-ups like Dropbox, Reddit, and Airbnb have launched out of Y-Combinator, which has been so successful with this process that SV Angel now guarantees a follow-on investment of $150,000 in the form of convertible debt (with very founder-friendly terms).
The problem with most of these accelerators, in my humble opinion, is that they focus almost exclusively on software. They do this by design, hoping to get enough advertising dollars through capturing eyeballs or traction in a space to force someone to buy the start-up. Or, if the start-up is lucky enough, to keep getting funding through the traditional venture capital route. When you hear about “lean start-ups,” people are almost exclusively talking about web, mobile, social network, or apps.
There are some interesting exceptions that incorporate the physical with a software layer. We are seeing this particularly in the “sharing economy” context—companies like
Uber, Airbnb, and Getaround. They are software companies, but they are marrying a physical delivery platform. They are also leveraging underutilized assets, aggregating them, and exposing them through a software delivery tool.
Uber is an on-demand black car service. You download a simple application onto your smartphone, and when you tap the “get a car” icon, you can get a black car to show up wherever you are in the city within minutes. Uber taps into the reality that most black car drivers often have to wait for hours between rides, idly waiting for a dispatcher to call with a new ride. The excess capacity of black cars in a city like San Francisco, New York, or DC is staggering. Yet there has been no easy way to tap into that excess capacity until now. Historically, one would have to call hours, if not days, before a car was needed in order to schedule a ride and then be sure to be ready for pickup when the car arrived. It was very regimented. Uber has enabled me to pack in more meetings in a day in New York and San Francisco just because I know I can get a car through its smartphone application within minutes of asking for one. Uber has bridged the physical with the virtual.
Airbnb does the same thing with house, apartment, and room rentals in thousands of cities around the world, exposing an enormous capacity of rooms that could never have been discovered without this type of service. Airbnb is a website that has aggregated thousands of spare rooms, apartments, and houses around the world that are available to rent like hotel rooms. Owners of the homes or apartments post the availability, costs, and descriptions with photos of their facilities on Airbnb’s website for potential customers to view and then rent. The excess capacity of empty rooms, apartments, and homes is enormous. The difficulty of launching a bed and breakfast is very high. So Airbnb has lowered the barriers both to offering a home or room to rent and to finding a home or room to rent. As I am writing this, our family is headed to Hilo, Hawaii, for vacation at an Airbnb home a block from the beach. We get access to a large two-bedroom apartment for the week, and it costs a fraction of what something that large would run at a resort.
Getaround is a car sharing service that lets people use someone else’s car. It’s like a rental car service, but you rent the car from your neighbor. Again, it has joined the virtual with the physical. Getaround puts a device on the car that allows authorized renters to drive the car. An authorized renter uses a website or smartphone application to find a car she wants somewhere close by and then is enabled through the device in the car to unlock the car and start it. And again, the excess capacity of parked cars in a city is staggering.
An accelerator representative that I spoke with recently told me that upwards of 30 to 40 percent of the ideas that were being submitted for entry into the program were physical, but because the accelerator couldn’t support the development of the physical projects, only 10 to 15 percent of the funding was going to these types of start-ups. This means that at an absolute minimum half of the potentially viable hardware start-ups were being turned down because there was no current infrastructure to support them. This clearly needs to be fixed. I am beginning to see progress on the hardware side. First, there are some new government labs focused on clean tech, solar, biotech, and nanotech. In the United States, we also have many university-sponsored accelerators that focus on similar areas. And we have just begun to see a couple of hardware accelerators that are focused more on innovation than invention. In San Francisco, Lemnos Labs started up to replicate the Y-Combinator model with hardware. Members receive access to Lemnos’s office, $50,000 in funding, mentorship, and the other services expected at an accelerator. Interestingly, the accelerator didn’t buy any equipment because it chose to locate within a few blocks of TechShop. So the start-ups get access to TechShop, too.
The first of Lemnos Labs’ successful launches was Local Motion, a start-up that has developed a GPS-enabled device that an organization can put on a fleet of cars, golf carts, or even bicycles and turn them into a shareable platform. Because Lemnos Labs is close to TechShop, Local Motion was able to develop the hardware nearby. It started out in Lemnos’ space and then moved production into TechShop San Francisco. One of its first prototype locations was the Google campus in Mountain View, California, where it has 150 electric vehicles and 2,000 bicycles. Local Motion raised a seed round of $1 million from Tim Draper of Draper Associates, Jerry Yang, cofounder and former CEO of Yahoo!, and Tony Hsieh of Zappos fame. Without access to a makerspace, there would be no way to cost effectively run a Lemnos Labs. With access to a makerspace, not only can Lemnos Labs exist, but all the other accelerators in the area can start to pursue hardware startups as well. The entire ecosystem becomes more efficient and broader in scope. It isn’t just about eyeballs anymore.
One of the most exciting collaborations TechShop has been involved in is as a part of the Fifth and Mission project, or the 5M Project, in San Francisco. Forest City Ratner, a large real estate development company, along with the Hearst Corporation, the media company that also has a large real estate presence in California, has been pursuing the purposeful development of a creative cluster in downtown San Francisco. A brilliant vice president at Forest City, Alexa Arena, is combining the ideas and work of Michael Porter, Harvard professor and founder of Monitor Consulting, on regional competitiveness and Richard Florida’s work on the creative class.
Situated on four acres in the South of Market Area (SOMA) in San Francisco was a grouping of underutilized buildings owned by Hearst Corporation. Over the years, different portions of the Hearst operation in San Francisco had moved out of the city, were outsourced, or in some instances, closed down due to structural changes to the newspaper business in the last few decades. Hearst wanted to do something special with the excess space, so it partnered with Forest City to see if Forest City could reimagine four acres of downtown San Francisco and make the ensuing development great.
This part of San Francisco sits about one block from one of the worst neighborhoods in the city, Sixth Street. It is also close to rapid transit, great shopping, and the convention center. It is just on the “wrong side” of Fifth Street.
Ms. Arena, using product development and design thinking methods like those used by IDEO, Frog Design, and other top design firms, began a research project to determine how to attract a key group of anchor tenants that would help kick-start a creative cluster. As part of the project, she interviewed a number of start-up CEOs in the city, including Twitter’s Jack Dorsey. He was just getting started with his new company, Square, and suggested she contact TechShop because it created its own community. She also pulled in Intersection of the Arts and The HUB, the social cause coworking space mentioned earlier in this chapter. There were plenty of others in the mix as well, but this became the core group that moved into the old Hearst campus at Fifth and Mission. Prior to the project, only Square and TechShop knew one another. Each has a community focus and its own focus and agenda, but each tends to attract members who are creative, artistic, driven, articulate, social, and outgoing.
Each organization had to take big risks to open in San Francisco. Intersection for the Arts, the oldest interdisciplinary art-granting institution in San Francisco, had to “abandon” a part of the city where it had been embedded for 40-plus years. The HUB had a small location in Berkeley, but it had to sign up for three times the space in San Francisco. For TechShop, this would become our first corporate-owned expansion site—and we had to raise $2.5 million to make it work. But each organization did it. Forest City and Hearst helped greatly. Square also committed to the location. Then magic happened.
A digital film school decided it “had” to be close by. Other start-ups decided they, too, wanted to be close. Intersection for the Arts stepped up to take over a gallery space on site. The HUB grew so quickly and started spawning start-ups so fast that it doubled the space it had committed to. TechShop took on another building to handle needs from start-ups that wanted more space. The Monarch bar opened right on Sixth Street. On Wednesdays and Fridays, 5M blocks off a street where Off the Grid, a local mobile food truck cooperative, pulls in half a dozen taco trucks, Intersection for the Arts hosts artists and musicians, and the community shows up for lunch.
About the same time the 5M Project opened, a new organization, SFMade, launched. The brainchild of Mark Dwight (founder of Rickshaw Bagworks) and Kate Sofis (managing director of SFMade), it is a nonprofit organization designed to help manufacturing companies within the city limits of San Francisco. The idea was to become a place where manufacturers could work together on their issues with the city and talk about hiring, manufacturing, exporting, and all the other issues manufacturers face in urban locations. SFMade started by simply locating its “office” on an open table upstairs at TechShop San Francisco. Since that simple, inauspicious start, it has grown to over 350 members and has direct contacts into the mayor’s office and local congressional offices. SFMade holds weekly seminars on different topics manufacturers care about and has even expanded outside of San Francisco.
Because of its success, SFMade has begun to help other large cities develop their own versions of SFMade. The timing is right. Manufacturing is coming back, and urban centers have a place in the ecosystem. But getting manufacturing to come back only works if cities understand the unique needs of a manufacturer and work with manufacturers to make them welcome.
The 5M Project is one of the most ambitious of these types of projects, but there are other successful start-up ecosystems. Tim Rowe is the founder and CEO of the Cambridge Innovation Center in Kendall Square, an area of Cambridge near the Massachusetts Institute of Technology. Tim has seen hundreds of start-ups come through in the last decade, and the space the center works within has grown to over 100,000 square feet. The Cambridge Innovation Center’s member companies have raised over $150 million in capital and now even have a $45 million start-up fund housed on-site.
I like what Wayne State University has done in Detroit with TechTown along with Dan Gilbert’s (Quicken Loans) BizDom. TechTown recently disclosed that it houses over 230 companies, up from 40 just a few years ago. These focused concentrations of tech transfer, accelerators, and seed stage funding can work, though not easily.
Adam Ellsworth and Bryan Duxbury decided that they wanted to make a lamp like the one in the Super Mario games. A yellow translucent box with an eight-bit question mark on each side, the lamp is turned on by hitting the bottom, and the user is rewarded with a little sound, just like in the game. Adam and Bryan thought it would be a fun project to build. They had no idea where it would take them. It was simply a personal project.
They leveraged TechShop to create the lamp pieces, using the laser cutters to cut out the acrylic and the silkscreen station to do the basic screen printing. They learned how to use an Arduino board—a single-board microcontroller—to control a simple LED and hacked together a sensor to the Arduino board that detected when the lamp was hit. They were pleased with the result and hung it up at TechShop for other geeks to enjoy their little hack. And then…
A gaming blog writer came through the shop, took pictures of the lamp, and posted them online, at which point people started asking where they could get one just like it. Within a few weeks, demand for the lamp grew to the point that Adam and Bryan decided to do a few short runs, set up an Etsy.com store online, and see if they could license the game icon. They gave their project the name 8 Bit Lit and had a hard time keeping up with demand. This is when I met them, through a woman they had just hired.
This woman, whom I had never met before, had approached me randomly one day and thanked me for helping her get a job.
“What are you talking about?” I asked.
“You are a cofounder of TechShop, right?” she asked.
“Yes,” I said.
“Well, I lost my job last week,” she said. “I decided to come to TechShop to learn how to do some things with my hands while I was looking for work. I became a member today, signed up for the silkscreen class, and now 8 Bit Lit has hired me to start helping them make lamps as soon as I finish the class. I start my new job, here, tomorrow!”
People at 8 Bit Lit struggled to keep up with demand for a number of weeks, switched from Arduino boards to a less expensive custom-imbedded chip set, and had an absolute blast working with all their new friends and coworkers. In fact, they had so much fun that after they caught up orders and slowed down shipping, they decided to form a company, keep the team together, and start doing custom contracting work for others. This is another example of the power of community and ecosystems. The environment they worked in helped them to not only make the project, but turn it into a small run and then a company.
What I’ve described in this chapter is the emergence of a new kind of community that grows up from a community that has a density of creatives in it. But to grow this community, it needs the infrastructure, design, purpose, support, and even building codes to flourish. Those cities that get this right will develop a vibrant creative cluster, and that cluster will produce culture, music, art, start-ups—and jobs.