If you live in San Francisco and know much about tech startups, you’ve likely heard of Founders Den, a shared office space and private club for startups and investors that leases 85,000 square feet on a nondescript block in San Francisco.
Founders Den accommodates between 12 and 15 startups at a time, each of them with six or fewer employees. The startups must be invited into the fold, and they must agree to stay no longer than six months. They’re also asked to pay market rates for the space they occupy.
“It’s a terrible business,” jokes Jason Johnson, an entrepreneur who decided six years ago to establish Founders Den with three friends: Jonathan Abrams, Zack Bogue and Michael Levit. The four work to break even each month, owing to additional office perks that they provide, like a full-time office manager. “If we wanted to make money on [the space], we’d lease it out to many more companies and charge a premium,” Johnson says. “But that isn’t of interest to any of the four of us.”
What is of interest is forming a “curated” community of founders who help one another and provide each other with investment opportunities, and on that front, Founders Den is proving very successful, especially for its creators.
Johnson says he has invested in several startups to get their start inside of Founders Den, including Docker, the six-year-old company behind the Docker open source platform space (it has gone on to raise $180 million from investors), and the mobile app company SocialCam, acquired by Autodesk for $60 million in 2012.
A founder doesn’t have to make room for anyone at Founders Den on his or her cap table; instead, “informally, we get to build a relationship over many months, and if we’re lucky, they’ll let us invest,” Johnson explains.
Johnson says he has also hired “several people who were either founders here or involved here in some way” into the company he himself founded at Founders Den: August, a maker of digital, keyless door locks and a doorbell camera. August has since raised roughly $50 million from investors and now employs 80 people. (It has also since moved two blocks away, though Johnson still pops into Founders Den regularly.)
Johnson might have created August with or without the support of his friends, but the camaraderie and support from Founders Den seems to have helped each of its founders, as well as many of its tenants.
Abrams has created Nuzzel, a popular social, real-time platform that allows users to see the news that their friends share, as well as makes it easy for users to create their own newsletters.
Meanwhile, as we reported last month, Levit recently teamed up with Rick Marini — co-founder of Tickle (sold to Monster) and Branch (picked up by Hearst) — to form Dragonfly Partners, a new advisory firm that’s matching U.S. companies looking to get sold with China-based companies that are hungry for revenue.
Having a clubhouse has helped.
Bogue says that at least 10 Data Collective portfolio companies have rented space at Founders Den — a nice deal sweetener for a fledgling startup in a crowded real estate market.
Abrams meanwhile says that he has happily looked over the shoulders of other, nearby founders when trying to work out bugs in Nuzzel’s platform. (Bogue was his very first beta tester, Abrams says.)
Indeed, Data Collective, Founders Den and Dragonfly Partners continue to operate out of Founders Den.
Seemingly, being in the mix has benefited shorter-term residents, too. In addition to SocialCam and Docker, some of Founders Den’s better-known tenants have included the point-of-sale software maker Revel Systems, which was reportedly in talks with IBM earlier this year about an acquisition; and the venture firm SoftTech VC, which closed on a record $150 million in commitments this past summer.
Certainly, people who are invited into the club by the founders — usually through a direct connection or a friend of a friend — seem to like being there. Charles Hudson, a partner with SoftTech who more recently left to launch his own seed-stage outfit, is back at Founders Den while he gets his new firm off the ground.
Other regulars on the scene include serial entrepreneur Jay Adelson, Lieutenant Governor Gavin Newsom, serial entrepreneur and Y Combinator partner Justin Kan and prolific angel investor Gil Penchina. Each pays a nominal “membership” fee to access a spot at Founders Den whenever it’s convenient for them to be there.
It’s a fun “side project for each of us,” says Bogue of Founders Den when we sit down to talk about its operations.
Could it have been more? We ask Bogue, for example, whether he or the other founders ever regret not turning Founders Den into more of a business, given that startups like WeWork have been sky-high valuations for creating collegial spaces for startups on a broader scale.
He says they don’t. “If I didn’t have Data Collective as my full-time thing, I might consider [trying to replicate Founders Den elsewhere],” says Bogue. “But expanding it would be a full-time job. Besides, he insists, the idea was never to get rich through Founders Den. “We don’t want to engage in the business of desk arbitrage. We’re doing this to build a cool community. We’re not looking to make any money off it.”
Pictured clockwise, starting from the upper left corner: Johnson, Abrams, Levit, Bogue