Informal Incubators: Startup Workspaces Sprouting Up in Unlikely Places (Including an Expelled MIT Frat House)

2/3/10Follow @xconomy

When Mahmoud Arram looked around last spring to move his web startup Sponty from his apartment to a real, live office space (to better accommodate the interns he needed to hire), he sought three things: a door that closed, lots of whiteboard space, and “access to really smart people.”

“It’s good to be able to bounce ideas off of very smart business people and engineers,” he says.

His hunt led Arram to some extra room that e-commerce company Allurent (his part-time employer) was renting out one floor below its main headquarters until it needed the room itself. And, as it happened, a handful of other startups were already working out of the Allurent space—on the third floor of the American Twine Building near Kendall Square in Cambridge, MA—generating the brainpower and buzz that he wanted. Arram not only got that enclosed office, it included almost an entire wall of whiteboard.

We know what you’re thinking—that there’s already a home at Allurent for new startups: Polaris Venture Partners’ Dogpatch Labs incubator. But that’s a formal program operated by a major venture firm, not what we’re talking about here. The space Sponty and the others work out of didn’t directly advertise itself as an entrepreneurs’ co-working environment, but that’s certainly what it seems to have become.

“It was definitely more serendipity than master plan, but I think the space and Allurent’s culture are very startup-friendly,” says Allurent co-founder (and Xconomist) Joe Chung. The real estate also contains the small conference rooms and big open space occupied by many desks that are characteristic of more traditional and intentional startup co-working environments.

It’s no secret that the greater Boston-area boasts a culture and infrastructure hospitable to a thriving startup economy. There are a multitude of venture capital firms with entrepreneur-in-residence programs, startup incubators (a la Dogpatch or TechStars), co-working spaces, and startup competitions—from the MIT 100K Business Plan Competition to the Harvard Business School Alumni New Venture Contest—too numerous to count (actually, we have counted them—see our X Lists). But while these different institutions or programs have set out with the intention of supporting entrepreneurs, we’ve also observed a more organic growth of startup-focused communities and groupings (like Allurent’s third floor) that add a new dimension to the area’s innovation friendliness. We’ve dubbed them informal incubators for the purpose of giving a name to the trend.

These types of communities flesh themselves out in a few varieties, as you’ll see in the different iterations described in this story. Our suspicion is that there are more out there and that, as angel investor Bill Warner points out, this is the beginning of a categorical shift in how (and where) we’ll be seeing companies start and grow their businesses. “You’re seeing a lot more companies coming together in much higher-density spaces,” he says.

“It gets a cross fertilization of ideas going,” says Warner, who himself operates out of the Cambridge Coworking Center, another shared workspace that rents to startups by the month. “It gets people meeting each other and hiring each other and supporting each other. It’s a valuable and important trend.”

This kind of support and networking is a big benefit that Emerginvest CEO Andrew Waterman has found at the informal incubator where he does his work. “You can’t always turn to your employees, advisors, or investors. It’s nice to be able to turn to other startup CEOs to get their opinions,” he says.

Waterman works out of an especially unusual incubator: the Alpha Tau Omega fraternity house at MIT, which was vacated following the organization’s expulsion from campus in September. Alum Kevin Vogelsang is in charge of the house until its fate is decided and has been working on his own startup there since fall. But early on he felt like he was missing out by operating in such an isolated environment.

“Your ear is not to the street,” he says. Vogelsang attended area entrepreneur meet-ups to find others looking for a community-driven work environment and soon invited a few other startups to join him. In addition to Emerginvest, an online information portal on world stock markets, there’s mobile app company Sensobi and web communication startup Shareaholic. “We’re all in similar positions. There’s a lot of momentum in working around each other,” notes Vogelsang.

Since Vogelsang lives and works free of cost in the house—which includes plenty of desks, a high-speed Internet connection, and a ping-pong table—he doesn’t charge anything to the companies that work alongside him.  That brings us to another trademark characteristic of the informal incubators: the minimal or non-existent rent charges that attract cash-strapped, early-stage companies or entrepreneurs who otherwise would have been working out of their apartments. Allurent’s Chung won’t reveal specifically how much he charges the third-floor residents, but notes, “let’s just say everyone (including us) seem to be pretty happy with the arrangement.”

Online life sciences PDF search tool Pubget, another Allurent tenant, attests to that fact. “Everywhere else it’s death by 1,000 expenses,” says co-founder and CTO Ian Connor. Pubget had been previously working out of MIT’s student lounge, which Connor says looks much like an informal incubator itself in the summer, marked by different entrepreneur hopefuls all attempting to hash out their startup ideas in the academic offseason.

Speaking of the Allurent space, it’s got something else to offer that we also see as characteristic of informal incubators: proximity to seasoned execs or funders with a lot of industry wisdom—and clout—to share. “When you’re just starting, you have to rely on a lot of introductions,” says Sponty’s Arram. “It’s very hard to cut through to influential people.” He says he can run upstairs to Allurent’s break room and grab a cup of coffee with Chung (who co-founded publicly traded Art Technology Group (NASDAQ:ARTG) before his Allurent days) if he’s looking for advice or contacts. It’s a convenience that would normally require an appointment if he was working from outside of the building.

That element of in-house support is reflected in another, slightly different flavor of the informal incubator: a stand-alone company working out of a seasoned expert’s and investor’s house. Wiggio, a Web 2.0 groupware for students startup, is based in the west Cambridge home lab of Bob Doyle, a Boston tech veteran who is the company’s first angel investor. Doyle (whose sons also helped to co-found Wiggio) has his PhD in astrophysics and is the CEO of an open-source enterprise management software provider called skyBuilders.com. He’s well known for co-inventing Merlin, a Parker Brothers handheld electronic game of the 1970s, and developing MacPublisher, the first desktop publishing program.

While the Wiggio/Doyle situation has a slightly more personal and singular feel than the community-style incubation of the Allurent or frat house spaces, it also reflects the sharing of resources and insights for the purpose of furthering innovation, without an officially advertised or planned infrastructure to do so. And Wiggio does so on the cheap, like the other informal incubators. The company paid no rent in the first year-and-a-half it worked out of Doyle’s home and has since migrated to a deferred rent payment model, so that once the company pulls in sustainable revenue, it will back pay Doyle for rent, CEO and co-founder Dana Lampert says.

Regarding Doyle’s role as an advisor and landlord, Lampert describes the shared business sense and push toward innovation that is paramount to the informal incubator model. “It’s really about helping us put together the right strategy. He helps us decide which features are most relevant to the market. He’ll say things like, ‘I tried it this way’ and ‘you don’t want to do it that way.’”

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