I've parked myself outside of Peet's for a brew. Also snapped a shot from our balcony earlier today - you can see Marin County across the water! A beautiful day today - slightly on the warm side; just the way I like it.

It's a great way to start what will be a hectic week. We're starting our big fundraising push tomorrow and while Ike is on the road, I'll be pushing out some interesting improvements to some of our core products. Good news is that January is shaping out to be a blockbuster month for us (best month of our existence!). The right combination of the post holiday credit card rush (always happens - people max out their cards and need more) plus news that the Fed lowered interest rates a few weeks back have opened up the floodgates for mortgage apps. Let's hope the remaining 19 days of the month are just as good as the first 12.

Amid all the running back and forth of the holidays and an upcoming board meeting, I forgot to mention that Centrro moved offices. We're now in more "professional" settings though still with a small office feel. We didn't go very far, about a block and a half away (from 3rd Street to 4th Street). We're still in shared office space but the building we're in has cubes, a reception area, kitchen, and nice conference rooms. Our office mates are a real estate investor and a couple of lawyers. The owner of the building (and one of our office mates) did a great job renovating the space. Our area is just below a nice skylight so we get a ton of natural light. I was telling Ike that our old offices had these fluorescent bulbs that were slowly killing our brain cells. We literally could feel ourselves getting more and more forgetful and were having trouble coming up with words to describe things.
 
We toured numerous office spaces in Jack London Square and Old Oakland. I can tell the economy is going downhill as I've never seen so many nice Class B+/A office spaces available. We even had brokers telling us to craft unique deals with landlords like paying for only a portion of the space in the first year, then slowly increasing the amount of space we'd "occupy" until we were paying on the full space towards the last year of the lease. Others were just telling us to make an offer ... any offer.
 
We chose shared space once again because we're still trying to keep things lean but also because we're waiting for the new Jack London Market to go online in the first half of 2009. It's a mixed use project that incorporates the largest open air market on the West Coast (bigger than the Ferry Building or Pike Place - see last photo) plus about 100,000 square feet of office space. Not to say we're going to be able to afford an office there but I'm betting that their will be a migration up from existing tenants of Class B+/A space to the JLM building. This is going to flood the market with even more good office space in the area which will put us in a better position to negotiate a good deal sometime in 2009.

One of the worst feelings in the professional world is having to let people go not due to performance (that's easy) but due to financial constraints. I've been reading about the latest rounds of lay-offs in our sector and it's pretty sad.

It's times like this that I'm so glad we've decided to stay lean. Yeah, maybe a project gets delayed here and there but I'll take that over having to tell someone they lost their job not because it was their fault but because it was my fault for not planning properly ahead of time. It's just unfortunate that it took a soft investment market for companies to realize they should pay attention to pesky little things like revenues and/or profits. My personal philosophy has always been that if cash flow cannot support a full-time employee (salary, benefits, taxes, etc) PLUS at least 25%, then don't hire that person. If it's a revenue generating position, have the person work on commission until they generate enough cash flow per the last sentence. Maybe it's time start-ups began running their businesses like nearly all the other businesses out there (ie, make profits now) instead of waiting for that next round or the buy out.

I'm reading Jessica Livingston's "Founder at Work" book and one particular chapter is quite appropriate. It's about how Charles Geschke and John Warnock only needed about $50K to start Adobe and that shortly thereafter they got $1 million plus contracts from guys like Apple and others to license their printing software. Why don't entrepreneurs think like that any more? Build something, make more money than you spent building it, repeat. Maybe that's just too pedestrian for today's founders but that's one way to ensure your business is recession proof. Another great read is Paul Graham's article about starting a technology company during a recession.

Not literally, of course. Anyone who knows me will agree I could lose a few lbs. I'm speaking from the start-up sense. I just read an article on Techcrunch that VC backed start-ups are having a hard time exiting. The post right after it was that Eyespot ran out of cash and shut down. I've never used the Eyespot service but it looks like it took some heavy engineering to get it done. To that end, they raised about $3.6 million and hired 22 people. I'm sure they also got an office, computers, water, etc. to support these 22 people. That's a lot of infrastructure cost and it looks like they didn't have the revenues to support it.

Taking the lessons learned from our last start-up, we definitely decided to go lean the second time around. Case in point, at our last start-up we got a 3 year lease on almost 5,000 sq. ft. of office space when we only had 6 employees (we were going to grow into it - so we thought). Turns out that the lease was one of our biggest cash sinks. Start-up number two? We share desks in a shared office space. Here's a shot of our messy work area.

We did this when we didn't generate any revenue because since we boot-strapped this venture, we thought it better to spend our limited funds on talent versus rent. It turned out to be a good move as we weathered through some lean months before ultimately hitting our stride and becoming cash flow positive. Fast forward to over a year and we're still sitting at the same desk except now we rent out a few more desks as we've grown. Once we have built enough of a cash flow cushion, we MIGHT think about getting a separate office space. Part of me has become attached to the more intimate setup, though. We now easily bounce ideas of each other which will become harder once everyone has their own desk. I guess that's the price of progress though.