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With Scott Orn

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Scott Orn

Scott Orn, CFA

The Startup Office of the Future - with David Bergeron of T3 Advisors

Posted on: 06/23/2020

David Bergeron

David Bergeron

President - T3 Advisors

David Bergeron of T3 Advisors - Podcast Summary

David Bergeron of T3 Advisors, a leading commercial real estate advisor to venture-funded companies, discusses how COVID will change the future of the startup office. From the next few months to several years from now, how startup office space will be forever different. Interviewed by Scott Orn, COO of Kruze Consulting, a leading startup accounting consulting firm. Learn more at kruzeconsulting.com.

David Bergeron of T3 Advisors - Podcast Transcript

Singer: (singing) It’s Kruze Consulting Founders and Friends with your host Scotty Orn.
Scott: Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. And before we get to just a fantastic podcast with David Bergeron of T3 Advisors, quick shout out to our friends at Rippling. Rippling makes the best payroll software; the best benefit software and they’ve got a really cool IT interface that allows you to spin up new employees. So, you provision their accounts and they can plug in all to their web services right away. You don’t have to spend like three hours, like we used to, doing that. Do you guys do that, David? Do you guys do it all manually and set everyone’s accounts up?
David: Well, of course we do. Yeah. Old school.
Scott: So, Rippling solves that. It will save you a crazy amount of money. Check it out. It’s a great service. And again, their payroll and benefits are great. One thing about the benefits I really like is it lets you work with independent benefits brokers so those people are really hungry to get you a good deal. So, check it out. Also shout out to the Kruze Tax team. They’re doing a ton of hard work right now. We’re right in the middle of tax season. So, shout out to Kruze Tax. And now welcome, David Bergeron.
David: Thank you for having me, Scott. It’s good to see you.
Scott: This is a three-time guest moment right here. This is a pretty big deal.
David: There we go. The threepeat. The threepeat, me and MJ.
Scott: So, do you want to give, then, just your quick background? You’ve been on the, this is your third time, but for those who didn’t listen to the first two, can you just tell them who you are and where you work?
David: Yes. Yes. Well, first of all, shame on them for not listening the first few times, but my name is David Bergeron. I’m the president of T3 Advisors. I’m the father of two. I’ve got a beautiful wife, but we run a company at T3 that works with high growth companies, trying to think about real estate and workplace in an entirely new way. And I think we’ve been at this for almost 20 years. We work all across the globe on behalf of clients. We’ve got folks in offices in New York, Boston, and throughout California. Kind of love this type of conversation with folks like you, Scott, given the perspective that you have with so many sorts of exciting and high growth clients as well that I think our worlds mesh really well for conversations like this. So, I’m really, really excited to be here today. And thanks for having me on again.
Scott: Yeah, no. And you’ve given really great advice in the previous podcasts. And then we talk when we’re not recording as well, and it’s really helpful. And I’ve just seen the kind of impact that T3 has in the startup space. And you also work with much bigger companies like the big, big tech companies, but in our world, you’re still a big player and it’s great to have you on the pod. So, the first, and we kind of sketched out an outline before we got on, but the first thing was just how the heck, we’re in the middle of COVID, how the heck are businesses, startups going to be using space going forward? What’s going to happen?
David: That’s the $438,000 question right now is what does the future of real estate, commercial specifically, look like on a go forward basis? And we’ll sort of obviously kind of caveat a lot of this around what we’ll talk about today for technology companies, right? So, it really is we’re not talking retail, we’re not going to be talking a lot of traditional brick and mortar manufacturing, restaurants. I think the conversation in our perspective is very much in line with high growth, venture backed, and publicly traded life science and or software companies. So, for that category of folks, I think there’s kind of two things that are happening right now. One, you have this, everyone keeps talking about like the greatest experiment of all time with this whole work from home element that we’re all being forced into today. And that’s wildly interesting for a lot of reasons. There’s a lot of interesting survey data coming back around how that’s either working or not working. And I think should inform a lot of the go forward strategies for these companies, as they map out the value workplace can either play or not play in the future state of their companies.
Scott: Well, it’s interesting you said was there’s survey data saying it’s working and not working. I haven’t heard anyone say it’s not working with the exception of childcare, which is really tough for everybody. And so, it feels to me like in the future, when people have access to childcare, when things kind of normalize a little bit, that takes care of the biggest problem that people working at home are feeling. Is that what you’re seeing? Or what examples are you hearing that’s not working?
David: We’re running our own surveys internally with a bunch of clients to gauge feedback and sentiment. And we’re trying to do it on sort of a longitudinal basis to say, “After four weeks in quarantine, how are you feeling? After eight weeks in quarantine, how are you feeling? After 12 weeks in quarantine, how much are you drinking?” So, we’re kind of having these conversations along the way with folks to understand how this is or is not working. And I will say overall, you’re correct that it’s not surprising that the highest corollary to happiness when it comes to work as a variable for any employee is commute time. And right now, no one has any commute. And so more so than title or product you work on or pay, not having to get in your car or battle up a freeway or on public transportation right now is a gift that everyone has been given. And so I think that matters, and you’re seeing that from, I think, a real positive trend perspective. On the flip side, to your point, the challenge with this experiment is that it’s flawed. There’s no school. There’re no camps. We can’t have house cleaners come. You can’t have your friends come over. You can’t have your kids go to their friend’s house to play, which is, I think, creating like a very like artificial state of reality that hopefully will not be our go forward norm. And I think it’s also misrepresentative of what it will be like to work from home once things sort of unlock and we sort of solve the health aspect. So, there’s a lot of, I think, confusing data. To sort of finish that comment, I think that there’s a lot of people that really dislike working from home. And we’re seeing that in almost every survey and it changes. It can be anything from 10% to 40% of a population that, for any number of reasons, do not enjoy or do not find themselves more productive at home. And I think that’s okay. And I think what we take from this is, it’s not a binary all or nothing, like the best thing to do is have everyone come back or the best thing to do is everyone work from home. I think what you’re going to start seeing as a shift is the companies that are progressive enough to say, it’s not all about solving for a population of engineers or solving for a population of sales folks or customer support folks, categorically based in department like we’ve done historically. And say, “Oh, the sales team can work remote. That’s okay. Engineers, you all got to come here and code next to each other.” I think that’s sort of blown the lid off of this at some level. Oh, those expectations now are going to be on the individual level. Like Scott was fortunate to have like the resources and the support and the WIFI and the means to work productively at home. He’s going to choose to work from home. But I may be a 25-year-old customer support person working in San Francisco and I live with four roommates and we have nowhere to go and work and our Internet’s crap and we don’t have air conditioning. And I just want to get back to the office for reprieve from the heat and actually get in a room that’s quiet and actually be able not drop my Zoom calls every 14 seconds. And that’s a very realistic problem that we need to be aware of and sort of allow this to either be working great for folks, which is awesome and not working great for others. There’re things even outside of the traditional work stuff that people need to get out of the house for. And those could be health reasons. I mean, those could be domestic violence reasons. There’re all kinds of stuff that we don’t know what’s happening behind the curtain that could be really, really important for us to get these people back and get them out and give them an option outside of just being stuck at home. And so, you need both.
Scott: So, do you think that’s going to be kind of a laissez-faire, “Hey, we’ve got an office and if you want to come to the office, you’re welcome to, but if you also want to work at home and…”? But I can also see cliques developing that way. It’s really tough. I don’t know what the right answer is here.
David: My hope is it’s not a laissez-faire approach. I think that it needs to be deliberate. And if it’s not deliberate, it’s going to be completely unwieldy. And to your point, it becomes Lord of the Flies style, it’s not going to end well. And so I think what my hope is, is that if we’re deliberate with solving for the individual and you come up with sort of a game plan for each person, and then sort of map that to the number of folks that 100% of the time want to work from home, you are going to have another percentage of your population that wants to work 100% in the office, or have the availability to work in the office, and then you would have this hybrid population of like, “Yeah, I’d love to work from home a couple days a week, but I also want to come in two or three days a week as well.” Great. Now we can sort of start to take a look at our space and say, “All right, we currently have 10,000 square feet and I have a population of X. “And based on like now the new expected sort of use case for our current employee base, now we’re going to have a utilization rate that is different than it was before. Whereas we used to sort of carry a seat per person and think about having some cozy seating if I’m going to go relax on in a phone booth. I have a call and [crosstalk 00:09:32].” I think that’s now going to be rethought. And your now hopefully less people overall come into your office, but you’re also going to have to remember, we’re going to need, at least for the next year or two, more space and de-densifying the number of desks in our spaces because of the social distancing sort of requirements and norms that will be put on. So that’ll also factor in as a variable to how much space do you do and don’t need on a go forward basis. And then the final piece of this, you could even see people kind of running shifts or like, all right, the green team comes in every Monday, Wednesday, Friday, and the blue team comes in every Tuesday, Thursday, and depending on who and how is sort of staffed accordingly. What you’re trying to solve for is you want to minimize your max capacity number at any point in time. If I have a hundred employees I’d like to design it such that I never have more than 60 ever in the opposite at once, which means then I can kind of keep my square footage down and not actually account for the unknown that what if everyone shows up on Thursday? We got to make sure we have the facilities that can handle that. And like you and I know no company ever has everyone show up every day. And so, you’re constantly living in this inefficient world of 20 to 40% of most office spaces are just completely unused on a daily basis, even though we’re like out of space, quote unquote. And so, I think this helps a lot of those efficiencies in being more deliberate and thoughtful and plan around how people can use this space, ultimately will save people money.
Scott: And you made a great point about de-densifying, which I hadn’t really thought of, but you’re right. People need to have more distance. I’m just reflecting back on our old office in downtown San Francisco. We packed it in. We had 28 people in that office and it was comfortable. It was fine, but it wasn’t for a COVID world. We could have probably fit 18 people in that office in a COVID world.
David: Yeah. Let’s be clear. You were running a sweat shop there. So that’s number one. Number two-
Scott: I was sweating because there was no air conditioning on certain days.
David: No, no, that was a gorgeous office. All kidding aside, but you’re right. And I think everyone’s going to have to think about this. If you had a space that could initially accommodate 30 when we add four-foot desks and we were all packed in next to each other, which by the way, a lot of people enjoy, like there was a lot of energy. You can sort of feed off the vibe and the momentum. And you hear a lot of just good stuff happening around you, which again, there’s a bunch of studies that show productivity by sitting next to someone who is productive and efficient, by just being next to them can increase your productivity by 10 to 15%. So that’s a real thing that now I’m losing, sitting here at home with no one next to me, except like this blank wall, trying to… I’m not inspired by that. And so, I’m much more inspired by being next to Scott when he’s getting stuff done and I can feed off that energy. So, there are considerations here that I think are in play that we’re going to de-densify. You’re going to have to be further apart. We’re going to take conference rooms that used to accommodate an eight-person meeting and it’s now going to be four or three or less.
Scott: Wow. I hadn’t thought of that.
David: Phone booths, like the cleaning procedures for like you’re in the phone booth doing a podcast for 45 minutes and then you finish and now I’m going to go in. Well, how are we going to clean that to ensure that we’re not passing any sort of germs back and forth? So, there’s a lot of very important, critical considerations that, if we’re going to go back, when we go back, people just need to be really thoughtful of. And I think that the best way to experience this, there’s a ton of stuff you can read, like infinite amounts of resources and sort of hypothesis online and Twitter and otherwise, I’m sure a number of the listeners have already read and heard. To me, that’s all interesting and sort of academic and theoretical. I think what you need to do is step back. Think about your own company, your own office. And I’d encourage you to like write the narrative, a day in the life of Scott, and think about, “Okay, I wake up, I make my coffee, I take a shower. How do I get to the office? Am I taking Caltrain? Am I walking? Am I jumping in an Uber? Is that all still possible? I get to my building; do I touch the elevator button? Do I get in an elevator with 10 people, with three people, by myself? I get to my space. How do I check in? Do I wipe down the surface when I get there? Where do I put my book bag that now may be contaminated? Where do I?” There’s just all these. And so really what you should do is just write the narrative of how does this need to go for us to maintain a level of cleanliness and confidence for the other employees in the office? Because the other aspect of this is sort of the mental warfare that will be coming back, thinking about and dealing with the sort of fear of whether it’s my own personal health or I live with my grandmother and I just don’t want to have someone infect me, or infect anything else that I’m associated with and then I take that back to my house. God forbids. So, the stakes are really high and people need to take this really seriously and be diligent about, do that narrative, do that day in the life and think about all of the kind of inflection points you need to solve for and that end user experience for your team when you come back.
Scott: I think that narrative idea is a really good one because you’re empathizing with your team. And like you talked about early in the podcast where you said that commutes are a source of major stress for people. Well, all of a sudden, we’re commuting in the COVID era where it’s probably 10 times more stressful, like I will be on BART or the bus and someone would cough on me all the time. That’s just infinitely more stressful. And your point about bringing something home to your grandma or your parents, or your kid who then infects other people is such a great point. So, it sounds like on reentry, maybe transition to that because you covered some of it. But I told you I was in a CEO group on Wednesday and all everyone wanted to talk about was, “How do we do reentry? Are we in danger of getting sued? How do we handle someone who just doesn’t want to come back to work?” How are you advising your clients on that?
David: Yeah. I mean, it’s all on the table right now. I think in terms of how to think about this and all these points you just brought up are all very important and key points everyone needs to be thinking about. Step one is create a task force within your team to think about reentry. And there’s a bunch of good best practices going around. The State of Colorado published something that I can share with you, Scott, a couple of weeks ago. The State of California actually came out with some best practices around office reentry that they’re also sharing. So you’re seeing some folks lead on this, at the state and federal level, which, by the way, what we need, we need some galvanized best practices that everyone’s subscribing to. To leave it to every employer, every startup CEO to figure this out, that’s not what they do. They have no idea how to do that. This is the wrong audience to be asking to solve like a health pandemic crisis and reentry. So, we need to be really careful not to expect our executives be super heroes when it comes to this.
Scott: Oh, I just went through that on the finance side with the PPP and CARES Act and it was torture and incredibly stressful. I agree. The government needs to provide that guidance.
David: Right.
Scott: It’s not a good situation when the government didn’t provide guidance on SBA and CARES Act. Let’s do this one right, folks.
David: We need to. I think being sort of open up the top of your funnel of information as wide as possible. Have a task force that’s taking all of the anecdotal things they’re hearing about their friends or their spouse’s company and what they’re doing and hopefully kind of group things to get you to a place of some level of confidence on how to go about this. You know, again, I think there’s like the de-densifying considerations. There are partial remote workers. Right? So how is that going to look for you and your team? There’re visitor policies. Do you allow visitors to come? Do you allow guests to come? What does that look like? I think you mentioned the public transportation considerations, which are going to be really important. What we’re finding is really the communication aspect. This is also critical. So, talk to your team about this now, make sure your messaging that, like, “We have created a task force to look at this and we’re gathering as much data as we can.” Be honest and transparent that “we don’t have all the answers. We shouldn’t be expected to have all the answers. So, don’t think that we’ve got this figured out, but trust and believe that we are highly aware and acute and empathetic to this, and we are doing the best we can. And we will keep you, as our teammates, updated on all the new information we’re gathering to ensure this goes as well as possible for all of us.” I think all these aspects are important and it’s going to be hard because I think the colleague of mine recently was on another webinar and sort of shared this parallel, which I thought was really good. The same way right now you’re experiencing, you’re in your house, you’re with your family, it’s stressful because you’re working from home and everything and the macro side, it’s sort of up in the air a little bit right now, but you can kind of relax at your house and sort of let your guard down. And then you get ready to go to Trader Joe’s or Whole Foods or wherever may be to grab your groceries once a week or whatever it may be and you kind of like mount up a little bit. You put the suit on and put the mask and the gloves and you kind of tune in and you’d go to the store and you’re aware of all this stuff. And you get home and scrub it all down and whatever, wash your hands and then you can kind of relax again and let your guard down. People need to remember that, when you go to your office, then it’s not your house. You can’t let your guard down the same way you can around when you go home. So, it’s not just about getting on BART and getting up the elevator. And once you’re in the space, you’re now safe because now you’re in a space with 30 or 50 other people that all, unless people are really treated the same way we treat how we experience each other at Trader Joe’s, it’s not going to work. And so that’s not going to be easy and that’s going to cause, I think, this to be hard for folks and emotionally sort of draining and so being thoughtful, like how long should we expect people to come back to the office? Do we start with half days? Come back for four hours. Let’s like phase into this, a little bit, experience that, kind of start to get used to it, understand the routines, kind of reduce the temperature in the room in terms of stress around this topic, because it’s new for all of us and it’s going to be scary because the stakes are high.
Scott: I totally love that idea of baby steps, getting people back in for four hours. That’s so smart.
David: Yeah.
Scott: The other thing I was going to say was I had been thinking of reentry like the downside, like if things went really wrong about maybe litigation or something like that, but the other thing that occurred to me on Wednesday when I was talking to my group was say you have most of your team in one office room. If COVID whips through your office, your business kind of isn’t functional for-
David: Right.
Scott: This is best case scenario, like people get better in two or three weeks, but you might have some really tragic things happen. But I feel like there needs to be some emergency planning or contingency planning, or even just risk mitigation with how often you let people come in. I don’t want to scare people or be too paranoid myself, but that prospect of your company just not being functional for a while is scary in itself.
David: I agree. Which is why I think, I’ll sort of touch on the first part of your comment around sort of the exposure and litigation aspects. I think you’re right. Obviously, we are an unchartered territory in terms of what does this mean from a liability perspective for me as an employer and as a person who’s responsible for ensuring the safety and the production of my employees? One of my core commitments to them, I don’t want to let them down. And yes, there’s a risk of me getting sued, which is obviously bad, but more importantly, I don’t want them to get sick and I don’t want them to get their family sick. That’s what I care about most. And so, all the more reason to take this stuff seriously, come up with a plan, do the task force, write your narrative, just slowly phase people back. Start with a small batch of your population, 10% of the people come back. Start with that. Let’s test it. Let’s learn from that. We’ll screw something up, undoubtedly, at the beginning. Have conversations with your landlord. Are we updating our filters on the air filtration, circulation perspective? What are we doing to get people up and down the elevator? Make sure we’re coordinated if we’re in a multi-tenant building on how this is going to work and everyone’s educated and then communicate that. I think, again, the more we can be telling people what we’re doing, aware of what’s going to change, set expectations accordingly, I think that really makes this infinitely smoother. And then even companies, I mean, we’re seeing this now. I mean, they’re going to say, “Listen, we don’t know what’s going to happen. We’re not going to force you to come back to the office.” For those that really do or have circumstances that they kind of need to come back also a mutual waiver, “Hey, sign this waiver to say we’re doing the best we can, but I can’t promise that this office will be perfectly safe based on what we don’t know today.” Are you okay opting into that as the employee and the employer? And again, I’m not a lawyer, so I don’t want to profess that that will protect you from future litigation, but at least it’s like, “I’m recognizing that I’m flawed. I’m not perfect as your employer. I’m doing the best I can. But if we do unfortunately have an outbreak, just know that here’s all the stuff we communicated what we’re doing and we did our best. So please don’t sue me.” I mean, so I think all of these things are kind of common sense at some level, but I think a lot of people are fearful to take action or be proactive about this because they really want to make sure they’ve got it fully baked out and sort of the perfect answer. And I think that’s a mistake. I think you need to get ahead of this and communications earlier than later.
Scott: I totally agree. And that waiver, and maybe it’s not even a waiver, maybe it’s just written notification, just letting people know all the good things you’ve done because you’re trying your hardest to keep people healthy. I think that’s a really great point you make. So, we got to wrap up in a second, but on your last podcast with me, you talked about how T3 and your team is doing these big, awesome reports on other markets besides the Bay area or New York or places that people work remotely or build a team remotely if you’re one of those cities. So, I was thinking about that today when I was prepping for the interview because I’m like, “Oh my God, David was like two years ahead of the world here.” So maybe you can talk about that initiative and how that’s working and has it really caught on fire now? People must really want that research.
David: Yeah. I mean short answer is yeah. This has only accelerated what was already a trend for all the right reasons. I think that you’re continuing to find people challenged by living in the incredibly high cost mega markets of New York and San Francisco and otherwise. And I think that what you’re finding is there are unbelievably talented people all throughout this country. They believe and want to participate in this, the Internet’s technology software movement that is the future of our economy. And they’re trying to be found and identified and brought into sort of the fold. And so, I think that trend has only been accelerated by this, with now people, I think, using this as a moment in time to, if I was going to make a change or move or kind of uproot my family, a lot of that’s going to happen over the next 12 months. I think companies with the sort of complete reevaluation of real estate on a go forward basis was now able to think about hiring people, opening offices in other markets that we may have been a little hesitant to do initially. And just like the proliferation of work from home, remote work is now being not just a nice to have or an optional, but in my opinion, mandatory, if you’re going to try and continue to maintain top talent at your company, you have to do this. It’s now no longer a choice. It’s now going to be a minimum requirement to hire the best of the best. You’re going to have to offer this at some level and offer in a way that’s compelling. Otherwise some other employer will, and you will not hold onto your best people. So, I think-
Scott: [inaudible] those research projects you were doing was like, say your interests. I’m just going to make this up, but say, someone needs to build a sales office somewhere, and I’m making this up, but it turns out Phoenix is the best place on earth for a sales team. Or maybe it’s a development team and it turns out that Salt Lake is the best. I just thought that kind of level of granularity where you guys could give scouting reports on cities and states was just so powerful. And to me, it’s like, “Oh my gosh,” because now you’re right. Those demographics, those people are still in those locations. Now they’ve worked from home or they have a satellite office, a smaller satellite office and it feels like kind of the mentality has been de-risked, like if you’re running a bigger company, you’re going to be more comfortable doing that and running that experiment than you would’ve pre-COVID, I would think.
David: Absolutely. And the costs are real. I mean, people sometimes get fixated on like, “Oh, is the price of commercial real estate cheaper in Salt Lake City than it is San Francisco?” Well, yes. Number one, it is absolutely. But more importantly, the price of labor is less expensive. And so, when you think about this, it needs to be led with talent and the talent is what drives both the productivity and the gains in your business, which is the top line focus that you want to have. And then in addition to that, you’re going to find talent is going to be a, more loyal and b, costs significantly less. And we’re seeing some of these cities when you compare it to the Bay area in particular, you can have all in sort of discounts up to 40 or 50% still within the domestic United States and parts of Canada. And I mean, if you can chop that literally down by 30 or 40 or 50%, that buys you another 12 to 18 months of venture runway. I mean, if you can take that money and sort of amortize out. So, there are huge, huge advantages to those companies that get ahead of this and push hard now. And we’re helping be really data driven around the selection of that, because historically it’s been sort of an emotional, like “I like to ski, so we’ll go to Salt Lake.” Or “I got a buddy who was in Denver, so we’ll just open a Denver office.” And not to say that can’t still lead to good outcomes, but you may be leaving another 25% on the table of cost savings for an equal or better talent pool, if you were willing to consider St. Louis, Missouri, or Houston, or the other kind of city that may not initially hit your radar? So, we’re finding that to be a really productive process to run people through.
Scott: You used the word deliberate early in the podcast when making your kind of the narrative and the checklist and the decisions on reentry. The same decision on what cities to relocate our team is deliberate is what I kind hear you, instead of doing the “Hey, I like to ski. I’m going to Salt Lake.” That’s really the takeaway.
David: Yeah.
Scott: Well, hey, man, this has been fantastic. You have so much good information and so much good advice. Really appreciate it. David Bergeron, T3. Maybe you can tell everyone where they can reach out to you or your webpage.
David: Yep. Yep. So, you can just find us t3advisors.com. We have a bunch of resources, actually COVID-19 resources, on there. So, if you need other stuff around reentry checklists or discussions with your landlords around rent deferment or all sorts of tools that we’re continuing to update daily there. Please check that out. You can reach out to me at just bergeron@t3advisors. So, shoot me an email and I’m instantly find them all on all of the social web locations around, Twitter, LinkedIn, Facebook, et cetera. So, but Scott, this has been amazing to connect with you again. It’s good to see you and see that you’re happy and healthy and the family’s good. And as always, I appreciate the conversation and thanks for the time.
Scott: Thanks, man. I appreciate it. Three-time, three-time appearance. This does not happen, very rarely.
David: That’s right.
Scott: David, what a great guest you are. So, thanks.
David: I appreciate it.
Scott: Well, take care, man.
David: Will do. Goodbye.
Singer: (singing) It’s Kruze Consulting Founders and Friends with your host Scotty Orn.

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