*This interview has been edited for clarity and time. *
Dr. Matt Motil had an awesome interview with Preston Pesek CEO and Co-Founder of Spacious. You might be wondering who Preston is and what Spacious is. The company is newer, but they are making waves. As said best by Spacious, “The inspiration for Spacious is rooted in Preston’s fascination and love of cities. Cities are examples of human cooperation, helping their inhabitants cultivate their very best
Can you give us the elevator pitch for your business?
Preston: Yea, so I am the Co-Founder and CEO of Spacious. We basically are delivering to the world in prime, urban destinations drop-in workspaces at a street and walk-in retail level. It means you can come in and get to work anywhere. We deliver this product a couple of different ways. We use restaurants that don’t otherwise open until 5pm and we use vacant retail spaces for a pop-up workplace. When you walk into Spacious, you get fast WiFi, a friendly host, and you can take any open seat. So we repositioned the idea of mobile work and turned it into a hospitality operation. It’s not an office mentality, but a drop-in retail mentality.
You are the first person I know that has an advanced degree in real estate. What are you studying with that?
Preston: You would study real estate law, which is very specific. You know, the history of property law is very diverse and is one of the oldest industries in the world–making use of the earth, but how it’s evolved over time in terms of the contract and how we trade and own property. You learn about the capital markets, so whenever you get a mortgage on your property–what happens after that and how it filters through the bond market. Also, the development process and what it takes to assemble all the pieces of contractors, land acquisition, financing, construction management, etc. All of that information comes together. You also learn how to do real estate appraisal–how to value things and the different market models. As a real estate investor, if you’re managing an investment fund, you learn how to target it for real estate and how you should design the fund and what kind of things you should put in the fund. There are only a few schools that offer Masters in real estate, NYU was fantastic. They have a great program there.
I didn’t know there was formal education for the real estate space. It’s really, really cool. I think of people who have aspirations to be a real estate syndicator or they want to control some real estate funds. Many people are floundering in that space, but it seems that there is a very anti-college attitude for real estate investing entrepreneurs.
Preston: I can understand that. It was really specific for me [to go to college]. I had an English degree undergrad, but as I worked with an architect, I realized the people who were actually calling the shots were the real estate developers and funds. I decided to get a Masters in real estate so I could be the one calling the shots. Real estate lends itself towards entrepreneurship. At every given scale, you can be uneducated and still make a ton of money with real estate. Depending on what scale you want to enter into wealth and real estate, it depends on what kind of education you need. I was looking at an entire city as a place to study, so I got the education necessary for that.
I think the typical real estate investor that I meet is from the school of hard knocks. Sometimes the school of hard knocks can cost you more money than getting formal education because you don’t know what you don’t know.
Preston: You’re totally right. It’s about how expensive is your learning curve. If you are doing 10s of millions of dollars in deals and you get a hard knock there, it’s a really hard knock. That does some damage. Whatever the nugget that you shelled out for your education, it might be worth it.
You have to do what makes sense for your goals. Sometimes a mentor might be the way to go over formal education.
Preston: Right. In real estate investing you either control the property or the financing. In my business, there are more things out there that need to happen, but I don’t need to know how to do them. I think it’s important as an entrepreneur to be able to hire the people who can take care of the other parts of the business. I have an engineer who knows how to write code and I don’t need to know how to do that. Part of entrepreneurship is not only leveraging your own skills, but leveraging the skills of other people. If you can set up compensation structures and build a team to get those people to work for you, you multiply your efforts and you’re able to be in the CEO seat in its highest and best use. It’s when you can use financial and human capital to get the larger vision accomplished.
You basically just described how to empirically grow and scale a business at the most finite level. It’s great because it doesn’t matter what business is being scaled and grown, the systems are all the same.
Preston: Yea, it’s great. Its the entrepreneurial mindset of “this is how the world should change”. What are the components around you that you can leverage to achieve that change? One of your questions in your questionnaire was “Who do I admire?”. I was thinking that the people I admire most–the people that I came up with were Frida Kahlo and David Bowie. What I think I like most about those people, in particular, is that they had such a unique vision for their version of being. They were able to compile and assemble all the media around them to give that vision to the world. That’s a philosophical approach, but entrepreneurship is no different. You have to figure out how to fix something you see in the world and give it to the world. It works for any industry. It’s the build or buy this mindset. You can either do it yourself or buy someone who can do it for you.
I think you develop what you’re passionate about. You can identify what makes you unique and how you can leverage it. It will help you figure out what kind of people you should hire so you can concentrate on what you are good at. When I was building my team in the beginning, I wasn’t sure what kind of person I needed or wanted and then I was hiring the wrong kind of people. That was on me though. It’s a journey in self-awareness and you also learn quickly that you are responsible for the people you hire.
Preston: Talent acquisition and the privilege to have people work for you is a combination of knowing what you need and articulating it and then hiring the person who has a passion for that role. Our Chief Operating Officer has a passion for hospitality. She loves the idea of creating an atmosphere that is inviting to people. That’s the entrepreneur’s job. You have to find the person who has a passion for the role. You should ask someone in a job interview what their passions are and what they want to see happen in their role. You should find someone who naturally aligns with the business role.
I found that when I interviewed someone and I felt kind of intimidated about how much they knew about the position and the job responsibilities that I felt almost an imposter syndrome and didn’t want to hire them because I wasn’t sure how I could manage them. I quickly realized that I was making a big mistake and those were the people I should always be hiring. I need my team to be people who I don’t know what they do, but they do an amazing job of it.
Preston: Yes! I feel like if I am the smartest person in the room, I need to get out of there! I want to surround myself with people who are way smarter about their roles than I am.
So, let’s talk about Spacious. The concept is that you are using commercial space that is being underutilized during the day. You work with the landlord or operator of the space, you work out some sort of fee with them, and then… what? Is it a software thing? A membership? How does that work?
Preston: We originally started out as a membership only system, but then we recently started a drop-in feature. We wanted to be accessible to traveling business people. It opens up whole new markets for us. The idea is that you can check out the app or go to the website. You will see a map of dots that show where you can stop in that day. We have a philosophy around product design, if you have to concentrate on the app and what you’re doing, we have failed. We have different seating options for everyone and a nice ambiance in each space. It’s meant to be productive. We have two different seating options, one is with a restaurant tenant who doesn’t open before 5pm. The restaurants are beautiful. The other option we have is a completely vacant storefront. We enter into a licensed agreement with the landlord of the space that is like an evergreen pop-up situation. Its a permanent place until the space needs to be used for a permanent resident. We are basically offering a high option value to the vacant storefront, so that they can give us a little heads up before we can’t rent the space anymore and that allows us to rent the space for a low value relative to market rents.
We negotiate our contracts within the confines of the options. We make it very easy for a landlord to say yes because we are essentially giving them free money during their free option period. They can do whatever to their asset whenever. On the demand side of our company’s operation, we are also giving the customer the option to drop-in to any place. Our pricing and business model is to give the customer access to every location in the city at all times.
It sounds like an awesome concept. I’m sure people call you the Uber of communal workspaces or something. I remember when Uber started and how it was only available in certain cities. Once I tried it, I was pumped. I was so excited when it came to Cleveland. It looks like Spacious could do the same thing. It could start spreading to more cities and your subscription service will blow up because you can work in any city at any time. I’m assuming you are looking at a 10-year plan like that.
Preston: That is how it works and how we would like to continue. Any space has predictable touchpoints so you know it’s Spacious but without being an aesthetic brand that is super clear. We aren’t Starbucks. We have diversity in the different spaces and it speaks to the generation who doesn’t care for cookie-cutter franchises. We actually control the WiFi so our members don’t have to put in a new password at every location. We want the user experience to be seamless and easy.
What daily practices do you find useful?
Preston: A daily mindfulness is a great practice. Whether it’s yoga or walking or meditating. It’s great to take a moment for yourself every morning or after work. You have to make sure to carve out the time for your headspace.
I think that’s great advice. The biggest business names out there are telling people to take moments and how they guard their personal time from being taken from them.
If you love the returns of real estate investing, but don’t want to deal with any people, you have the option to be the bank. You can be part of a trust or a fund. Right now, I have a fund set up for accredited investors with over $5 million in assets. The fund has preferred interest and 70% profit sharing. Visit me at investwithdrmatt.com to find out if you have the opportunity to invest with us.
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