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5 October 2017 | By Chris Torney Interview

RocketSpace: rubbing noses with unicorns

How a former lean start-up is helping large companies overcome the fear of disruption 

The approach Duncan Logan took when setting up his business RocketSpace in San Francisco six years ago came straight from the Silicon Valley playbook. The Scottish-born entrepreneur identified a gap in the market, tested his idea at almost zero cost, and then got his company up and running by cutting clever deals with suppliers.

But RocketSpace is no technology firm – in fact, it is a “real world” business providing office space, as well as other less tangible benefits, to fast-growing companies.

With 18 unicorns [companies worth $1bn or more] coming through just one RocketSpace building in six years, Logan has a unique perspective on what these companies need – but his own success came from anticipating industry disruption.

In 2011 software engineer and entrepreneur Marc Andreessen predicted that software companies would stop selling software to industrial companies and instead take their software straight to market.

“For me, this was when the penny dropped,” said Logan. “I understood that the world was about to change, because every industry was going to see disruption from new, digitally focused companies rather than traditional industrial businesses. It was obvious there was going to be a huge explosion of new companies.”

Logan conceived RocketSpace as a place where these technology businesses could be based, collaborate and bounce ideas off each other.

Lean beginnings

Further inspiration came from a book by Silicon Valley entrepreneur Eric Ries called The Lean Startup, which looks at how new businesses can be created with a minimum of resources.

“I was trying to work out how I could test my idea before I actually launched the company,” Logan says. “So I set up a fake advert, ran it in Craigslist, and the responses started coming in thick and fast. It was all down to this lean start-up philosophy which says don’t build anything until you know there is demand.”

He then persuaded a San Francisco landlord to provide office space in return for a share of the firm’s revenues, while the furniture company Steelcase offered Logan favourable credit terms as long as his clients acted as guinea pigs for its new ranges of chairs and desks.

“I used no capital up front: I had $20,000 to my name, and I managed to work it out so that the startups would pay me in advance and I’d pay my rent in arrears so I’d have a 45-day float. And that’s how I built the business.”

The importance of environment

RocketSpace now has locations in the UK, Australia, Canada and China, and describes itself as a “co-working accelerator” as well as a “global ecosystem of people and ideas”. Both labels hint at the reasons for its success.

“Who you hang out with is enormously instrumental to the success of your business,” says Logan.

“The conversations you have around the water-cooler, the events you attend, or the way other people operate and make connections: all these factors can inspire you to go for something far bigger.”

Who you hang out with is enormously instrumental to the success of your business

Logan argues the number of unicorns seen through the original RocketSpace location is testament to this – although he adds RocketSpace “got lucky” in that its earliest clients included the likes of Uber, Spotify and online shoe and clothing company Zappos.

“Firms like that set this tone and mentality of how to operate, and that rubbed off on [virtual reality hardware firm] LeapMotion, [entertainment companies] Kabam and SuperCell and all these other unicorns.”

Cherry-picking the best businesses

RocketSpace is now trying to emulate this success in the UK: earlier this year, the company set up a base in London, which is being run by Priya Guha, the former British Consul-General in San Francisco.

“I think the UK has an amazing tech scene,” Logan adds. “And I wouldn’t say it lacks ambition, but it needs to have more confidence in itself. There are fantastic entrepreneurs in the UK who have a tonne of ambition but they need that confidence to understand that building a $1bn company these days is not really a unicorn – it is far more common that we think.”

Given the importance of its working environment, it is no surprise that RocketSpace enforces strict entry requirements. “We focus on the top 5 per cent of funded technology startups,” Logan says. “We turn most people away because they don’t meet our criteria.”

Every major corporation in the world should have a degree of fear about what is out there that could disrupt us

The first stage of the selection process involves looking at who has invested in a company: “The quality of the investors is going to be a good indication; then we look at the quality of the founders and the company itself.”

But an increasingly significant – and initially unexpected – part of RocketSpace’s operations involves giving many of the world’s largest companies access to its insight and network of innovative start-ups.

“Every major corporation in the world should have a degree of fear about what is out there that could disrupt us, or what innovation is out there that we should be taking advantage of,” says Logan. “RocketSpace is the cure for this disruption anxiety.”

Disruption 2.0

The firm’s corporate services range from consultancy on potential threats in particular sectors, to setting up working groups of large firms to analyse technological developments in specific areas. In many cases, established companies will collaborate with start-ups based in RocketSpace’s campuses.

“It’s a hugely symbiotic relationship for a corporate that has scale and resources to invest in, partner with or acquire a startup which has raw innovation that they can deploy.”

People won't be able to see out their careers in the industry they trained in

Logan is appearing at this year’s CBI Annual Conference on a panel discussion on the topic of automation – an issue he believes could be as disruptive to the world of work as the digital revolution has been to traditional industries.

“If you’re a lawyer or an accountant and you are doing stuff straight down the middle – run-of-the-mill audits or contracts, say – those jobs are going to go,” he predicts. “Artificial intelligence can do so much of the day-to-day work, I think we are going to see a big shift in the way people work.

“The challenge we are going to have is that the cadence of change is getting faster and faster. People won’t be able to see out their careers in the industry they trained in, they are going to have to seek out second or third careers – and that isn’t something that is natural for us to think about.

“But I am optimistic: I don’t think people are going to sit around being unemployed. Society has a fantastic ability to utilise human resources in new ways.”

Duncan Logan is speaking as part of this year's CBI Annual Conference: A World of Opportunities on 6 November.

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