uBeam Office Space Woes?

A few weeks ago I wrote about possible impending office space issues for uBeam, and from the CEO's recent Facebook posts it seems that they may still be having them. Yesterday this appeared on the feed.

For those of you unfamiliar with the term, HAZMAT is HAZardous MATerials and basically means things that can harm people, so corrosive, poisonous, radioactive, flammable, explosive, etc. For example, if you're manufacturing physical items you may need chemicals to etch or clean components that you can't just flush into the sewer, and so you need to both store the chemical safely and dispose of it in a safe manner. The semiconductor industry, for example, uses all sorts of etching chemicals you don't want getting near you, and when it first started often incorrectly disposed of them (basically, pouring them out the back of the facility) and created very toxic areas, some of what are now called Superfund sites - areas that are so contaminated they need special consideration to clean up. 

There's a reason there are strict controls on what gets stored and and how it's disposed of, and cities have strong incentive to make sure they stay clean - and Santa Monica is pretty strict, the city do not want their pretty beaches turned toxic. Landlords are also usually careful about what gets into their buildings - no-one wants a spill that messes with other tenants, or precludes future tenants from moving in. You don't see many manufacturing facilities in city centers, as no-one wants to mix retail and restaurants with carcinogen storage.

There's sometimes no reason that many of these materials can't be stored safely, it just the buildings aren't setup to handle them, and neighbors just don't want it near them. It seems uBeam have not yet moved production away to some large scale factory, and need to be using hazardous material in their research. How much research? Well, 12,000 sqft is a lot - that's nearly 1/3 of an acre - and most estimates put space needs at 150 sqft per person. How many people does uBeam have, is it the 80 people that would indicate?

No it's way short. So assume they need 4,500 sqft for the staff, that's 7,500 sqft for the labs. That's an enormous amount of space. Do they need a wind tunnel or something? The listing for the building they are currently in states the space at 4,500sqft so what are they adding they need so much more? They used to have a San Jose facility at around 8,500 sqft but that was shuttered earlier this year.

So are they adding huge production lines? Doesn't make sense in a city area if you're moving to production. In that case you move to an industrial park and a much lower cost area, or offshore it. It's not something you do in Santa Monica.

Are they adding huge numbers of staff? If so, fair enough, but that implies a new large funding round, in which case they could afford some good locations - but the CEO is asking for 12,000 sqft at $40k/month, so $3.33 sqft/mnth. You're lucky to get anything decent in the SM area for less than $5/sqft per month. (Note that places like LA and SF list per month, lots of areas go per year, be careful in that metric.) Generally, if you've a lot of staff, office space starts to pale in cost - imagine you've 50 well paid engineers, that's several million a year right there. House them in a nice large building (let's say twice this cost) and it's still less than a million a year. That's not cheap, but labor costs are the largest slice of the budget pie - at least pre-production.

Interestingly the CEO's father piped in and seems to have trouble with basic maths of monthly leases. He's only an order of magnitude off. I wonder if he's doing the safety calculations? (Joking aside, see how easy it is to make the month/year mixup in rental costs?)

Other entrepreneurs are there to help though:

Which is bizarre as surely a well funded company like uBeam, on the verge of an enormous Series B and going to be worth billions, wouldn't be looking to share space with another startup? Also interesting is that they need it now. That's understandable - if you have equipment and labs you don't plan that move in a day, it takes weeks to do a good job of moving everything, and they need to be out January 1st. (How much is a few thousand square feet of storage in Santa Monica? Twenty or so 10' by 10' lockups should do it.)

So what do we see here? They are indeed moving out of their old place, as I blogged in September, but don't yet have anywhere new. They aren't looking to setup manufacturing facilities, and are apparently not adding staff (job ads also don't indicate that), but 'need' a monster 12,000 sqft (I honestly have no idea what on earth they need that much for). It also needs to be cheap, and $3.33 indicates they are either being exceptionally careful (that trait uBeam are well-known for), or simply can't afford more. Landlords also check prior to multi-year leases the credit worthiness of their prospective tenants - if they don't have clear revenues or money in the bank, they'll pass, as who wants a deadbeat tenant?

Now the company could be just signing the paperwork for their next funding round and waiting on the money coming in (I have said that despite my opinion, there's a ton of dumb money out there looking for a home, I think there's a >50% chance of another round for them), but this is a weird situation. If a round were completed we'd have heard of it, and they could afford something better. That they are failing for HAZMAT repeatedly and at the last moment has me wondering - are they really failing for HAZMAT, which can be determined in the first few minutes of an application? Are they failing for credit reasons, and the landlord just doesn't want to say that to the company for fear of offending their local VC investor who has many companies looking for space, or is this simply the public excuse given? Or are they really forgetting to tell the landlord about the HAZMAT until the last minute?

Who knows? None of this makes complete sense, it could be any of the above, or something ridiculous I just can't fathom. We don't have all the info, but it's just another interesting day in the history of uBeam. We'll see what the next chapter of that is soon enough.