The Flexible Office Economy - Ep. 2: Kyle Coolbroth, CEO Fueled Collective

"And so the insight became there is a need beyond working in the space. And it really got to our core belief in and our core principle, which is belonging. It's good to belong, right? And so people, even though they left their physical working space, they still wanted to belong to this community."

In this episode:

• The hero's journey of Kyle Coolbroth, Coworking OG
• How principles of The Experience Economy are shaping the evolution of Coworking
• How Coworking is driving higher asset yields for owners and developers
• The human need to belong
• The social dimension of work and workplace

People and companies mentioned

Fueled Collective, LiquidSpace, Coco, Joseph Pine, James Gilmore, Starbucks, Soho House, The Battery, Wingtip, Neuehouse, Tishman Speyer, Boston Properties, British Land

Listen to the full interview here:

Read the full interview here:

Mark Gilbreath:           00:10               This is the Flexible Office Economy and I'm Mark Gilbreath. This week we're talking about real estate experience and in particular a new platform that is putting a twist in what the industry has come to know as Coworking. My guest today is Kyle Coolbroth, the CEO and founder of Fueled Collective. Fueled Collective defines itself as a "Real Estate Experience Platform" and is combining some things we're very familiar with in the flexible office economy, namely shared workspace and is adding elements that are perhaps less typical, for example, social club by night. Kyle founded Fueled Collective in 2018. Welcome Kyle and thank you for joining us today on the Flexible Office Economy.

Kyle Coolbroth:           00:49               Thanks Mark, Glad to be here.

Mark Gilbreath:           00:52               So Kyle, let me jump right in. In 2010 before there was a Fueled Collective, you and your partner Don Ball founded Coco, an extremely successful Coworking operation with locations in Minneapolis and St Paul, Minnesota. I think that makes you an ‘Original Gangster’ in the Coworking industry! Reflecting on that moment 10 years ago and the years since, what do you wish you had known when you started Coco that you perhaps do know today via the wisdom that you've learned?

Kyle Coolbroth:           01:20               Yeah, I definitely feel like I've put the dog years on since that date, and I do feel like an OG or a grandfather in the industry for sure. It's been an amazing amount of time, Mark as you know, just how much has changed in the industry. When we started, I don't think it was an industry, you know, "Coworking" as a name. We were still arguing whether there's a hyphen in it (Editors note: this is settled history: there’s no f@#$ing hyphen in Coworking) and what did it actually mean? What was it as a product or a service offering? So it's just changed so much. I if I look back, I guess I wish I would have - you always wonder where things are going, where the trajectory is going - I wish I would have had a better handle at the rate at which scale was going to happen. I always knew it was going to scale. I always believed as an industry this was transformative for individuals and enterprises alike. I just didn't at the time realize how quickly that ramp would go. So that's, that's the hindsight.

Mark Gilbreath:           02:35               So just to put a fine point on that, you feel like the scale happened faster than you would have imagined in 2010

Kyle Coolbroth:           02:42               Yes. When you start to think about individual companies that scale, like we just could never have imagined - I saw it more like the boutique individual coffee shop, local coffee shop phenomena that was scaling out. If you remember that point in our economy. And then along comes a Starbucks, right? I think the same thing has happened, but I don't think any of us standing back in 2009-2010 could have expected that.

Mark Gilbreath:           03:12               Do You think the Flexible Office Economy or the Coworking wing of that economy will shake out in anything close to or similar to the way that the coffee shop industry has? Starbucks has 50,000 locations and the next biggest chain is probably not even a 10th of that, and then there's a long, long tail of independent operators. Is that an analog for what you think we're going to see?

Kyle Coolbroth:           03:36               I think it could be. I think that's undetermined. The industry of Coworking and the shared flexible office is so much broader than coffee. That was a very finite thing where what we're working on is broad across many different spectrums of how we work, how we live and how we socialize. So I think there's an analogy there, but it's not 100%. You'd be mistaken to try to mimic that with a business model going forward.

Mark Gilbreath:           04:11               So "Fueled Collective", you describe yourselves as a "Real Estate Experience Platform". That's unique. Maybe you can begin by explaining what does that mean? What is an "Experience Platform and how is this different from the things that have come before it?

Kyle Coolbroth:           04:27               Yeah, absolutely. We started as an independent operator. We were probably a large regional, if you think of it from that perspective. And as we decided to grow, we chose a licensing and franchise model. So when we think about a Real Estate Experience Platform, our customer base now is two-front. We have our members which are awesome and have always been part of the human part of the business that we're building. But now we're also on the developer side and working with franchisees and investors to create an offering. So we kind of have two customer bases. When I think of the Real Estate Experience Platform, that speaks largely to the developer or the property owner, those investors and franchisees. And what we mean by that is we are bringing a set of activities that can occur within a building, that start to activate the building, morning, day, night and weekend. And it is about the experience. I'm a huge follower of Pine and Gilmore who wrote The Experience Economy, an older book, but we're seeing it come to fruition - as commodities become services, become products, become experiences. That's where we're at. And so an "experience" implies that the business itself is going to be able to guarantee a higher margin on it's delivered services because they're more than the commoditized services. So that's what we're building. And so, you might ask, "well, how are we doing that?". But that's basically what we're doing. So when we talk about that experience platform, it's just gotten multiple components that we're creating to build more margin for the businesses involved.

Mark Gilbreath:           06:40               So lingering on that franchisee or developer constituent for a moment, I think I inferred from some of what you just shared that your model perhaps aims to have the potential to drive a better yield on an asset. Is that a fair statement? And was that the intention - was that the cornerstone of the business: "we need to find a way to drive a higher yield on an asset, ergo - Fueled Collective" was spawned?

Kyle Coolbroth:           07:13               Yeah, I think the intersection of things that came together... the first insight we had that really led us to the model was that as we grew and became more successful and we saw our members grow and become more successful, what often happened is a team would come in, they would grow and then they would leave and they would go get their own space. And they would go to a building because they needed that, right? They needed their own identity, they needed their own space. But almost the immediate follow up question was "how can I still belong to the community?". And we were in a place where the only thing I could sell you was a place to work during the daytime. And so the insight became there is a need beyond working in the space. And it really got to our core belief in and our core principle, which is belonging. It's good to belong, right? And so people, even though they left their physical working space, they still wanted to belong to this community. That gave us the insight that there's a social dimension to what we're offering, beyond work. Pretty obvious to those of us in the Coworking world, but when you flip the lens and you are no longer part of that community, you feel like you left. Like, "we broke up". And our thinking was, "you don't have to break up anymore". That insight then led to, "if I'm a property owner, do I want to continue just leasing a space to an individual Coworking operator? Or do I want to go with a super-national, or do I want to get into the business myself? And that's our platform comes in place. We're in essence enabling investors and property owners to use our platform and a phenomenal brand and experience and let them participate in that.

Mark Gilbreath:           09:09               Part of the experience that you offer the member is a sort of "social club by night" aspect? How much a part of "still belonging", still being a member of the community, does that traditional after-work-hours aspect of how you might work in the space come into play? Is that the center point of when and where they stay involved or still belong?

Kyle Coolbroth:           09:39               Yeah, for some it certainly is that is. That's their touch point, their anchor. But not for everybody. I think the other part of it is, as we think about work in the future, if you look at millennials, we've all talked about that to death, but do you look at Gen Z what they're really looking for, you look down the curve a little bit more, "we work more when we socialize and we socialize more while we work. So the blur is that intersection of where all that comes together. The other part of it is that it's just hard to professionally socialize. So thinking about your day, go try to have a professional conversation at a bar after hours with a prospective hire or client. You certainly can do it and it's what we have to do, but it's not great, the coffee shop or restaurant. So all those things are what makes sense. Social Club, the binding. Right? And if you're working, you know, you just extend your day and maybe that's part of where you do your meetings or your networking.

Mark Gilbreath:           10:57               So Coco Coworking (the predecessor to Fueled Collective) certainly had a vibrant community in the pure work context. I was privileged to be able to be a part of it from time to time when in Minneapolis and so I was able to see it firsthand. So certainly you well understood that and I can see how that led you to that first insight of "how can I still belong". To what extent while it was still Coco, had you experimented with that after hours social club programming and operational aspect? That does read like something very new and perhaps complicating with Fuel Collective? Were the learnings of that done and dusted in the Coco days or is that something that you had to delve into anew with the launch of Fueled Collective?

Kyle Coolbroth:           11:45               Yeah, I mean some of the origins and the thoughts certainly were there. We tried a social club membership that we called a "fan" membership. But the problem was we offered it absent a cocktail bar or any other programming. It was a way for people to stay connected and we allowed you to come to events. So we didn't really have value for it. So we just failed miserably with that idea. But again, it was those insights, it was kind of those achings that we had felt and, you know, previous members and then members who were in enterprises who still had an office to go do, but they didn't, they were still looking to belong. So some of it came (from Coco), but we had to really fundamentally reimagine it. And that's where we landed. And that all started when we started our partnership. We had a group out of New York who is part of the partnership, the original Fueled Collective. And that led us to start to look at clubs, and start to look at what was happening on the coasts. There were some good examples. You've got the Battery, you got Wingtip out on the west coast, Soho House, a Neuehouse. We looked at all of those. The gap that we saw is at many of these you needed to be selected by the club. And I think our human centered approach that we learned from Coco was "no, no, no - I want to build a club for everyone where it feels inclusive for everybody who is interested in participating and curious and part of that economy".

Mark Gilbreath:           13:34               Is there a consumer that actually wants something more elitist than that? I know I want to be a part of the club that lets everybody in. My skin curdles a bit at the "gated community". What have you observed thus far? Who wants to belong in this feel-good, arms-open club that you've created?

Kyle Coolbroth:           14:06               Yeah, it's extraordinarily diverse. I would say. Here's what I've noticed. And this is a topic you see discussed often. I'm seeing more women show up. It's a more social environment that seems to attract more women entrepreneurs, and, really some incredible gatherings and conversations. I just think it just brings more diversity. I think the clubs - there's a negative connotation about a club that I think many of us have and certainly, from Mark, your and my generation and down, that a club feels like something that might be older and I don't belong. And certainly male dominated. I think that we're observing there's a huge hunger beyond that and a when positioned properly and designed properly, we're seeing great diversity and I love that. Is there a marketplace for the exclusive? Sure. There always will be the marketplace for the exclusive

Mark Gilbreath:           15:17               From an operational standpoint, it would seem to me at some simple level that if I can create, with a layer like social club by night, the opportunity to utilize more of the asset in a portion of the day where it's perhaps typically been sitting idle, that that could be a real powerful economic lever.

Kyle Coolbroth:           15:40               Yeah.

Mark Gilbreath:           15:41               On balance, I could also imagine that the operational complexities of social club by night are unique and different from a staffing and a quality of experience and a customer retention standpoint, than the known day-officing thing. So on both those points - utilizing more of the asset and getting positive margins out of that evening and dealing with the unknowns of operating yet another whole business within the business, what have you encountered?

Kyle Coolbroth:           16:10               Yeah, both. From a Coworking standpoint, you've got one thing to offer to really develop as a business and that is a membership working in this space. As we've expanded into basically putting a hospitality layer on top of it, we now are doing events. And I think of events like life moments that we have as, as people and humans. They're business events that we have as businesses and entities. And so we've added that on top of the coworking, the working need, and then the social club is there. It is like a cake and the more, ingredients you put in a cake, the more complexity there is to make it. So we certainly have seen the complexities. Certainly for our customers and our members, our members benefited greatly because there's just a ton going on. Our Cincinnati location is fully operational. We're running about 80 events there in a month. So if you can just imagine a space where you've got that much activity happening nights and weekends and it all flows through the social house and the cocktail bar and then people were working during the daytime. It's a vibrant place you want to be, so that's super cool. And then from, from our other customers standpoint, the investor and the Franchisee, it's, it's activating a building in ways and creating yield, like you said, beyond normal.

Mark Gilbreath:           18:11               These spaces that you're creating under the banner of Fueled Collective, they're beautiful. There, there seems to be a very substantial emphasis on design. Who are some of the brands that you're drawing inspiration from today, either within the Flexible Office Economy or more broadly that I have in some way "fueled", no pun intended, what has manifested in your new business?

Kyle Coolbroth:           18:44               Yeah, it's a great question. So I'm a history buff, so we look to history actually. And what really drove it was the origins of the British social club. So once you have that theme and you start to think about an experience, you want this experience to be thematic. So when you walk into our spaces, it feels like a place you've almost been at before. It feels a little bit like home. You feel special for being there, yet it's not pretentious. And it feels just very inclusive, inviting for everyone. And so we borrowed from Soho House, it was an influence for us for sure and then I would say again, a lot of British architecture, British early paintings and artwork kind of influenced it. So you'll touches of that everywhere in our spaces.

Mark Gilbreath:           19:56               I'm deep into my second Churchill biography at the moment, that's my bed stand book right now, so you're you're conjuring up images of Winston with a cocktail in his hand sitting in leather chair.

Mark Gilbreath:           20:09               So Fueled Collective has an ambitious scope in terms of its layer cake of service offerings. Has anything not worked? Did anything fail in the initial hypothesis that you went to market with? All be it, it's only been, what a year and a half now?.

Kyle Coolbroth:           20:26               Yeah. Just a little over a year. I think if I back up, we started as Coco. We did a test as a licensed model and that was up in Fargo if you recall. We decided, we're going to test this. And this was pre Fueled Collective, but we wanted to test the licensing model. We failed at that. That was just a struggle. I think what we learned there is, just the size a marketplace needs to be. There needs to be substance there, right? And it has to be more than just a lot of excited people about an idea. So that was an early learning. So as we're looking at markets where we're pretty selective about, not only the market but the actual location of the property. Is it the right one? Is it a brand association that we want, and is it the right demographic in and around the area. So that's a big lesson-learned we had. Now we certainly picked up some of that expertise with our franchise partner who dives deeply into that on behalf of the investor. That would be one of the big things. Since then, I think the biggest thing we've learned is just where is that investor? And, and just, we're having to bring together more of a marketplace ourselves is one of the challenges. We have to find the right development, which is independent of an investor conversation and it's bringing those two things together, getting alignment and moving forward.

Mark Gilbreath:           22:13               Drilling into that a touch further, what's your most binding constraint today in terms of scaling Fueled Collective?

Kyle Coolbroth:           22:23               I would say our our greatest constraint is probably timeline. I'll say that a lot of the interest is coming from stuff that's coming out of the ground. It's new development. And so the runway is a little bit longer on that. Literally for us, I don't see much of a constraint on opportunity. It's getting the alignment of the capital and the location and the development and just aligning those two.

Mark Gilbreath:           23:01               Kyle, are you finding that the new developments that are coming out of the ground - are you finding that those developers have already earmarked some portion of their asset strategy to be something other than traditional office tenency? Has there been a carve out for, "I'm going to put an 'experience' in here or I'm going to put flexible office in there". Are you finding that yet?

Kyle Coolbroth:           23:26               Yeah, I would say, virtually in every conversation I have today, whether it's an existing property owner or a developer who is, who's creating something, they all fundamentally say I need to have a coworking solution. They all see it as an amenity where, you know, in the past used to be, well, I got to have the little gym, right? Health and wellness is certainly still part of it. We've pulled that into our vision. But the idea that the activation component of a building is this kind of a solution is front and center to everybody. I just can't escape that conversation today. Which is fascinating, if you go back eight, nine years ago, right?

Mark Gilbreath:           24:19               What is the ideal partner profile for Fueled Collective? And before you answer, I asked that question against the backdrop of the numerous other entities that are out there that have shifted toward a partnering model and are partnering with developers. So there are a handful of flavors out there - you're a distinct one - but from your vantage point, who's the ideal customer partner that you would definitively want to be chosen by or partner with and likewise, would see in you the ideal fit for their asset?

Kyle Coolbroth:           24:54               Yeah, I think our ideal investor partner in these kinds of deals is that we can uniquely bring to them is two options. If you really boil that down - I could go sign a lease with someone. I'll make my rent payments and let that someone arbitrage my rent and earn money. Or, you could partner with us and we can bring an entire turnkey platform in for you where you get to arbitrage yourself. So the latter is the perfect partner for us. It's the building owner who's going, "yeah man, I'm tired of giving up all that margin to someone else. I would like to see, you know, a little bit more there". We built our platform in a way that I can turn key and I can hand you the keys as a property or an investor or if you just want to be the owner and not involve, we've actually built the management company that we'll run it for you, similar to a hotel management company would. So we'll operate it on your behalf.

Mark Gilbreath:           26:09               What's your reaction to those owners that are both wanting to have that margin themselves and furthermore, have decided that they wish to have their own distinct brand. For example British land with Storey, its Coworking offering or Tishman Speyer with Studio and Zo, Boston properties with Flex by BXP.

Kyle Coolbroth:           26:31               Hines has launched one... everybody's got one. Here's the thing. I think those are all, I think they're all interesting. Those are large companies. I wonder how long that's going to be interesting to them. You have to love this business, right? And you have to execute it well. If we look back in history, there's, there have always been companies who try to verticalize everything. There've been only a couple who have done it well. And so I think the verdict is out. I find it interesting and it validates our principles and what we're doing. And I think those companies will do that and they'll experiment with a company like ours to see which one really works best for them.

Mark Gilbreath:           27:32               So is a long view for you then, that early experimentation from some of those big notable brands ultimately will boomerang back to being absorbed by specialized operators that do that as their core competence?

Kyle Coolbroth:           27:48               I think so. I think that very well may happen. But some of them are well capitalized, so who knows. I mean, this is where, again, back to your first question, if I only knew back then that we would even have this conversation, that would have been amazing.

Mark Gilbreath:           28:12               You know, a ton more than you did. You're one of those... you're in a select category of folks that started early, learned a ton, were actually successful in generation one of Coworking, carried it into generation two of Coworking. All the while, at a time when the market is pulling enormously strongly. The opportunity and the demand is far beyond what I had imagined in 2000 and in fact, when I met you. So given that, to the extent you're willing to share with the audience, how will you define success for Fueled Collective? What are your ambitions for the business?

Kyle Coolbroth:           28:49               Yeah, so along with history, I'm kind of a philosophy geek. I look at deeper impacts. I think certainly we can define it across business success metrics, I want to build a phenomenal brand that is well known, where you Mark could be traveling across the country and your membership would apply to you as you go from location to location. The number of locations, the size of the spaces and the experience that you have - those are all business metrics. But when I scale up and I think really about success, I think about where we are at today as a culture. You don't have to look too far the news to know that the more digitally connected we've become, the more humanly separated we've become. And I think what we're building is this place that people want to belong to. So I think we're building a place where we actually can come back together as a society for the things that make an impact. I mean, Ben Franklin, he started a club that became the library system of the United States! What's possible if we actually start to get together again in a social way, professionally, what could we do? What impact could we have? That's how I look at success. So yes, the business things, yes, I want a lot of members, but I'm not going to count it by the investment dollars we raise or the, you know, the number of members. Those are all those things are important.

Mark Gilbreath:           30:43               I hear you and I commend that. It's honorable and I know it's heartfelt and true. It's interesting because you and I both have sat down in front of lots of investors as well and they want to hear the scale story. They want to hear you say, "I'm going to pave the earth with Starbucks or whatever the business is you are foisting. As a purpose-driven CEO, do you ever feel a misalignment with the financial interests that are circling around you looking to write you checks. Have they ever you to be something that you don't want to be or present Fuel Collective as something that you worry might corrupt it's soul?

Kyle Coolbroth:           31:41               It's a great question. I mean, one of the hardest, hardest things to do is scale a human centered business. Right? And that's what all of this is about. We're all on the same kind of business. So how do you do it? How do you do it? Well, how do you do it authentically? I believe that with this kind of a purpose, in this kind of a mission, that the other things follow, right? You still have to be a very good business person. You still have to be able to answer the financial questions and show a model that delivers on those. But you don't have to sacrifice one for the other. If you're purely chasing the investment, I think that's where the paths diverge. I think that's where you start to become something you're not right. So I think we're going to see of those models play out in the industry, and we may be seeing that now.

Mark Gilbreath:           32:44               We may be. One of the frequently voiced predictions about the Flexible Office Economy is that we're going to see a lot of shakeout that we're going to see increasing attrition, whether that's by Coworking entrepreneurs just closing their doors or by being acquired. As a business person and as a philosopher and an observant individual, what's your critical assessment of why Coworking entrepreneurs are walking away or having to. Or is that attrition actually something that you think is happening or is going to happen?

Kyle Coolbroth:           33:17               Yeah, I think it's two thoughts on that. I think it's natural. I mean, if you look at any industry that starts from something and scales, there's always consolidation. That's just like the history of things, and it's the life cycle. So there's a business life cycle that just naturally is going to happen. I think as a individual or regional Coworking space, just shared office of any combination, those are the, those are the ones that are going to get squeezed right now. And I know it because I'm, I live at, and I've lived it for so long now. It's exhausting. I mean, you put everything into it. So as an owner and operator to have your heart and soul into it. And, and there are some predatory practices nowadays, where people are dumping space at virtually no cost. It's so cheap to acquire, marketplace, right, that you run into that and you just go, what do I do? And I think there's a lot of people who are in that place right now, where it's just like, the return on investment and the return on emotion might not be there any longer.

Mark Gilbreath:           34:41               I think Return on Emotion is something that we all need to pay more attention to.  Kyle, Mr Coolbroth, CEO Fueled Collective, thank you for your time. Moreover, thank you for the creativity and the inventiveness and the leadership that you bring to the Flexible Office Economy. We appreciate you joining us today on the Flexible Opposite Economy.

Kyle Coolbroth:           35:03               Thank you, Mark. It was a pleasure. Let's do this again.

Kyle Coolbroth:            35:03               Thank you, Mark. It was a pleasure. Let's do this again.