Cheni Yerushalmi and Joe Raby, Founders of Sunshine Suites

Interview by Shane Pearlman

Cheni Yerushalmi and Joe Raby are the founders of Sunshine Suites, a company that provides affordable working space in the heart of New York City. Over the last year, there has been an explosion of people talking about coworking. For those of us who are not interested in spending the entire day working from home or coffee shops, there are now options that allow an individual to have the office benefits of a larger company at a reasonable price with other like mined people.

Quick note: The interview was with Cheni. When I sent in some supplemental questions after the fact, Joe was nice enough to take time and answer them. Since most of the answers are Cheni’s, I will place [Joe] by any paragraph in which Joe piped in.

What current entrepreneurial efforts consume your time?

We currently run Sunshine Suites. Joe and myself have also started a new venture known as Harmony Community Time Share. This company purchases vacation homes for rent exclusively to the Sunshine community. We feel it complements our current venture by offering services that promote networking while having fun outside the work space.

Why coworking? How did you get into this business?

When Joe and I first went into business we experienced the hardships of a small business renting office space first hand . It became apparent to us no landlord we dealt with cared about or interests. We both felt strong desire to change the sector and become more tenant friendly and pro-networking.

How we got into this adventure? We had a online gaming network for which we rented about 200 sqft in the Flat Iron area. The space cost nearly 5k just to acquire and rent was outrageous. Long story short, we felt that although we were proud of our space, we couldn’t bring clients and it didn’t show well to the potential employees we were trying to hire. It felt that small business like ours were always in catch up mode from companies which were well funded.

[Joe] I think the true value of our business approach became clear when we had one of our favorite Shiners (I won’t name him or his company out) fell about three months behind on his license fees. Cheni and I both really liked him and didn’t want to evict him, but knew that’s what we probably should do and what most landlords in NY would do. Instead, we had a “eureka” moment and decided to do whatever we could to keep him in business. We had an adventure travel company move in who needed a website - and instead of evicting our friend we referred the business to him, resulting in a large sale for him. The end result was that the travel company was happy, our friend had gotten some work and money, and we were paid everything we were owed in full. From that moment on it became our way of doing business - a decision that nobody can get to the top by themselves and that we are all stronger and better if we work with each other.

Can you paint us a picture of the workspace of the future? What needs to happen for this to become a reality?

The future will consist of more networking but on a global scale. We believe as technology and the cost of doing businesses drops individuals and small business will utilize smaller spaces that offer high networking and accountability to its inhabitants. When there is a system in place to monitor and report business transactions and rates similar to a FICO score there will be more accountablity. This will make companies more responsible for their behavior limiting bad business practices which currently occur in most shared office solutions.

What’s the biggest mess you’ve dealt with in the last 12 months?

Over the last month our biggest hurdle has been the growth of Sunshine. Over the past year we have almost doubled in size and have come across new challenges we haven’t seen in our first 5 years of operation. Some off these include, expanding to new neighborhoods which we aren’t as familiar with, creating a stronger and recognizable brand and pushing our message to the masses with a limited budget for advertising.

[Joe] We’ve totally restructured our advertising and marketing methods. While previously we would advertise on google and other websites, we have recently hired a PR company and have created a referral bonus structure to get large referral networks, such as Meetup, to work with us and refer their client base. We feel this is crucial in filling up our new office as well as keeping all our offices full while limiting our expenses.

I see a lot of people debating what it takes to make a co-working space profitable. How are you managing the balance between offering a service that draws in the right customers while controlling the cost of your overhead?

Sunshine is about the community and not just the bottom line, by providing a valuable service and a fair price we have in a win-win scenario in which both parties grow and collaborate with one another. Sunshine’s main growth comes from within. The community grows and so do we, when we provide fair services and over exceed the clients expectations the client rewards us by referring us to other potential clients.

Why do you do what you do? What inspires you? When do you get most excited? What keeps you up at night?

We are believers in collaborating and offering straight, honest services without a hidden agenda or added fees. We get a kick out of seeing people’s faces light up when they first take a tour of our facilities and then hear the price is less than they thought. Once companies begin occupying the space they start networking and growing and that is the biggest thrill, and when they grow, we grow. We want to give people the opportunities we never received when we sat on their side of the table.

[Joe] We’ve got literally hundreds of thank you letters and testimonials from referrals and other people who have really enjoyed the space. Recently I connected two businesses - one company who puts advertisements on the top of taxi’s and the other who puts credit card readers in the back of the cabs. They both had contacts in different cities with different people, and have been able to collaberate and both expand their business considerably.

We’ve also seen numerous companies grow from two to 20 people on the strength of referrals within the space and doing business with other Shiners. The fact that we grow so organically really makes this a very exciting endeavor. We receive such positive feedback and feel that our clients are very grateful for the services we provide, and that is an inspiration.

Peter & I run a software firm and do quite a bit of research and development. One of the biggest concerns I have with Co-Working is privacy and protecting my client’s IP. How has Sunshine Suites and your tenants been dealing this issue?

Over the years we have learned that open space has its pro’s and con’s. Obviously, working in an open bright space in a community setting, while gaining a lot of momentum is a big positive. However, a positive aspect of a large office setting is, of course, security which dealt with the traditional door and key. At Sunshine we wanted to keep the best of both worlds by offering our clients a variety of solutions including an open floor space while still addressing the importance of security.

Sunshine went into a joint venture with a furniture company to provide a customizable suite which are cool and hip, while offering solutions that are flexible in their configurations, so when companies change their work habits, they can change their workspace, maximizing office space at an affordable level. We added features like overhead filing systems and lockable sliding doors to insure multiple levels of security. We also provide state of the art security system to oversee every element of the space and monitor potential wrongdoing. Another key security practice we take is doing criminal background checks to ensure no felons enter the space and have key card access to all common and private areas.

Sunshine also takes the time to know its clients and makes sure the companies with conflicting interests are segregated on separate floors and areas. We even separate companies who wish to have low sound level, from sales companies who can talk all they want without causing stress and interruptions.

Another element which we thought made a lot of sense was to add private sound-proof phone booths around the facility so individuals can go into on a spare place and take a private call without fear of eavesdropping.

Finally, in a day with Internet hacking as a major concern to all companies Sunshine invested a lot of time money and energy in creating a back-end system that protects our clients by offering firewalls and IT Support for numerous issues and concerns.

We’re entering a recession. How are you preparing your company? How is the huge real estate mortgage crises affecting your business?

We built our business model with the understanding that recessions are an uncontrollable phenomenon, which affects companies across the board. We chose to deal with this issue by diversifying our clientèle base in many sectors, and creating solutions that are optimized by one to 40 person companies. Rather than positioning ourselves as a high-end service with ala carte services and hidden fees, we chose to go the route of all-inclusive, affordable, flexible solutions. This allow larger companies to downsize in bad times, and small and new companies to limit their risk when either starting or consolidating their expenses. Our price point begins at $350 per person, arguably the cheapest solution in the Metropolitan area.

What does your average daily work / life balance look like? How much time do you work, play and sleep?

Joe an I believe that a healthy mind creates a healthy business. Part of our business strategy has been to create out-of-the office relationships. This harbored our idea of our most recent endeavor: Harmony, a vacation retreat exclusive to the Sunshine community, that Shiners, management, and guests can got to, relax enjoy the company of their peers, neighbors, and activities such as snowboarding, skiing, snowmobiling, etc. It is also lends itself to networking in ways traditional events cannot achieve. To be more specific, Joe has moved the Sunshine operation to Israel where he enjoys life on the beach, while maintaining daily operations.

How are you funding this? What are some of the suggestion you have based upon that experience?

Initially, we funded this operation through our own assets, and as we have progressed one of our existing Shiners arranged a debt financing arrangement, which has helped us attain funding without forfeiting assets of the company. In addition to that Sunshine is a profitable company, our proven business model allows to take the risks most developing companies cannot. Finally, Sunshine recently sold a small round to friends and family to give them options as Sunshine moves foward.

The cost of capital using debt is much cheaper than using equity financing if you are a profitable company. Using friends and family puts a lot more pressure on performance and fulfilling high expectations.

How is Sunshine Suites different than a traditional land-lording company? How are you differentiating yourself from other co-working spaces catering to freelancers and small business owners such as Citizen Space and Independence Hall?

Simply, Sunshine’s business model is catered to be the alternative to traditional office space rentals. We are do not offer leases, rather we developed a month-to-month license agreement which flexible, cost effective, and requires only one month’s security deposit. In addition traditional office spaces do not emphasize networking, collaboration, or style. By offer numerous networking event, sports teams, vacation homes, and creating affiliation deals where our Shiners have the opportunity to save 10-60% of services that may have otherwise been over their budget. Also it’s the presentation, companies can project our image onto their own. We provide the uncommon such as: roof decks, and video conferencing, are all included in one affordable package.

We provide a lot more flexibility and cater to smaller businesses. Provide a strong community base for companies to grow and network The ability to grow and shrink your office needs on demand without being taken for a ride or signing long term leases.

What is the last thing that made you laugh out loud?

We crack up talking to each other on the phone everyday, you need to love the person who you work with. (In a very platonic way).