What Co-Working Spaces Can Teach You about Morale and Engagement RocketSpace CEO and founder Duncan Logan shares how space and one's peers impact a company's final product.

Today's entrepreneurs have all the tools they need to network, share ideas, celebrate their wins and commiserate about their losses. Yet, as Duncan Logan learned at his own startup, hyper-connectivity is no substitute for old-fashioned human interaction.

In late 2010, Logan tested this hypothesis by running a Craigslist ad for co-working space. When a couple prospects asked if the space was specifically for tech companies, he ran a second ad, this time geared toward that crowd. "I got something like 15 responses in the first 12 hours," says Logan, whose early tenants included the founders of Achievers, Leap Motion and Uber. "I had to run out and actually find space."

Today, RocketSpace is home to about 180 companies ranging from tiny (yet funded) startups to more established businesses looking for flexible space and networking opportunities. All told, the co-working space includes 700 desks and spans nearly 70,000 square feet on several floors of two adjacent buildings in downtown San Francisco.

Entrepreneur spoke with Logan about the benefits of cohabitating and the obsolescence of cubicles.

Entrepreneur: You were vice president of global sales and marketing operations at MessageLabs, which sold to Symantec for $700 million. How did you make the jump to landlord?
Logan: I moved from the U.K to the States in 2008 and set up a buyer listing service called National BLS. It never really got off the ground, and I ended up shutting it down. We rented a little office in the back of a great big building, and it was soulless. There were five or six of us struggling away on this idea. When you're working on a startup, there are obviously lots of tough days, but it can be even harder if you're working in isolation. When I shut down the company at the end of 2010, I started looking into the idea of co-working space.

Entrepreneur: RocketSpace has some diverse tenants, but all are in tech and all have received early stage funding. Why limit your market?
Logan: I think demand for RocketSpace has been so strong because we are tech only. A week after we opened there was a waiting list, and I asked 'How do we go more niche from here?' That's where I said if you haven't raised one round of funding you're too early for us. This is not an incubator or a place to hang out while you're thinking about tech. I thought that would restrict the flow, but the exact opposite thing happened. Demand doubled.

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Entrepreneur: Why do you think that is?
Logan: I'm a strong believer that you are a product of your environment. I always say that Harvard's greatest success isn't in the curriculum it teaches but in its ability to attract the very best. The same is true of young companies.

Entrepreneur: Why is it important to build this culture for companies that, at the end of the day, are independent of each other?
Logan: They aren't working together, but there's a huge amount of crossover. For example, we have a company doing cool stuff with Facebook. When you're sitting having a beer after work, and someone says they're struggling with Facebook, someone else might say, "You should speak to that guy down there.' There is that speed and serendipity of being in the same space.

We've also seen an evolution of co-working space. It used to be only startups but increasingly we see larger companies looking at this as office as a service. Some started here and could afford their own space but will stay as long as we keep providing more desks. Others, like Spotify, are based somewhere else but use this as a satellite office. Meanwhile, a lot of corporations are looking to partner with or acquire startups.

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Entrepreneur: What do you do to facilitate interaction?
Logan: Every day and night there are events here. Because everyone is in tech, the events are focused around technology or entrepreneurship. We also have a wine social every Wednesday.

Entrepreneur: Is there any logic to who sits where?
Logan: When we first started it was all very open. It looked like a great big trading floor. Everyone wanted remove cubicles and open it up. We used to say that headphones are the new cubicles, and to a certain degree it's still true. What we have found is that different people enjoy different environments. Sales teams want the hustle and bustle. If you're coding, you want to see other people but you don't want the noise. If you walk around our campus you'll walk into noisier spaces and quieter places. That's by design.

Entrepreneur: What about by industry? Do companies worry about protecting intellectual capital or losing talent to other companies.
Logan: On a campus of our size we can move people, and occasionally this happens with competing products. We have some companies doing things with Twitter that want to sit in different buildings. But there have been surprise cases. MOG, Spotify and Beatport were happy to be close to each other.

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Entrepreneur: Cubicles or no cubicles?
Logan: I don't see heading back to high cubicles in any form. A lot of people work off huge screens or at standing desks, and that helps break up the space. We also use phone booths so people can go there for private conversations and high-backed sofas put together for more privacy.

Entrepreneur: Clearly you've given this a lot of thought.
Logan: We have been a test kitchen for what works in an office environment. We are raising money now to design the office of the future from the ground up. This is based on three years of work we've put together to create the optimal offices, from light and ceiling height to furniture and flooring.

Entrepreneur: How important is office space for recruiting people and keeping them happy?
Logan: When you're a five-person startup, you find space you can afford and you probably don't have money to do anything with it. If you're hiring away from a big tech company, it helps to be in a good location with high-quality facilities. Millennials do not see the same boundaries between work life and home life that older generations did. They are constantly "connected" and working. Office location is important. They want to live and work in an urban environment without a long commute between the two. They want break out areas and soft seating to perform different tasks while in the office. Taking a break for 10 minutes to play a game and clear the mind is as important as having a standing desk for a healthier lifestyle. Top talent, expects it all.

Entrepreneur: The networking opportunities can't hurt.
Logan: There is an additional safety net in a co-working space. If your company doesn't survive, chances are that someone in the building is looking for someone with your skills. We also have 'Returners,' people who started at RocketSpace, get acquired and come back a year or two later to start another company. I am having special t-shirts made for them.

Editor's Note: Entrepreneur Media is an investor and partner with AlleyNYC, a coworking space in New York City.