For all the stuff we hear in the press about Venture Capital, one thing that you don’t hear about as much is that operating a (small) venture fund is really similar to operating a “small business.” Yes, while we strive to fund the next big business, our own business is a small business.

Venture funds tend to have relatively small, close-knit teams and generally do not need a lot of infrastructure. At its core you need a place to meet people, and that’s about it. Ultimately the business of venture capital is all about people.

When I was getting started with K9 Ventures, University Cafe, Coupa Cafe, and Monique’s Chocolates were my favorite meeting spots for a while. In fact, I’m guessing that some of the best micro-VCs today got their start in cafes.

Back in 2009, it was a conscious decision to be an “off-Sand Hill Road firm.” Some of the best firms in the business are on Sand Hill and it’s always been a curious oddity to me as to how Sand Hill Road became the epicenter of the venture business. My choice to be off-Sand Hill was driven by the brand I wanted to portray for K9 — part of that brand is to Be different, to not just think different, but act different.

Being in downtown Palo Alto was great. I love downtown Palo Alto. It has a great vibe and energy too it and also has great options for food. I’ve thoroughly enjoyed being in downtown Palo Alto for the past 5 years.

But change is afoot. There’s been a lot of talk about the changes in San Francisco, but there are changes happening in downtown Palo Alto as well. Here’s what I’ve observed:

High retail turnover
The retail business is tough — there’s no doubt about that. But just take a walk down University Ave in Palo Alto and you’ll notice how many stores are new. If you do the same walk long enough, you’ll also start to see how the turnover in retail stores is extremely high. Some spots change hands almost within 6 months to a year. Then there are some that seem to be doing brilliantly (Oren’s Hummus and Cream being two that are at the top of mind for that). And there are those which are staples and have a regular clientele (Jing Jing, Mandarin Gourmet and Thaiphoon being the one’s I frequent).

High Demand for Office Space
It feels like all the big companies in tech have decided that they all need an office in Palo Alto. Downtown office space availability is close to record lows based on what I’ve been told by numerous commercial real-estate agents. The high demand of course leads to soaring rents. Class A space in downtown Palo Alto is now going for $7-$8/sq ft per month (For anyone reading this from outside the Bay Area, yes, that’s per month — rents are quoted per month in the Bay Area) once you add in the NNN expenses.

High concentration of VC funds
New VC funds all tend to be either in San Francisco, or in downtown Palo Alto. Although I don’t think the landlords on Sand Hill Road have anything to worry about, since it’s just a gradual shifting of the landscape, not a massive upheaval, but there’s a clear trend towards there being more and more venture funds in SF and PA.

Watching these changes and thinking about what I want to K9 to be when it grows up has made me think long and hard about something as simple as the working environment. My fear is to end up going too deep into the “financial services” end of the spectrum rather than the “technology R&D” end of the spectrum.

With that in mind I’ve decided that it’s time for K9 Ventures to take the next step and move to a larger, industrial space, where it can continue to be focused on technology R&D. Unlike a traditional “office” space, I want this to be a space that is focused on fostering creativity and technology innovation – where new technologies, new ideas, and new ways for startup teams to work together can take form (note: almost a quarter of K9’s portfolio companies are hardware companies: Lytro, Occipital, Coin, Tangible Play, 3Gear Systems).

The new space will be nick-named “The Kennel.” It will still be in Palo Alto, but not in downtown. I look forward to inviting some of you to come visit The Kennel in the near future.

You can follow me on Twitter at @ManuKumar or @K9Ventures for just the K9 Ventures related tweets. K9 Ventures is also on Facebook and Google+.