Fundraising, productivity critical this year for co-working startups

  • Companies are now looking to serve customers with longer-term commitments, rather than leasing individual desks or seats
  • As reported by JLL India, the share of co-working in overall office leasing increased from 8 percent in 2018 to 14 percent in 2019.

After a rapid expansion process, co-working Fundraising startups are looking to raise fresh capital and turn profitable to fund the next growth step, as demand for collaborative workspaces in India remains high.

The dynamics of shared workspaces are also evolving and shifting towards long-term dedicated enterprise customers and creating personalized goods, rather than pursuing smaller startups and entrepreneurs and leasing individual desks or seats.

Top providers, including WeWork India, Smartworks Space Coworking Pvt. Ltd, Awfis Space Solutions Ltd and Table Space Technologies, together with smaller firms such as IndiQube and CoWrks, account for more than 80 percent of flexible space leasing and pursue strategic expansion through an asset-light or revenue-sharing model to burn less energy.

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“Today’s co-working market is mainly driven by the multi-city presence of top operators. Growth has so far been the priority, but now that it is a proven form of business, they are looking at profitability, capital raising, and the operational component. It’s a volume-driven market, so operators look at prime locations, bigger customers, “said Knight Frank India, national director of office transactions, Viral Desai.

Indique, which raised capital from WestBridge Capital India Advisors in 2018, is looking to raise $30-50 million to boost capacity, as the Bengaluru-based company looks to nearly double its 2.5 million sq.ft operational space in the next 12-15 months.

“Larger companies are seeking larger spaces. The momentum has built up and for more growth, we need a new round of funding. We are undertaking buildings that can be renovated or transformed into office spaces as well as distress properties trapped with lenders, “said IndiQube, co-founder and chief executive officer (CEO), Rishi Das.

This year, WeWork India has added 5,000 seats and is aiming to hit 10,000 seats by June. However, there are also a lot of riders on the fundraising plans it announced last October to promote growth. The New York-based Indian subsidiary We Co. is also planning to turn profitable this year.

“While we keep growing and holding on to our market share, the greater focus is on productivity. Capital is a big driver, how quickly or slowly we expand. Unlike before, when we tried to grow rapidly, we are now looking at deals where landlords finance the desks we are adding, in fully-funded management contracts or revenue sharing, “said Karan Virwani, who heads WeWork India.

Even CoWrks based in Bengaluru, who said it would raise $50 million last year, is still self-funded and so far has not raised any external money. According to Abhishek Goenka, CEO, CoWrks, though this year it will add 15,000-20,000 seats, no one is building more speculatively and shifting towards facilities that are designed to fit.

The co-working segment of India has seen tremendous growth in recent years and is now a hub for new workspaces. According to JLL India figures, the share of co-working in overall office leasing increased from 8 percent in 2018 to 14 percent in 2019.

Coworking Space smart works Pvt. Ltd, which turned profitable last year and last year raised $25 million from Singapore’s Keppel Ground, follows the conventional landlord offer and has begun to take up larger spaces across the top nine Indian cities. “Everybody today focuses on productivity rather than simply reaching the topline and there is no unreasonable expansion,” said Neetesh Sarda, founder of Smartworks.

Awfis Space Solutions Ltd is planning to set up centers in even smaller cities such as Kochi, Ahmedabad and Indore, one of the biggest and well-funded co-working startups.

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