Dec
15
2018
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The limits of coworking

It feels like there’s a WeWork on every street nowadays. Take a walk through midtown Manhattan (please don’t actually) and it might even seem like there are more WeWorks than office buildings.

Consider this an ongoing discussion about Urban Tech, its intersection with regulation, issues of public service, and other complexities that people have full PHDs on. I’m just a bitter, born-and-bred New Yorker trying to figure out why I’ve been stuck in between subway stops for the last 15 minutes, so please reach out with your take on any of these thoughts: @Arman.Tabatabai@techcrunch.com.

Co-working has permeated cities around the world at an astronomical rate. The rise has been so remarkable that even the headline-dominating SoftBank seems willing to bet the success of its colossal Vision Fund on the shift continuing, having poured billions into WeWork – including a recent $4.4 billion top-up that saw the co-working king’s valuation spike to $45 billion.

And there are no signs of the trend slowing down. With growing frequency, new startups are popping up across cities looking to turn under-utilized brick-and-mortar or commercial space into low-cost co-working options.

It’s a strategy spreading through every type of business from retail – where companies like Workbar have helped retailers offer up portions of their stores – to more niche verticals like parking lots – where companies like Campsyte are transforming empty lots into spaces for outdoor co-working and corporate off-sites. Restaurants and bars might even prove most popular for co-working, with startups like Spacious and KettleSpace turning restaurants that are closed during the day into private co-working space during their off-hours.

Before you know it, a startup will be strapping an Aeron chair to the top of a telephone pole and calling it “WirelessWorking”.

But is there a limit to how far co-working can go? Are all of the storefronts, restaurants and open spaces that line city streets going to be filled with MacBooks, cappuccinos and Moleskine notebooks? That might be too tall a task, even for the movement taking over skyscrapers.

The co-working of everything

Photo: Vasyl Dolmatov / iStock via Getty Images

So why is everyone trying to turn your favorite neighborhood dinner spot into a part-time WeWork in the first place? Co-working offers a particularly compelling use case for under-utilized space.

First, co-working falls under the same general commercial zoning categories as most independent businesses and very little additional infrastructure – outside of a few extra power outlets and some decent WiFi – is required to turn a space into an effective replacement for the often crowded and distracting coffee shops used by price-sensitive, lean, remote, or nomadic workers that make up a growing portion of the workforce.

Thus, businesses can list their space at little-to-no cost, without having to deal with structural layout changes that are more likely to arise when dealing with pop-up solutions or event rentals.

On the supply side, these co-working networks don’t have to purchase leases or make capital improvements to convert each space, and so they’re able to offer more square footage per member at a much lower rate than traditional co-working spaces. Spacious, for example, charges a monthly membership fee of $99-$129 dollars for access to its network of vetted restaurants, which is cheap compared to a WeWork desk, which can cost anywhere from $300-$800 per month in New York City.

Customers realize more affordable co-working alternatives, while tight-margin businesses facing increasing rents for under-utilized property are able to pool resources into a network and access a completely new revenue stream at very little cost. The value proposition is proving to be seriously convincing in initial cities – Spacious told the New York Times, that so many restaurants were applying to join the network on their own volition that only five percent of total applicants were ultimately getting accepted.

Basically, the business model here checks a lot of the boxes for successful marketplaces: Acquisition and transaction friction is low for both customers and suppliers, with both seeing real value that didn’t exist previously. Unit economics seem strong, and vetting on both sides of the market creates trust and community. Finally, there’s an observable network effect whereby suppliers benefit from higher occupancy as more customers join the network, while customers benefit from added flexibility as more locations join the network.

… Or just the co-working of some things

Photo: Caiaimage / Robert Daly via Getty Images

So is this the way of the future? The strategy is really compelling, with a creative solution that offers tremendous value to businesses and workers in major cities. But concerns around the scalability of demand make it difficult to picture this phenomenon becoming ubiquitous across cities or something that reaches the scale of a WeWork or large conventional co-working player.

All these companies seem to be competing for a similar demographic, not only with one another, but also with coffee shops, free workspaces, and other flexible co-working options like Croissant, which provides members with access to unused desks and offices in traditional co-working spaces. Like Spacious and KettleSpace, the spaces on Croissant own the property leases and are already built for co-working, so Croissant can still offer comparatively attractive rates.

The offer seems most compelling for someone that is able to work without a stable location and without the amenities offered in traditional co-working or office spaces, and is also price sensitive enough where they would trade those benefits for a lower price. Yet at the same time, they can’t be too price sensitive, where they would prefer working out of free – or close to free – coffee shops instead of paying a monthly membership fee to avoid the frictions that can come with them.

And it seems unclear whether the problem or solution is as poignant outside of high-density cities – let alone outside of high-density areas of high-density cities.

Without density, is the competition for space or traffic in coffee shops and free workspaces still high enough where it’s worth paying a membership fee for? Would the desire for a private working environment, or for a working community, be enough to incentivize membership alone? And in less-dense and more-sprawl oriented cities, members could also face the risk of having to travel significant distances if space isn’t available in nearby locations.

While the emerging workforce is trending towards more remote, agile and nomadic workers that can do more with less, it’s less certain how many will actually fit the profile that opts out of both more costly but stable traditional workspaces, as well as potentially frustrating but free alternatives. And if the lack of density does prove to be an issue, how many of those workers will live in hyper-dense areas, especially if they are price-sensitive and can work and live anywhere?

To be clear, I’m not saying the companies won’t see significant growth – in fact, I think they will. But will the trend of monetizing unused space through co-working come to permeate cities everywhere and do so with meaningful occupancy? Maybe not. That said, there is still a sizable and growing demographic that need these solutions and the value proposition is significant in many major urban areas.

The companies are creating real value, creating more efficient use of wasted space, and fixing a supply-demand issue. And the cultural value of even modestly helping independent businesses keep the lights on seems to outweigh the cultural “damage” some may fear in turning them into part-time co-working spaces.

And lastly, some reading while in transit:

Nov
01
2018
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Retail-as-a-service provider Leap raises $3M and launches first store

The past decade in retail has been the golden age of direct-to-consumer (D2C) and digitally native vertical brands (DNVBs) that use the internet to communicate with customers, execute transactions, handle distribution and offer better economics.

But as small independent startups have scaled into unicorn territory and as countless brands have saturated digital channels, customer acquisition has gotten harder and costlier. Companies are now trying to meet customers with different purchase habits by developing physical stores. 

However, building an effective brick-and-mortar presence can be expensive and risky for DNVBs, requiring resources outside their core competencies. Chicago-based startup Leap is hoping to make it easier for digital brands to grow physical retail footprints without the typical risks of store development by taking care of the entire process for them.

Leap offers a full-service platform covering the complete life cycle of a brand’s brick-and-mortar launch.  In addition to owning the lease and the financial commitments that come with it, Leap covers everything from staffing, experiential design, tech integration and even day-to-day operations. 

(Photo by Alexander Scheuber/Getty Images)

Less than a year since its founding, Leap announced today the launch of its first store and the close of a $3 million seed round, led by Costanoa Ventures, with participation from Equal Ventures and Brand Foundry Ventures.

The debut store will act as the first Chicago location for Koio, the high-end D2C sneaker brand backed by headline-grabbing names like the Winklevoss twins, director Simon Kinberg and actor Miles Teller. 

Instead of paying a monthly lease fee, along with all the other variable costs associated with operating a physical store, companies like Koio pay Leap on a percent of sales basis, effectively minimizing risk and incentivizing performance. 

On top of minimizing development expense for brands, Leap believes its customer insights and intelligent logistics platform can help improve shopper engagement, increase customer traffic and drive brand lift. If the startup’s thesis proves true, brands can improve both sides of their brick-and-mortar unit economics by reducing customer acquisition costs and amplifying customer value.

At its core, Leap simplifies a DNVB’s physical retail operations into a single line item on its P&L, allowing the company to focus on brand building and supply chain rather than retail strategy, while also allowing them to scale faster. 

With the latest fundraise, the company hopes to build out its team and continue new location expansion.  Longer-term, Leap’s co-founders hope to build a vast network of sites that can help provide intelligence around new store development and shopper preference.

“We want to be the platform to help brands go to market in the offline space”, said co-founder Amish Tolia.  “We want to help brands build direct-to-consumer relationships in local neighborhoods across the country and enable them to focus on what they’re best at. Enable them to focus on product innovation, supply chain management, great marketing and brand building.”

A glimpse into the future retail

While Leap’s value proposition is straightforward, its business model points to a bigger trend in the world of retail.  

By opting to sell its software and brick-and-mortar services rather than creating its own brands, Leap effectively acts as a “retail-as-a-service” platform. The as-a-service strategy is already quietly growing in popularity in the retail space, with companies like b8ta, the Internet of Things gadget retailer, launching its hardware-oriented “Built by b8ta” platform earlier this year.

Though likely heavy in upfront capital costs, retail-as-a-service businesses don’t have the same constant concern around supply chain, manufacturing, consumer acquisition and marketing spend. And in certain pricing models based on a monthly fee or percent of square footage basis, platforms can see more stable revenues relative to pure retail startups.

From a brand perspective, DNVBs have been looking for ways to extend growth runways while minimizing the cost and uncertainty that deterred them from physical stores in the first place. The as-a-service model can make brick-and-mortar retail a much more scalable engine, possibly even cooling rising concern around bubbling consumer valuations.

As more of the young digitally born D2C giants resort to as-a-service companies to find marginal customers, we may see the rise of a new set of startups fighting to establish themselves as the platform on which brands operate.

If the last decade was defined by retail online, it’s possible that the next decade will be defined by retail-as-a-service.

And if you find yourself in Chicago, feel free to check out the Leap-enabled Koio Store at 924 W Armitage in Lincoln Park.

Feb
22
2018
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Indigo Fair raises $12M to connect wholesalers with smaller retail outlets with a smarter service

 Max Rhodes was walking around that weird little parklet in Hayes Valley in San Francisco after taking a break from a five-year stint at Square to figure out what he wanted to do next — and he kept seeing Square registers everywhere. It made him think about the connections between the average product maker and those retailers. That’s what prompted him to start Indigo Fair. Read More

Sep
27
2017
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Adobe wants to make every online retailer more analytical

 In its most recent earnings report, Adobe reported record revenue, but CEO Shantanu Narayen admitted he was a bit disappointed with the Experience Cloud results. That’s the part of Adobe that includes the Analytics Cloud. Today, the company is announcing an update to the analytics product aimed specifically at the lucrative retail/ecommerce market. Perhaps it’s not a coincidence.… Read More

Sep
18
2017
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Goodbye, photo studios. Hello, colormass virtual photoshoots

 Berlin-based colormass, one of the startups presenting today at TechCrunch Disrupt as part of the Battlefield, has developed a platform that lets you recreate an IKEA-style experience for your own merchandise: highly realistic, but digitally manipulated 3D facsimiles. Read More

Jan
22
2016
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FiveStars Gets $50M To Help Small Retailers Run Loyalty Programs Like Their Bigger Rivals

POS FiveStars, a five year-old startup that has built a platform and app to run loyalty programs and shopping analytics for small brick-and-mortar retailers, has received a reward of its own: the company has raised a round of $50 million, funding that it plans to use to continue its focus on “mom and pop shops” and building its brand and business across the U.S., CEO and… Read More

Aug
27
2015
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Narvar, A Service That Improves Online Post-Purchase Experiences, Raises $10M

narvar ipad screenshot Narvar, a startup that enables companies to better engage with customers after online purchases, said it has raised $10 million. Narvar provides companies with software that improves the post-purchase experience. That can include a better interface when it comes to shipping, more detailed text updates, and then of course options to return products and buy new ones. Those updates can even also… Read More

Apr
01
2015
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IBM And Apple Release Eight More Enterprise Apps For Healthcare, Airlines And More

healthcare_4_devices_desktop_2x Apple and IBM’s partnership that has the companies working together to produce enterprise-friendly apps has expanded yet again with the addition of eight more apps designed for iOS devices, including the iPhone and iPad, bringing the total number of MobileFirst apps up to now 22. The new apps are focused on the healthcare and industrial products industries, following prior announcements… Read More

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