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:

Mar
13
2018
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WeWork expands its Flatiron School education business to London with £1M in scholarships

WeWork — the co-working startup valued at $20 billion with some 200,000 members across 200 locations globally — is continuing with its strategy of expanding into a wide array of adjacent operations to grow its business. Today the company announced that it will be expanding the coding-focused Flatiron School abroad, starting in London this June.

Alongside this, it’s also launching a scholarship program, offering £1 million in fees to people from underrepresented groups in tech to enrol in Flatiron classes, working with existing local groups like AllBright, Code Bar and Women Who Code to spread the word.

This is the Flatiron School’s first move outside of the U.S. for its physical classes — it had already offered online courses internationally before this — and notably it is also WeWork’s first significant educational effort since acquiring the New York startup last October for an undisclosed sum.

Since acquiring Flatiron, WeWork’s chief growth officer Dave Fano — who himself joined WeWork when the company acquired his own startup, building infomation modelling firm Case, heralding the start of the company’s acquisition spree — said that the idea has been to let Flatiron run business as usual, offering a variety of online and in-person coding and related courses. That is now changing as WeWork puts the acquisition to work, so to speak.

Expanding the kinds of services that it offers in European markets specifically is an interesting move for WeWork. When it first opened for business here in London, for example, people hiring out desks in other people’s offices, or working out of dedicated co-working spaces, was already a standard practice.

“There was lots of co-working already, so there was no need to educate the market on it,” Fano said in an interview. Hence, adding in more services and offerings is a way to help differentiate WeWork from the rest of the productivity pack. Education sits alongside a number of other services that WeWork has been developing, from offering all-in, optimised office spaces (complete with the ever-present glass decanter of fruit-infused water in the kitchen) both for individuals and running then on behalf of other companies, through to event planning (by way of its Meetup acquisition), and likely more down the line.

On the other side, this move is also an indication of how Flatiron, which had raised a modest $14 million in funding in its five years of life before getting acquired, is using the acquisition by the well-capitalised WeWork to upsize and compete against the likes of General Assembly and others who have doubled down on international expansion to build out their coding education businesses.

Flatiron School’s London operation will be based out of Finsbury Pavement, one of WeWork’s multiple London locations, and it will kick off with two courses, one a full-time software engineering immersive course that will last 15 weeks; and the other a part-time front-end web developer course that will run 10 weeks.

There have been a lot of efforts, both private and public, to help raise tech literacy among the workforces of the world, as industries and economies hope to train people for the next generation of employment as more legacy roles and processes tip into obsolescence, and all signs point to a more digital, connected and technological future.

Not all of these have been home runs, though, with many programmes failing to connect the dots between learning new skills and then applying them in actual jobs. And of course there remains a big digital divide between those who are already socially or economically challenged ever getting access to either the training or the subsequent work opportunities.

The company claims to have a strong success track record for its educational program.

“In the US, Flatiron School has set the benchmark for programming education with its community-first learning platform, market-aligned open-source curriculum, and outcomes-focused approach to education,” claims Adam Enbar, Flatiron School’s co-founder and CEO. “Since 2012, Flatiron has maintained a 99 percent graduation rate for its Software Engineering Programs in NYC and more than 2,000 students have graduated from Flatiron School to date, across both the on-campus and online programs. With our new Flatiron London location, we’ll be able to give more people access to attain the skills they need to create their life’s work.”

Meanwhile, a spokesperson for the school said that it also has a 99 percent placement rate for those looking for jobs in NYC in the area of the immersive program, and 97 percent placement overall in software engineering, iOS development and the fellowship program.

It’s a small start, but offering £1 million in scholarships alongside the launch can offer at least a small boost in trying to fix that problem. And for WeWork, which has now raised $7.3 billion in funding — including backing from the seemingly bottomless coffers of Softbank’s Vision Fund — a $1 million scholarship fund is small change, so hopefully it prove to be successful and it might consider how it can dole out more.

Updated with more stats.

Mar
13
2018
--

WeWork expands its Flatiron School education business to London with £1M in scholarships

 WeWork — the co-working startup valued at $20 billion with some 200,000 members across 200 locations globally — is continuing with its strategy of expanding into a wide array of adjacent operations to grow its business. Today the company announced that it will be expanding the coding-focused Flatiron School abroad, starting in London this June.
Alongside this, it’s also… Read More

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