Executives at three co-working firms say they expect to see the industry grow despite a looming recession and questions about WeWork’s business model following the release of its IPO prospectus last week.
“We’re not scared of a recession,” said Nick LiVigne, Convene’s head of product. “We think this is a sustainable model, whether that’s domestic or international.”
The comments were made during a panel discussion with IWG’s Michael Berretta and the Yard’s Richard Beyda at SPACES on Wednesday. LiVigne distanced Convene’s business model from WeWork because 80 percent of the firm’s revenue came from non-co-working sources, and 50 percent came from enterprise sources, he said. Furthermore, he brushed off the idea that the possibility of a recession had motivated the firm’s decision to expand into London.
WeWork’s IPO prospectus revealed the co-working giant has $47 billion in leasing commitments in the U.S. over 15 years, and some $4 billion in committed revenue.
LiVigne said if the co-working giant’s IPO went well, it would benefit the whole sector. Regardless, it presented an opportunity for competitors to learn. “First of all, it teaches us that we need to be sound in our metrics; we need to be clear on what our product is and what it isn’t,” he said.
On Thursday, WeWork’s $47 billion valuation was criticized by Democratic presidential hopeful and former tech executive Andrew Yang, who tweeted that it was “utterly ridiculous.”
Left to right: Richard Beyda of The Yard, Michael Barretta of IWG, Nick Livigne of Convene, and The Real Deal’s David Jeans (Credit: Griffin Meyer)
But will other co-working companies’ valuations increase or decline in the event of another IPO?
“I think the most important thing that you see today is a massive amount of notoriety directed here and that can only help us,” Berretta said at the event, which was moderated by The Real Deal’s David Jeans. “It’s led to more customer knowledge around the product and I think it’s gradually, over the last 24 months or so, made it almost a household name that you can get a flexible alternative versus going into a conventional lease, which is the cornerstone of the business.”
Co-working is becoming an increasingly crowded market. Berretta predicted that with that level of activity, there would likely be more mergers and acquisitions over the next two to three years.
Responding to a question about whether that was something The Yard, a smaller outfit, had factored in to its strategy, Beyda said: “We’re investors. We look at the best exit strategy, or the best opportunity to make money. We’re in this to make money. Some people say they want to change the world but we want to do both things at one time.”
On Thursday, flexible office-space firm Industrious announced it had raised $80 million in its latest round of funding, bringing its total funding to more than $220 million.
The firm last year adopted a new business model that has seen it move away from traditional leases and into partnerships with landlords and building owners.
CEO Jamie Hodari told Bloomberg that relying on management contracts was “more sustainable, thoughtful and less risky,” and said he intended to phase out existing leases — a direct contrast with WeWork’s model.