The flex-office market is itself becoming more flexible with the rise of operator networks.
Wider adoption of remote work and an ever-growing number of flex-space providers is generating demand for technology that helps employers efficiently source short-term space around the world on the fly, irrespective of the name on the door.
One of these so-called flex aggregators, New York-based Upflex, raised $30 million from WeWork and others months after scoring an exclusivity deal with the coworking giant. The Series A round values the startup, founded in 2018 by Christophe Garnier and Ginger Dhaliwal, at nearly $100 million, Garnier told The Real Deal.
The flex-office market has hundreds of players and is so fragmented and inefficient that employers struggle to get their far-flung employees the space they need, Garnier said.
“In order to power the future of work, we need to get the three actors — employers, flex-space providers and brokers — working efficiently together,” he said. “It shouldn’t take three months to create a flex work plan.”
Upflex’s network spans 80 countries and some 6,000 locations managed by more than 700 operators, including hotel companies looking to monetize underutilized rooms. The technology does more than catalog space; it also helps fill a vacuum in behavioral data, Garnier said. Employers can now track where employees gravitate and quickly adjust their footprints.
The Series A, announced earlier this week, brings the startup’s total equity funding to more than $34 million. Newmark and Cushman & Wakefield also participated in the funding round alongside Ecosystem Integrity Fund, an existing investor, and venture funds including GPO Fund, Coelius Capital, Industry Ventures and Inertia Ventures.
The fundraise, and a flurry of recent deals, signals renewed momentum in the flex-office business, which was decimated by the pandemic alongside the traditional office market, forcing Knotel into bankruptcy and WeWork to downsize. Most recently, CBRE plied another $100 million into Industrious to fund its international expansion.
Flex-office space is said to be a key component of many companies’ “back-to-office” plans. A year-end study by JLL found that 41 percent of office tenants’ post-pandemic work strategies include increased use of flex-office space.
Still, Garnier described the fundraising environment today as difficult, with many coworking and flex-office investors “burned out.” It took a year for the company to complete the funding round, he said.
“Our unit economics has been very thoroughly questioned,” Garnier said. “Our margins have been very thoroughly questioned as well.”
Upflex has competition on the technology side of the business. In April, U.K.-based The Instant Group merged with Coworker.com, creating the largest global coworking marketplace, according to the deal announcement.
And Flexspace, a New York- and San Francisco-based startup founded by two former WeWork executives, just launched its on-demand workspace platform with $6 million in seed funding from early-stage consumer tech venture firm M13 and others.
Upflex’s pricing follows the Airbnb model: Real estate owners list their workspaces for free, while the users — employers and their employees — pay a technology fee to use the platform as well as “consumption fees” at variable rates depending on a workspace’s size and location. Upflex kicks money back to the owners after taking a cut.
The rise of flex-space marketplaces is paradoxical, given the lengths companies like WeWork, Knotel and Convene went to over the last decade to build brand equity. Participation in such platforms could “dilute” a brand at the margin, but all players benefit from the technology, according to Garnier. Smaller companies get access to a wider user base and giants like WeWork get access to locations in secondary and tertiary markets where they might not have a presence, he said.
Garnier said the technology is not meant to disintermediate brokers, but rather better equip them. Office users still trust their brokers more than anyone, he said.
“Who are we to tell all those large occupiers what they should be doing?”