As the drama of WeWork has been playing out, another New York-based co-working space provider has been watching on the sidelines.
Industrious, a lesser-known WeWork competitor, announced in August that it had raised an $80 million Series D from investors including
TF Cornerstone. The round brought the company to $222 million in cumulative VC funding.
Industrious CEO Jamie Hodari (pictured) told PitchBook that he expects his company to become profitable as early as 1Q 2020. By comparison, WeWork lost more than $1 billion last year. And
International Workplace Group, a publicly-traded workspace provider based in Switzerland and listed on the London Stock Exchange, is already profitable.
Hodari offered his thoughts on WeWork's troubles and discussed how his company's business model has shielded Industrious from excessive overhead.
"We provide management services to landlords, so we're not bound by long-term leases," he said. "While we're growing by 129%, our overhead only grows by 50%, so eventually we come out ahead."
By avoiding leases and instead leaving possession of floorspace in the hands of a building's owner, Industrious appears to have dodged a bullet in its role as a service provider. This seems to be key as WeWork, by comparison, commits to lengthy leases and takes possession of the space, paying rent to a property owner and hoping to receive larger proceeds from the workers it serves. This has resulted in an average lease period of about 15 years for WeWork's US-based locations, per its S-1, contributing to $47.2 billion of future undiscounted lease costs.
Industrious' approach has yet to be tested by international expansion. The company, founded in 2013, serves more than 40 US cities but plans to use its recently raised funds, in part, to break into Canada and parts of Europe. It acquired office space provider TechSpace in May and Chicago-based co-working company Assemble in August 2018.
Hodari declined to comment about WeWork founder Adam Neumann but said he is generally optimistic about the implications of Neumann's creation. "I think (WeWork) has validated the need and demand for co-work space. ... We are indeed finding that companies are trying it out and coming back asking for more."
Images courtesy of Industrious