WeWork Rival Knotel to Reduce Headcount by Half
(Bloomberg) -- Knotel Inc., a company that manages and rents short-term office space, said Friday it was cutting or furloughing half of its staff, or about 200 workers, in response to the coronavirus.
Amol Sarva, Knotel’s chief executive officer, said the company was eliminating the jobs of about 30% of its staff, mostly in the U.S., and putting another 20% on furlough in markets where that is available, mostly in Europe. The New York-based startup operates offices in more than a dozen cities across the U.S., Europe, South America and Asia. It has raised a reported $560 million in venture funding.
As the coronavirus wrecks economies across the globe and as companies and governments are requiring workers to stay away from the office, once-flush startups are cutting jobs and downsizing. Knotel and other flexible office space and co-working companies are likely to be hit hard. Customers might default on rent or cancel contracts, and the idea of working near other people may never feel quite the same again.
Sarva said Knotel is stopping efforts to acquire new real estate or sign new leases, which led to many of the job eliminations. The focus now is on serving its existing customers, he said. Knotel is also working with local governments to provide office space for relief efforts.
Sarva said he hopes the move will help the company be ready for what’s ahead. “It's intended to prepare for the worst case, like a long health crisis, long economic crisis,” he said. The company is revising down its forecasts for 2020, Sarva said, but still expects to be profitable this year.
Knotel’s biggest rival, WeWork parent We Co., has been struggling after a failed initial public offering last year that led the company to cut 2,400 jobs in November. WeWork has been facing blowback for continuing to stay open and charge members, especially in areas where governments are requiring residents to shelter in place.
WeWork could also face a cash crunch in the near future. More than a quarter of their members are on month-to-month leases and could choose not to renew during the crisis. And its biggest investor SoftBank Group Corp. is threatening to unravel a $3 billion stock buyback scheduled to close next week, which could block WeWork from receiving an additional $1.1 billion in debt it was counting on.
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