Startup Street: India’s Largest Co-Working Startup Is Almost Profitable (No, It’s Not WeWork)

This week on Startup Street, we have India’s largest co-working space startup that is just about to achieve profitability and how it plans to sustain it. Attrition in startups exceed the outsourcing industry’s record-breaking rates seen a decade ago. Shekhar Purohit of a consultancy firm called First Mumbai tells how this can be curbed. And the ‘Startup India Yatra’ is coming to Maharshtra this week. Read on...

India’s Largest Co-Working Startup Is Eyeing Profitability

Awfis—India’s largest co-working space provider with 1.5 million square feet under 55 centres—is eyeing profitability in October 2018.

And that’s thanks to an Oyo-like strategy of shared ownership, keeping itself asset light and risk averse, Chief Executive Officer and Founder Amit Ramani told BloombergQuint.

Founded three years ago, Awfis has grown over four-fold over the last one year from 5,800 seats to 25,000-plus seats, with its revenue showing a similar jump.

“Awfis takes a different route than any other industry player, we're more value driven and are betting on that for a much larger market share,” Ramani said, differentiating the company from the better-known brand WeWork. Moreover, “the Awfis product is well attuned for Indian market and not merely a copy of a global model,” he said. “It's designed keeping in mind the business challenges and needs in the Indian business ecosystem.”

To sustain growth and become profitable, Awfis plans to double its presence in India over the next year by expanding into tier-II cities like Jaipur, Chandigarh, Ahmedabad, Bhubaneshwar, Kochi and Indore. It's currently operating at nearly 90 percent of its capacity.

“Intense competition among shared workplace operators is leading to rapid expansions," said a report by Cushman & Wakefield. “We foresee the current ramp-up stage to continue for the next couple of years.” The Industry is set to reach a valuation of $2.2 billion by 2022, Ramani said citing multiple reports.

Awfis will use its latest funding of $20 million that it raised from Sequoia Capital, TTS:IO and Innoven Capital for these plans, Ramani said. It received $11 million and $40 million during its inception and over the last year and half, respectively.

Why ESOPs Probably Won’t Help Curb Attrition In India’s Startups

Indian startups are notorious for their attrition rate which is known to be higher than that seen in business process outsourcing firms a decade ago.

Startups currently witness an attrition rate of around 50 percent, said Shekhar Purohit, founder and managing director of First Mumbai Consulting (who gives a much benign picture compared with some media reports). That’s twice the rate seen in well established firms.

That being said, ESOPs (Employee Stock Ownership Plan) are not the best way to bring this attrition rate down, he said.

The workforce in most startups comprises fresh faces. Attrition among employees with less than 2-3 years of experience is as high as 70 percent compared with 15 percent for those who have been in the industry for over 10 years, Purohit said, citing in-house data. “The primary reason for this difference is that junior employees expect instant gratification in the form of additional remuneration unlike experienced employees.”

They often prefer immediate monetary rewards which allows them to upgrade their lifestyle, rather than locking themselves into a long-term investment.

But cash-strapped startups may not always have the option to raise salaries. Purohit laid out a four-point plan which might be a better alternative to ESOPs.

• Offer a rewarding experience: While money matters, a rewarding and holistic work experience is very important today.
• Mentoring: Mentoring and providing regular access to the senior leadership for career development boosts the confidence of junior employees.
• Create a culture of transparency and treat employees as customers: If a firm’s communication is better, its employees are more likely to develop a sense of belonging and feel that they are a part of the firm.
• Intangible Benefits: Offering financial support for important events in an employee’s life such as marriage, higher education, advanced medical benefits, memberships at gyms, etc.

The Startup Yatra Is Coming To Maharashtra

Prime Minister Narendra Modi’s Startup India programme—which has been scouting for promising entrepreneurs and ideas across the country—will reach Maharashtra on Oct. 3.

The ‘Starup India Yatra’ is literally just that. A van equipped with facilities for individuals and startups to pitch their ideas will travel across 16 districts with 23 stops and 14 bootcamps. Entrepreneurs are meant to record their pitch in these vans for the government to choose from. Winners will receive support and mentorship to make their ideas tangible.

The yatra is coming to one of the largest startup ecosystems in India after Gujarat, Uttarakhand, Uttar Pradesh, Odisha, Madhya Pradesh, Chhattisgarh, Jharkhand, Andhra Pradesh and Telangana.