A co-working space designed by MyDreamPlus, China. (Source: MyDreamPlus Technology Co Website)

WeWork China Rival Raises $120 Million in Hillhouse-Backed Round

(Bloomberg) -- Beijing MyDreamPlus Technology Co. Ltd. raised $120 million in a funding round led by Hillhouse Capital and General Atlantic as competition in China’s co-working market heats up.

The money will be used to fuel expansion as the three-year-old startup targets more than doubling its floor space in the next 12 months. The financing comes just weeks after the Chinese unit of WeWork Cos. said it was raising $500 million to boost growth in the country. MyDreamPlus plans an initial public offering in about three years and declined to disclose its valuation.

MyDreamPlus is among a host of mainland startups competing with WeWork to secure buildings and lure tenants. Co-founded by Li Wenlei, the Chinese company has 37 locations that it tailors for local tastes, including making its system for booking meeting rooms compatible with the country’s ubiquitous WeChat messaging system.

“You have to constantly evolve your products while serving a wider customer base to win in China,” Li said in an interview at one of the company’s co-working spaces in eastern Beijing.

The company has about 300,000 square meters of office space and will add 100,000 square meters in each of the next four quarters. It also has an engineering team of more than 100 in Chengdu to develop automation such as the WeChat-based booking system to reduce labor costs. Among the local touches are dedicated areas for some of its clients, including a restricted working area for a unit of a state-owned enterprise.

Li said the average gross profit margin for the company’s offices is around 30 percent currently. While MyDreamPlus has 25 locations in Beijing, it also has spaces in Shanghai, Chengdu, Hangzhou and Xi’an.

“We choose well-developed areas for our offices so our tenants can have better access to public transportation or restaurants,” he said.

WeWork said this month it plans to add as many as 50 new locations in the Greater China region by the end of this year. It’s raising funds beyond China at a rapid clip, most recently getting $1 billion from SoftBank Group Corp. in the form of a convertible note.

While competition remains fierce, investors are gaining more confidence in the sector, according to Liu Haojie, an analyst with iiMedia. The industry consultant expects shared office platforms to generate as much as 60 billion yuan in revenue this year.

“The cash-burning period is behind us now, major players are competing for a stronger operational ability or more services with added value,” Liu said.

To contact Bloomberg News staff for this story: Gao Yuan in Beijing at ygao199@bloomberg.net

©2018 Bloomberg L.P.

With assistance from Editorial Board