Workers using computers at their desks are reflected in a glass door inside Tech Temple, a co-working space for start-up companies sponsored by Infinity Ventures Partners, in Beijing, China (Photographer: Tomohiro Ohsumi/Bloomberg)

Startup Street: Co-Working Spaces Are In Vogue This Year

This week on Startup Street, we look at how the idea of sharing an office is gathering pace in India. The two early-stage Indian startups that have earned recognition from the World Economic Forum. And what lies ahead for Oyo as it expands its international footprint.

Hey, Do You Wanna Share An Office?

Late to the party, Indian startups are warming up to the idea of working out of shared offices like never before, the demand for which has seen an exponential rise in 2018.

In the first three months of 2018, co-working offices took up 2 million square feet space, surpassing the tally for last year, according to a report by real estate consultancy Knight Frank. That number is set to triple over the next three years, the report said.

“India is at the cusp of a co-working revolution with several large players spread across the country,” the report said. “There are close to 200 co-working players running an estimated 400 shared workspaces across the country today.”

Bengaluru, NCR and Hyderabad that witnessed the highest co-working transaction activity during the January-March quarter.

Globally, co-working spaces are a mainstream phenomenon in developed markets like the U.S., U.K. and European countries, with many startups opting to share an office instead of leasing one. They have been growing at an average 54 percent per annum since 2010. Knight Frank estimated that the cost per desk of being based out of a co-working space is at least 5-15 percent cheaper than renting out a commercial office.

People work inside a shared office space in Los Angeles, California. ( Photographer: Patrick T. Fallon/Bloomberg)

In India, things have just started getting interesting. Belgium's IWG Plc, formerly Regus, is the most well-established shared workspace operator with 2 million square feet of space under operation. However, newer players like WeWork, CoWrks and office are starting to get aggressive and accounted for a large chunk of the transaction activity in 2018.

Yet, co-working spaces in India account for paltry 4.4 percent of the annual commercial office space transaction volume. “Despite the demand, there are several challenges that have to be tackled,” Knight Frank said. That includes impediments such as a “conventional mindset” and privacy concerns.

Corporate occupiers thus tend to lean toward co-working space with contained floors or spaces within the facility to overcome this risk and will move to managed solutions for significant scale operations.
Knight Frank

The concept is gaining acceptance as perceptions change. Approximately 50 percent of the clients occupying Indian co-working space are big corporates, according to Knight Frank. And this can go as high as 80 percent in more premium priced offerings, it added.

Oyo’s Eastern Expedition

Budget-hotel startup Oyo has expanded its footprint to China, making its third foreign foray.

Oyo launched operations in 26 Chinese cities, including Hangzhou, Xian, Nanjing and Guangzhou, with a chain of over 11,000 franchised or managed rooms, it said in an emailed media statement. “With this launch, Oyo Hotels is all set to substantiate its leadership in the market.”

Ritesh Agarwal, founder and chief executive officer of Oravel Stays Pvt, owner and operator of Oyo Rooms (Photographer: Prashanth Vishwanathan/Bloomberg)  
Ritesh Agarwal, founder and chief executive officer of Oravel Stays Pvt, owner and operator of Oyo Rooms (Photographer: Prashanth Vishwanathan/Bloomberg)  

This comes after Oyo had set up shop in Nepal in 2017, and Malaysia in 2016. It claims that business there has “grown multi-fold”.

The country’s (China’s) tourism industry is flourishing and enjoys a strong influx of both domestic and international tourists, Ritesh Agarwal, founder and chief executive officer at OYO, said in the statement. “Also, the market is as fragmented as in India."

Cracking China isn't easy, with the presence of a developed home-sharing industry that involves the likes of Airbnb and Tujia. Despite operating without a chief in China, Airbnb has boosted listings by 125 percent to 200,000 compared to last year. It has not disclosed sales growth but has pledged aggressive investments in China, according to Bloomberg. However, local player Tujia, backed by China's largest travel operator Ctrip.com, is leveraging their knowledge of local conditions and giving fierce competition.

But Oyo has one of the most eccentric dealmakers on its side: Masayoshi Son. The chief of SoftBank has faith in Oyo, as was evident at the annual general meeting of the company earlier this week. “It is another wonderful company. I would really like to introduce this company to all of you. The founder, as of today, is only 23 years old. It is amazing. He is so powerful,” Son said in his address.

Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp. (Photographer: Akio Kon/Bloomberg)
Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Group Corp. (Photographer: Akio Kon/Bloomberg)

Son said that SoftBank will support Oyo’s growth in China as well. “There is a monthly increase of about 10,000 rooms booked for a night. It's the biggest player in hotel business. Oyo is being supported by us in the form of a joint venture.”

Son's love for Oyo has reflected in investments by his $100 billion Vision Fund. Last year, Oyo had secured a $250-million funding round led by SoftBank. According to Crunchbase, which aggregates information on startups, SoftBank has invested a total of $440 million in Oyo over three funding rounds.

Two Indian Startups Named In WEF’s Tech Pioneers List

Ahmedabad's My Crop Technologies and New Delhi's SocialCops have featured in the World Economic Forum's Technology Pioneers list, a cohort of 61 early stage firms that will stand a chance to visit the annual meeting in Davos, Switzerland.

WEF has recognised startups that are “pioneering new technologies and innovations ranging from the use of artificial intelligence in drug discovery, the development of autonomous vehicles, advancing cybersecurity and reducing food waste, to applying blockchain to a decentralized engagement platform”, it said on its website. The startups will become part of a two-year journey where they'll engage in WEF's activities and events around the globe.

MyCrop Tech, founded by Deepak Pareek in 2016, is a machine learning-based platform to help farmers with insights, expertise and resources to increase their productivity, and profitablity, WEF said. "It helps farmers reduce the costs of cultivation by using good agricultural practices and information customized for each farmer."

The other startup Social Cops, founded by Prukalpa Sankar in 2013, is using data intelligence to clean up organised data. “SocialCops is a data intelligence company on a mission to solve the world's most critical problems, such as cleaning up unorganised data,” WEF said. “The platform overcomes the immense challenges of dirty data in emerging markets and transforms them into intuitive insights and better decisions.”

The selected startups will meet at the WEF Annual Meeting of the New Champions 2018 in Tianjin, China, in September. Some of them will also participate in the WEF Annual Meeting 2019 in Davos in January, the statement said.

The Technology Pioneers programme has been running since 2000. The companies selected by it in the past include Google, Airbnb, Twitter, Spotify, Twitter and Wikimedia.