WeWork’s Rumored $3Billion: Good News for the Industry, Says Jamie Hodari

Published on March 13, 2017 - By Cecilia Amador

Several news outlets reported last week that WeWork is likely to get at least $3 billion in funding from Japan’s SoftBank Group.

Allwork spoke with Jamie Hodari, CEO and Co-Founder of Industrious, to learn about what this means for other flexible workspace operators and what WeWork’s next move might be.

“Despite how quickly coworking has become the workplace mode of choice for most small and growing businesses, it’s still a very young industry,” Hodari said. “The reality is, there are really few very sophisticated players in the market that have a meaningful and unique product vision, strategy, and sense of who their core customer is.”

“WeWork is one of those players, and is by most angles the most sophisticated player in the shared workspace market. As a result, I have an enormous amount of respect for them.”

According to Hodari, WeWork getting the alleged $3 billion from SoftBank is good news for the workspace-as-a-service industry as a whole. “The way I think of it is like this: to gain a shared office customer, you need to educate them about the benefits of working in a shared setting; then you need to convince them that you’re their best option among the shared office operators. The former of these (educating people about the benefits of shared workspace) is the more labor intensive, time intensive, and expensive part. So as WeWork grows (and gets more funding), they are out there doing a lot of the visibility and education work for the industry as a whole, which has a really salutary effect on demand in general.”

Clearly, Hodari doesn’t feel threatened about WeWork’s funding and its potential growth. He did, however, mention some concern about WeWork’s model and how the increased funding might affect their product and service offerings.

More funding and more investors means that more expectations need to be met. “Where this new funding gets complicated is that I think customer-centric businesses do best when they have a clear sense of who their core customer is and how they serve that core customer. WeWork’s valuation is so high right now that they don’t really have much of a choice than to be everything to everyone. It will be interesting to see as time goes on how they will try to fullfill that promise. Because it’s a very difficult, if not impossible, thing to do (being everything to everyone).”

With this in mind, Hodari also speculated that WeWork is likely to change its current operating model.

“It’s really hard to deploy $3 billion via the traditional leasing model that WeWork has used. I would even go as far as to say that it’s almost impossible. This validates their shift towards buying buildings, as this enables them to better ‘take a crack’ at what the office building of the 21st Century should be like. By buying the buildings they operate from, they can deliver on this 21st Century office building promise more efficiently and they can also better deploy the capital that they are raising.”

What this means for the industry

“I think, and I’ve said this before, that what you’ll see is that there’s going to be a consolidation of the industry and some of the core performing operators will come under a lot of pressure; in part because there are, for the time being, cities and neighborhoods where there isn’t enough competition yet.”

“In the future, it’s almost inevitable that there will be a WeWork in striking distance from most operators. Those workspace operators that have strong products, loyal customers, and top services will be fine; but the ones that can’t or don’t do that will eventually find themselves in a lot of trouble.”

What about Industrious?

We couldn’t let a conversation with Jamie Hodari go without prying into what Industrious is up to. Here’s what we were able to find out:

“We have  a very large wave of openings beginning this April, with two locations opening per month, moving to three new locations per month starting at the end of the Summer.”

As for funding rounds of their own, Hodari commented: “we do have some fundraising and M&A activity to announce in the next month or so.”  In other words, we’ll be hearing exciting news from Industrious in the near future, and  we are almost sure that we can expect them to keep on growing and reaching new markets.