The trend for co-working — in which startup founders, corporate employees and freelance workers park their laptops and rub shoulders in well-appointed offices at hip locations — has swept the world in recent years.
In 2007, there were just 14 such spaces globally. A decade later, there were more than 14,000, according to research from co-working group GCUC, which sees the total hitting 30,000 by 2022.
And nowhere is the potential greater than in China, where a thriving startup scene, boosted by a well-funded venture capital industry, has encouraged young people to dream of making billions as the next Jack Ma.
WeWork, the US co-working startup backed by Softbank, first entered the Chinese market in 2016 but is seeking to fast-track its growth by acquiring smaller Chinese counterpart Naked Hub (branded "naked Hub") in a $400 million deal, two people familiar with the situation told FinanceAsia on Thursday.
The deal underlines the appetite for shared offices in the world’s second-largest economy. It's also a sign the office-sharing industry is maturing, as it is only the second M&A deal in the history of the sector, according to Bloomberg data. It's also a relatively rare example of a foreign company buying a Chinese rival — after the likes of Uber and McDonald's opted to sell their China interests in recent years.
The acquisition is a signal that WeWork aims to speed up its expansion in China after it raised $500 million last year from a Hony Capital-led consortium.
In a blog post on Thursday, WeWork’s chief executive Adam Neumann explained his decision to acquire the three-year old Chinese company, citing their shared philosophies and visions of the future.
“At the center of it all is the power of human connections. And making a connection with another person is about treating them as they would like to be treated. The golden rule,” he wrote in the blog. “In that regard, good hospitality, technology, and design are the pillars of the future.”
WeWork already has a presence in China, having developed its business in key cities like Shanghai and Beijing since 2016, but it wants to expand into other major Chinese cities to compete with major local rivals such as Ucommune, which rebranded from its original name UrWork because of WeWork’s trademark infringement lawsuit. Beijing-based Ucommune, China's largest co-working provider, is backed by Alibaba’s Ant Financial and Sequoia Capital.
WeWork currently has about 10,000 members across 13 locations in mainland China and Hong Kong. It aims to have 40,000 members in 40 locations in China by the end of 2018.
A US-based spokeswoman at WeWork declined to comment on the price it paid for the Naked Hub deal.
In its most recent fundraising round in August last year, WeWork raised $4.4 billion from Softbank’s Vision Fund and the sovereign wealth funds of Saudi Arabia and Abu Dhabi, valuing the shared office provider at $20 billion.
It is the company's second acquisition in Asia after its purchase of Singaporean company Spacemob in August last year.
OFFICES OF THE FUTURE
The concept of shared offices originated in California's Silicon Valley as startup entrepreneurs sought out cheaper alternatives to traditional office leasing. As the Chinese internet industry booms, so more college graduates and ordinary Chinese will want to be the next Jack Ma of their generation by starting their own business, thus creating strong and growing demand for co-shared offices.
Both WeWork and Naked Hub lease offices from landlords and offer hot desking deals to its members, who range from startups to corporates.
“The values we share toward creating a vibrant community for our members by using design, technology, and hospitality are core to how both companies are successful,” Grant Horsfield, chairman and founder of Naked Group, said in a statement.
Founded by Naked Group in 2015, Shanghai-based Naked Hub is backed by Hong Kong-based private equity firm Gaw Capital and serves 10,000 members across 24 workspaces globally. Naked Hub is the co-working unit of Naked Group, a 11-year-old luxury resort and design company.
About 200 Naked Hub employees will join WeWork’s 250-strong staff in China.
In July last year, Naked Hub agreed to merge with Singapore’s JustCo, but the proposed merger fell apart due to differences in expectations that emerged during the due diligence process.
