One wouldn’t expect to hear too many good news about companies in the coworking space industry ever since the WeWork debacle earlier this year. Going from a valuation of $47b down to the more realistic $10b, the best-known brand in the industry that called itself a tech company despite being a rather modern real estate business, caused a lot of concerns in the sector. Yet, as it turns out it doesn’t have such a tremendous spillover effect and investors are still in the space. The latest evidence is the Bulgarian coworking management software startup OfficeRnD that has just raised a new round of $3m.
The round is led by Hungarian fund Flashpoint Venture Capital, and Launchub Ventures, one of the first investors in the company participated as well.
Fuel to speed up the exponential growth
In the past two years, the company has been growing exponentially expecting to reach annual recurring revenue of $2.5m in 2019. It currently has more than 500 customers, operating over a thousand flexible office locations globally and serving over 100k members. In a nutshell, OfficeRnD develops an ERP system for flexible offices that automates processes like billing and resource management, leaving more space for activities like community building.
The new funding will be used to enhance the product by automating key business processes and speed up the growth of the company by expanding the sales team, reads an official statement. “We will make our member-facing tools 10 times better than what’s on the market, including WeWork’s own member apps and portals. We will make our clients stand out from the crowd with the best digital experience they can provide to their members and customers,” tells us CEO and co-founder Miroslav Miroslavov. He himself seems optimistic when it comes to further growth potential – neither the WeWork debacle nor the expected recession could have dramatic effects on OfficeRnD’s business, he says.
“We have already started to see that some of our clients are looking to expand into prospect WeWork buildings, which is good. Landlords are also looking more into creating their own brand and making it right. This is good for us,” the CEO tells us. Contrary to many expectations that the expected recession will affect negatively the flexible office industry, Miroslavov is confident that it might even have the opposite effect. From his experience, during a recession, there’s a drop in the demand for flexible workspaces for a month or two, following by a massive jump. He says the reason for that is the fact that many companies consider using flexible workspaces in shaky times and are less willing to sign long-term leases.
Fundraising in times of WeWork
The negative experience Japanese SoftBank made writing down $9.2b over WeWork, hasn’t scared the European investors away. Miroslavov told us he didn’t experience any fundraising difficulties strictly related to the failure of the coworking giant. “Coworking and Flexible workspaces are here to stay and one bad example doesn’t change the perception much. In fact, we see a good pickup in some of our clients that will take over some of the void space out there. The demand for flexible workspaces is growing faster than ever and this will continue with or without WeWork. In fact, the industry is thankful that they spent billions on marketing and educating the world that flexible working works,” he comments.
“The transformation in this industry is happening now and we are happy to continue being part of OfficeRnD’s journey,” is confident also Todor Breshkov, Partner at LAUNCHub Ventures, one of the first investors in the company, that leads also the current round. According to a recent report by Zion Market Research, the global flexible office market was almost $27b in 2018 and is expected to generate around $111.7b by 2027, at a CAGR of around 17.1% between 2019 and 2027. The market for shared and flexible offices will grow to 30% of the entire office market in the next five years, told us Miroslavov in an earlier conversation.
“We looked into the market and we were very impressed with Miroslav and the OfficeRnD team, which managed to build a market leader in the US and UK markets, incubating their R&D team in Bulgaria. With our investment they will be able to scale their R&D and Sales team further to be able to service even more happy customers,” comments Alex Konoplyasty, Managing Partner of Flashpoint Venture Capital. Currently, OfficeRnD’s strongest markets are the US (40%), the UK, Europe, and New Zealand, where the company also has its offices.
A good year for the company
Earlier this year, the company won the US Coworky award for being the best tech to run space at the international Global Coworking Unconference Conference. Of course, we asked the logical question – why the startup didn’t go fundraising in the US, since this is one of its strong markets. “Having customers in the US is a must-have for any company that wants to raise in the US. But this is not the only prerequisite. US investors are also looking to have a significant team presence in the US too, which includes key people from the company and even some of the founders. At this early stage, we decided that it’s better to stay in Europe for just a little longer and then, raise the next round in the US, when we have stronger company foundations,” explains Miroslavov.
In 2019, OfficeRnD also won the Best Startup in Bulgaria recognition at the Central European Startup Awards, and was selected as part of the first cohort of companies at the Bulgaria Innovation Hub.