May 03, 2017
Holden Page is a Crunchbase News editor and columnist.
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Coworking has become normal for the modern class of workers with an entrepreneurial mindset, and those who eschew traditional offices in favor of remote work.

For the coworking masses, coworking spaces typically offer coffee, desks, member-tailored events, and more, making the office environment a central hub of startup and early-stage technology activity in an area.

The growing trend has not been lost on venture capitalists, who are interested in more than merely how you work. They want to invest in where you work as well.

Coworking’s Rapid Growth

If it’s starting to feel like coworking spaces compete with your local Starbucks on every block, you aren’t losing your mind. Over the past half decade, the number of coworking spaces open has rapidly grown.

According to Deskmag, the number of coworking locations has grown globally from 1,130 spaces in 2011 to 13,800 in 2017. And due to coworking spaces setting up shop in ever-larger spaces (such as the Grain Exchange Building in Minneapolis), allowing for the accommodation of ever more members, global membership jumped from 4,300 members in 2011 to nearly 1.2 million in 2017 according to the same data set.

Aloma Loren Murray, the founder of Eugene Mindworks, credits the growth to “independent contractors, sales reps, freelancers and startups who are looking for a place to work out of and connect with others.”

It also doesn’t hurt that WeWork, a very well known tech unicorn, has received $3.69 billion in funding. The coworking giant has also actively popularized the term coworking according to Jewel Mlnark, a co-founder of Workfrom, which helps remote workers find the best coworking spaces to work out of in their area.

“Now that we’ve had a word for coworking for 20 years and WeWork has popularized it, not only are we seeing more spaces emerge, we’re seeing people who now know it exists and to look for it,” Mlnark told Crunchbase News.

The coworking trend has even infiltrated big box stores looking to reinvent themselves. In partnership with Workbar, a Boston-based coworking space, Staples has set aside space for coworkers in three of its stores. And according to Entrepreneur, “more than 200 people have signed up for the memberships.”

We know WeWork is well funded, but just how interested are venture capitalists in the coworking trend?

Coworking Is Popular, But VCs Have Put Their Eggs In One Basket

Despite rapid growth in the sector and some very large rounds into a single player in the space, the venture capital story for coworking companies isn’t overly bright.

According to Crunchbase data, over $4.8 billion dollars has been put into US-based coworking spaces since 2013. It’s a big number, but not as big as you might initially think.

For every year since 2013, WeWork’s funding rounds account for at least 93 percent of the coworking industry’s yearly venture haul. Inclusive of its $1 billion secondary market offering, WeWork has taken a little over 96 percent of total venture funding in the space, as the chart below starkly shows:

(Note: Crunchbase data tracked a total of 50 investments in the coworking category. Traditional real estate investments into coworking spaces were excluded in this dataset.)

Funding for the category, while growing on a year-over-year basis, is largely predicated on WeWorks’ outsized—for the category—funding rounds.

The number of deals and dollars included in the coworking sector grew for years, but given WeWork’s leadership in the category, it’s hard to state with complete certainty that the sector as a group is performing well in terms of driving new investment.

When looking at coworking from a venture capital perspective, it’s safe to say, for now, coworking is WeWork and WeWork is coworking.

When Coworking Isn’t Just WeWork

Even though WeWork has raised the grand majority of funding in its niche, some venture-backed coworking spaces have found their place serving specific verticals. Here are a few coworking spaces which have found funding in WeWork’s wake.

  • The.Wing. A coworking space based out of NYC, The.Wing is made exclusively for professional women. Inspired by “the heritage of Women’s Club movement of the late 19th century,” The.Wing has drawn in $10.5 million funding from the likes of Kleiner Perkins Caulfield & Byers and Girls Ventures. And according to Marguerite Ward, who wrote about her experience in the women-only space, The.Wing also excels at “facilitating networking.”
  • Fuigo. Made for interior designers, Fuigo is based in New York and is not exclusively a coworking space. It also provides interior designers a cloud-based project management and accounting software. You cannot simply buy the software. Instead, you get it through a series of membership tiers, of which studio space is included in one of the tiers. The concept has landed Fuigo $1 million in seed funding and raised an additional $3 million in debt financing.

There are also a number of other startups in the coworking category that aren’t tied down to physical locations. Both LiquidSpace and Pivotdesk allow you to book office and meeting space on the fly.

There has also been a rise in coworking startups who provide memberships to multiple spaces in any given region. One such startup, Croissant, offers a $99/month pass to 40 coworking locations in New York City, Washington D.C., and Boston. It’s an idea that receiving $125k in seed investment to do so. And it’s a concept that Darren Buckner, the other founder of Workfrom, anticipates will grow as coworking spaces attempt to compete with WeWork’s footprint.

Workplaces Of The Future

There’s little doubt that coworking will continue to grow. Whether VCs will be the major driver of new players in the space and the growth of its larger players in coming years remains to be seen.

And while WeWork’s massive funding rounds have certainly helped to popularize the coworking concept, the hold it has held on funding in the space potentially limits other startups attempting to innovate in the coworking space.

Illustration: Li-Anne Dias