Shanghai-based co-working startup naked Hub has closed a $33 million funding round led by Hong Kong’s Gaw Capital to build on its China-based vision of a shared office future, according to statements by Gaw Capital and naked Hub executives.
With six of its co-working “hubs” already established in Shanghai, the offshoot of resort developer naked Retreats has announced that it will put this funding round to work building 20 to 30 new branches by the end of 2017.
In an exclusive interview with Mingtiandi, naked Hub CEO Jon Seliger explained his company’s vision of the future of co-working for naked Hub, China and the Asian region.
A Market Three Times the Size of Manhattan and More
naked Hub, which has ramped up quickly since establishing its first hub in Shanghai one year ago, will need friends like Gaw Capital, and a big supply of cash, if it hopes to win the China co-working competition.
In less than 12 months, co-working in China has gone from afterthought to mainstream with everyone from $16 billion powerhouse WeWork, to headline grabbing developer SOHO China, trying to get in on the act. WeWork recently closed a $960 million funding round last month to fuel its own expansion, with Chinese companies taking a leading role in the investment.
For naked Hub, the size of the China opportunity makes the challenge worthwhile.
“Shanghai is three times the size of Manhattan and while the per capita GDP is less, the market has a lot of opportunities,” Seliger said. “You have the government promoting entrepreneurism; you have them offering incentives for starting a business and obviously these companies will need somewhere to call home. This is good for the co-working sector as a whole and we see room for growth in China’s first and second tier cities.”
To leverage the mainland’s opportunities for scale, naked is making sure that the co-working culture that developed in the US appeals to Asian companies.
“Currently we are 60 to 70 percent Chinese and that is the direction it is going,” the former luxury brand executive pointed out. Seliger also stressed the varied nature of the businesses choosing to be based in naked’s hub. “It’s also a diverse crowd. It’s young and old. It’s worth noting that our space isn’t dominated by any one industry unlike many incubators or accelerators that often feature a tech-centric membership.”
And with this round of funding naked Hub is ready to expand its vision of co-working beyond the Shanghai city limits.
“We are looking for opportunities across China as well as outside of China,” Seliger made clear. “It seems like locations such as Hong Kong and Singapore can support multiple co-working operators and we are looking at these places next year. In 2018, we are examining opportunities deeper into Southeast Asia, Australia and even India as well.”
Aiming To Be At The Top Of The Co-Working Pyramid
While naked Hub is aiming for scale, the company says it hasn’t headed down-market to build its numbers.
“We’re at the top of the co-working pyramid, offering a premium product,” Seliger told Mingtiandi. “In the long term, people will flock to quality, community and service and these are what we strive to build at naked.”
The pricing for naked’s offerings bears out its willingness to go for the top end of the market. While members can get access to hot desks in the company’s centres for RMB 1800 per month, a fixed desk starts at RMB 2800 per month and goes as high as RMB 4800 per month in some locations. Traditional offices with actual doors cost still more. By comparison, fixed desk space at WeWork’s location in Shanghai, which opened in July, goes for just under RMB 2800 per month.
Despite leading the way on pricing, Seliger sees the company’s co-working centres as presenting good value. “Co-working is clearly more affordable and flexible than other office options. It’s scalable too. No deposits. No long-term contracts. None of that.”
Besides the potential cost saving, naked promotes their centers as a community-based way of doing business, such as members might find in the US startup scene. “We have the same vibe as you would find in New York or other co-working spaces in the world,” Seliger noted. “People come here for different reasons. For some, it’s the location. For others, they can join a community right away. The people and companies here do business together and connect with one another.”
Big Centres for Major Clients
While co-working conjures images of scrappy startups run by recent graduates, naked Hub and its competitors are gaining traction with corporate tenants as well.
Based on the company’s experience with its earlier centres, naked’s location in Xintiandi — which opened last month — was designed to accommodate teams from large corporates, as well as individual entrepreneurs.
“This hub is somewhat different than our other locations,” Seliger explained. “We have seen data that shows people are going for larger teams so we decided to create some larger spaces here since the location is more geared to more established companies.”
In recent months the company already closed a 41-seat deal with financial advisory firm Towers Watson, and advertising heavyweight WPP has 40 people working from the naked Hub on Fuxing Lu.
“MNCs don’t need their entire team to be at Grade A office tower or someplace expensive. They can be working from just about anywhere in the world, so it makes sense to put them in a co-working space where they can save a bit of money and also have their team in a more collaborative environment to get their creative juices flowing.”
And even in its centres geared towards entrepreneurs, naked is attracting “hubbers” from an industry universe that extends far beyond building websites and crunching code.
“Tech companies only take up 25 percent of our space. They are the largest group, but we have a diverse group from all backgrounds. There is no one single industry that dominates and that is one thing that helps us build our community.”
naked will need those big clients if it hopes to fill its planned portfolio of centres. The 700 desk, four-storey Xintiandi centre is naked’s sixth hub and is already 40 percent leased after opening early last month. The company plans to bring its number of centres to seven by the end of this year with a soon to be opened location on Shanghai’s Xikang Lu.
Even the Xintiandi location will be dwarfed, however, by “the Mothership,” a 1500 desk location in the business district of Gubei. In that centre, just west of the Shanghai’s busy downtown, the company is adding F&B operations and a “co-wellness” offering to help add to its lifestyle appeal. The Gubei location will play a key role in helping naked reach its target of 20,000 to 25,0000 hubbers by the end of 2017.