Knotel’s $60M Round Further Validates Popularity Of Flexible Workspaces

Flexible workspace operator Knotel has raised $60 million in what it describes as a “corporate funding round” led by Norwest Venture Partners in the latest deal in the popular space.

Back in August, I looked at how a new generation of alternative workplace startups were hoping to give coworking giant WeWork a run for its money.

New York-based Knotel, which designs, builds and runs custom HQs for companies, is one of those firms. This round brings its total venture raised to $160 million. Besides Norwest, existing investors Bloomberg Beta and commercial real estate brokerage firm Newmark Knight Frank participated in the latest financing.

In April, Knotel raised in $70 million in a Series B round that was led by Newmark Knight Frank and The Sapir Organization and included participation from The Wolfson Group, The Moinian Group, and Wainbridge Capital.

Overall, equity funding in coworking surged to just over $7 billion in 2017 compared to $233 million in 2013; however, a significant chunk of that VC and PE money ($6.16 billion to be exact) was raised by WeWork and its Chinese subsidiary. So far in 2018, startups in the coworking sector have raised $3.11 billion in equity-only VC and PE funding. But we’re also seeing a different trend: about 83.5 percent of that $3.11 billion, or $2.58 billion to be exact, was raised by companies other than WeWork.1

We updated the key chart from August and this is what the funding landscape now looks like.

More Room To Grow

Knotel doesn’t just build custom headquarters for companies. It also manages the spaces with flexible terms. Back in August, Knotel operated over 1 million square feet across 60 locations in New York, London, San Francisco and Berlin. It now operates more than 1.7 million square feet across nearly 100 locations, according to a company release. The company also said (in that same release) that it’s on track to exceed $100 million in revenue run rate by the end of the year.

As of August, Knotel had more than doubled its headcount to 150 employees. During that same period, revenue had increased by 300 percent, the company told me back in August.

Knotel plans to use its latest capital infusion “to deepen its coverage in current core and new markets among mid-market and enterprise businesses,” it said in a release.

Norwest Managing Partner Jeff Crowe will take a seat on Knotel’s board as part of the latest financing.

“Agile workspaces represent the next generation of corporate offices, and Knotel is the clear leader of this movement,” Crowe said in a written statement. “The Knotel team has the innovation and drive to transform the commercial real estate world towards this vision of flexibility, speed, and transparency.”

Increased funding for flexible workspace operators should come as no surprise considering that the segment has been growing at an average annual rate of 23 percent since 2010 and is expected to make up nearly one-third of the commercial real estate (CRE) market in 12 years’ time, according to a recent report by Jones Lang Lasalle Inc. We’ll likely see more companies vying to give WeWork a run for its money.

Illustration: Li-Anne Dias

  1. This being said, WeWork has raised the lion’s share of total funding in 2018, but most of it was debt financing.

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