Can’t coworking be a real business ? (takeaways from the Austin Unconference)

We are poor, but we are happy !

Raines Cohen, our “Coworking Coach”,was holding out his iPad displaying this phrase in front of the crowd, during the wrap-up session of the Coworking Unconference in Austin, on March 10th 2011.

Basicaly, it summed up one of the general feeling that surfaced during an afternoon of workshops.

In Austin, coworking spaces owners and coworking catalysts from all the United States shared opinions and tips about coworking community management, coworking spaces business models, the place of coworking in the future of labour, the rise of a new generation of nomad workers and so forth…

Altough coworking is firmly growing all around the world,  it has, so far, not demonstrated is was a very profitable business.

In Austin, some coworking space owners conceded that, if they had indeed reached the financial breakeven, they often had to give up their own compensation. Fullfilling the passion for connecting people with each others and build the local community is a sufficient reward for some of them. Others say they keep a second professional activity to secure a complementary revenue.

Question : how sustainable is that kind of “altruistic” model on the long run ?

A few weeks ago, Citizen Space, once the flagship of the coworking movement in San Francisco, announced it was closing its doors, due to an unbearable decrease in membership…

According to Emergent Research, a research firm on Small Businesses, mentioned by Deskmag, the annual morbidity rate of coworking spaces in the US is 20%.

Why is coworking less profitable than business centers altough it offers better care ?

“That’s weird. What makes that a coworking space is less profitable than a business center, whereas, in general, they offer a more valuable service : the building and management of a community of likeminded people…”

We had this discussion with the representative of one of the conference’s sponsor.

What would be the solution ? To increase the price of subscription as opposed to the tariff of business centers ? Doesn’t a better service deserve a higher fee ?

Public support, community funding,…

As a matter of fact, we heard of different business model in Austin.

First, public authorities, it appears, are more involved in the funding of Coworking spaces in the US than we would think in Europe.

Gangplank in Chandler (Arizona), is a non profit organisation designed for coworking. The association got a 400.000 $ grant from the local authorities. Entrepreneurs and freelances aren’t even charged for working in the space.

CoHabitat, based in Shreveport (Louisiana), is another example of a publicly funded coworking space.

“It’s nothing but normal, we are doing the job of economic development agencies”, tells CoHabitat.

If public funding can provide the kickoff seed, other funding models exist. Some coworking spaces, for instance, launched community subscription, crowdfunding or micro-lending to start up. The model seems to generate a lot of engagement within the community. It’s not specific to the US. In Europe, for instance, The Hub Brussels raised money twice via its network of careholders.

Can/should coworking be a real business ?

Though, we may think that all coworking spaces aren’t able to create such a commitment  from their local community of fans.

Does it mean we aren’t seeing as much coworking spaces creation as coworking spaces entrepreneurs wish to open ? Who knows…

Though, we are not taking much risk assuming that lack of business objectives could limit the expansion of coworking around the world, to the expense of entrepreneurs, freelances and open minded workers who are massively looking to experience and benefit of entrepreneurial ecosystems…

Coworking can definitely expand as a business. There are today evidences.

New Work City, for instance, in Manhattan, attracted the sponsorship of the Pearson group. The company has found a great value in coworking.

“Pearson plans to tap into NWC for talent, get feedback on our digital products, and potentially partner or invest in some of the community’s startups”, writes the press release.

NextSpace, in Santa Cruz (California), has opened a new era for coworking. The company just raised 425.000 $ from investors.  NextSpace (280 members) is already operating two spaces and is planning to open up three more in California.

NextSpace is offering a bunch of other services on top of a desk and connections. It seems to increase its its revenue stream.

New Work City and NextSpace, as well as many other coworking spaces we met in Austin, are fiercly commited with the values of coworking (openness, collaboration, connection, engagement, sustainibility, sustainability…). They ackowledge that community is the most important dimension in coworking.

Next to non-profit coworking spaces, it seems there is definitely room for for-profit coworking spaces. The latters are likely to speed up the development of the coworking movement, for the good sake of the movement.

What could we learn From an European perspective ?

The maturity of the coworking market is slightly higher in the US than what we can observe here in Europe.

The US experience is very instructive. Based on the evolution of the North-Amercian coworking movement, we can open up the debate already and boost our level of awareness about the growth of coworking in our European countries.

We should definitely try to avoid a 20% close down rate in the European coworking market…

Jean-Yves Huwart
Coworking Europe 2010 conference

3 responses to “Can’t coworking be a real business ? (takeaways from the Austin Unconference)

  1. Great post Jean-Yves!

    I just wonder if we should really focus on avoiding a 20% close rate? In my opinion we should focus on serving the needs of coworkers in a city best and not on keeping coworking spaces open for their own sake.
    I think right now we should focus on experimenting and having the opportunity to stop early, when the model doesn´t work out. Closing is not equal failure. It just shows that we are in a very dynamic prototyping phase and that the one proven, solid business model that works best in every situation isn´t there yet. And probably never will be there. From the coworking spaces that had to close down in germany we learned e.g. that people who want to run a coworking space should be aware of the fact that they need a coworking community before they open up a space. We learned that location is very important. We learned that you need people how are motivated & have the skills to run intersting events, etc. If people open up coworking spaces who can´t deliver on most of these “must haves” they will have to close down their spaces again. And that´s okay.

  2. Thank you Peter.
    Close or fail quicly! I buy that.
    The 20% threshold is more of a symbol.
    As a matter of facts, I think we can avoid the waste and disappointment of a failure for a number of coworking initiators if we repeatedly stress on the “must have” you are underlying.
    These last months, I met some very passionated people who are eager to launch a coworking space. Howevern they aren’t aware, at all, of the community building inherent to the coworking concept. Nor are they of the economics of coworking…
    Bringing more analysis and understanding in the coworking will be beneficial for the whole community.

  3. Pingback: Coworking « The Hub Brussels

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