When a steam pipe in New York’s City’s Flatiron district exploded in July, many of the surrounding buildings were shut down for several days. Dan Reich, CEO of Troops, a company that makes automated collaboration software for sales teams, couldn’t get into his office.
“We would have had to work from home,” he told me. “We had nowhere to go.” Luckily, he says, he was renting his office through WeWork, and so he dispersed his team to desks across the coworking network for the week. Troops is the first company to take advantage of a new WeWork offering for medium-sized companies. Rather than renting an office or a floor at a WeWork proper or having WeWork build and operate a previously leased office space, as it does for enterprises, companies with 11-250 employees can now get an individual office space through WeWork. Think of it as WeWork à la carte.
The service, now called HQ by WeWork, officially launches today. “For the longest time we’ve been enabling companies to take full floors at a WeWork, but it was kind of a hack,” says Dave Fano, head of growth at WeWork.
To accommodate mid-sized businesses, WeWork is leasing spaces in realm of 5,000 to 6,000 square feet, as opposed to whole buildings. Companies that lease these spaces through WeWork will have a membership to the whole WeWork platform, enabling them to, say, book conference rooms outside their immediate office or attend WeWork sponsored events. WeWork will also maintain the office spaces it rents. The company will handle cleaning, plant watering, and coffee services. Unlike with its other properties, there will be no full-time staff member on location running the office. The product is pitched as a slimmed-down version of a typical WeWork. “We’re calling it ‘service light,'” says Fano.
Part of a larger plan
Around the country, small businesses—defined as having one to 500 employees—are getting more profitable, according to a 2017 survey from the Federal Reserve Banks. “It comes down to providing education on managing personal finances, encouraging greater transparency in lending practices, expanding access to capital, and breaking down barriers to procurement opportunities,” wrote New York Fed president William C. Dudley at the time.
Through its network, WeWork is hoping to provide more such educational services, helping companies with marketing and/or sourcing new customers. Last October, it purchased New York-based coding bootcamp Flatiron school with the intention of eventually offering classes to its 268,000 members. Creating a new menu of service for medium-sized business appears to be the next layer of its plan to help businesses grow.
Reich began to look for a new office when his company hired its 20th employee. At the time, Troops was three years old and renting a small office inside a coworking space on 68th Street and Madison Avenue in Manhattan. Though his company was growing, Reich didn’t want to commit to a long-term lease. He had considered expanding into a WeWork, but found that he couldn’t get the privacy he needed. So, the story goes, the WeWork team offered him the opportunity to try out this thing they were working on, now called HQ by WeWork.
Since getting on board with WeWork, Reich says he been relieved that he doesn’t have to waste his time in the minutiae of running an office, like figuring out which speakers to buy “so we can listen to music throughout the day,” he says. WeWork does that. He also didn’t have to negotiate a lease, design the space, or hire a cleaning service. He just has to focus on running his company.
It’s easy to see how someone could get used to the conveniences of such an arrangement, which speaks to the crux of WeWork’s strategic thesis: Get them hooked when they’re running a young, scrappy company, and keep them for life. In the WeWork life cycle, it may start with hot desks, “because it’s super cheap and they have no money,” says Fano. But as these startups grow, WeWork wants to shepherd them to the top, from five employees to 50,000. And when a company has gotten so big that it’s ready to expand internationally, Fano says, “They’ll use WeWork and go through the whole cycle again.”
Of course, there are risks to working with mid-sized companies that aren’t necessarily profitable and don’t know where their next check is coming from (or when it’s coming in). WeWork typically asks companies to sign a one-year lease and 90-day vacate notice. But it also has account managers who do quarterly reviews with companies to think through their spacial needs. That means adding services or, in some cases, downsizing. Fano says WeWork is happy to move people around within the platform.
And what if one of these companies goes kaput? That happens, says Fano, and WeWork fills their spot. “There’s pent-up demand,” he says.
Fano thinks HQ by WeWork will be especially popular in tight real estate markets like Tokyo or Hong Kong, where it is hard to get an office space at all, let alone for a good price. For now, HQ by WeWork will be available in New York, San Francisco, Toronto, and London.