Knotel targets WeWork’s top spot in flexible offices

WeWork has set the pace in the flexible working sector, but relative newcomer Knotel is gaining ground, with plenty of cash in the war chest and some big ambitions. EG spoke to its co-founder Amol Sarva may well be the human antidote to all-black, T-shirt and blazer-wearing WeWork founder Adam Neuman. When EG meets Sarva, co-founder of Knotel, he is dressed in a top hat and gold and red jacket. And sartorial style isn’t the only win Sarva wants over WeWork. He wants Knotel to take as much market share in Europe from WeWork as possible. New York-based Knotel was over in London recently on a week-long client networking event, culminating in a circus-themed bash at Covent Garden cabaret bar Circus, complete with fire breathers, contortionists and endless platters of sushi and glasses of champagne. It goes some way to explaining Sarva’s outfit – so too does his decidedly non‑real estate background. Technology entrepreneur Sarva has worked in many other sectors, from neuroscience to telecoms, but saw an opportunity to deliver a service-driven offering focusing on leasing office space, furnishing it and subletting it back to companies under flexible terms for a mark-up. And so, in 2016, Knotel was born. The firm has already raised $160m (£126m) and is out for a Series C round of funding for $200m. The Kuwait Investment Authority is said to be one of the main investors in discussions for the round. With plenty of investment, the business is raring to go and has made no secret of its desire to lease more buildings than WeWork in major cities. So far, Knotel has done this in New York (100 buildings against WeWork’s 60). In terms of floorspace, Knotel still has some work to do to catch WeWork. It occupies some 2.2m sq ft, versus WeWork’s 5.4m sq ft. “I think by September we will be in more properties than WeWork in London,” says a confident Sarva. “They have been in business for nearly 10 years, whereas we have been doing it for three and have already leased more buildings than them in New York and we are close here. We will just do that in other cities and then we will stop caring about it.” The circus around flexible working and who will be the ultimate ringmaster is far from over yet, so EG sat down – between fire-breathing acrobats – with Sarva to find out more about Knotel and what makes it different from the host of other flexible space operators trying to take the biggest slice of the pie. EG: How did you go about launching this business without industry experience? AS: I don’t know a lot about property. I came to it from a clean, naïve starting position and I had some questions: Why do people pay a lot of money for something, take possession of it and then find it just doesn’t work and they need to spend another six months on construction. It doesn’t make sense. If you bought an iPhone and it was delivered to you and then you had to assemble it, you’d be a little bit upset about that. But somehow in the world of offices and real estate it is normal. We are trying to transform that. EG: How disruptive is your company? AS: I think it’s a little tricky to show up and say you have to change everything. It’s a bit confrontational and negative. Some people who work in this area want to say: “We are disrupting everything. Owners, screw you; we are going to buy buildings that compete with you. Brokers, forget about you; we are going to start our own brokerage. Companies pay us whatever we ask because we are the best thing.” It’s not a friendly posture. What’s happening has actually created a benefit for all of us. Owners have an opportunity to make more money; brokers can do their work and get paid faster; companies can save money. There is a benefit for everyone, but I haven’t heard others talk that way. EG: Which tenants do you work with? AS: We work with the largest companies in the world. We serve big US tech firms such as Buzzfeed, Microsoft, and Oracle. We are still figuring out how to create offices for law firms, which need different kinds of offices. I don’t think we have a single legal client yet. EG: How is your approach cost-effective? AS: I think the confusing thing for most people is how you manage to fit out space on a short lease to one client, before having to overhaul it to suit another client. We think of that problem statement as an opportunity. If people want something that is hard, and you can find a way to do things that are hard, then maybe you win. So yes, we do that. We help companies get the place they want, including set-up, fit and design in the way they want. Imagine setting yourself in a way where you’re very happy to be fired every day from your job. It’s a difficult thing but we are creating a business that benefits from change. If you do the thing that is being asked – instead of fearing it and hiding from it – then that can be transformational. Many people in the real estate business say, “Oh you want change? Well that’s not possible. I want a very long obligation from you and an investment commitment.” EG: What is different about Knotel compared with other start-ups you have been involved in? AS: I have been involved in about 100 different companies and I started maybe 10. I was an investor or adviser in the others. Of the 100 companies I have been involved in, things don’t always work out. Maybe half of those are not around any more. Knotel is bigger than anything I’ve ever been involved in and it’s growing faster and it’s in a bigger market. EG: How do you think Knotel will fare if the market takes a turn? AS: Life in London has been weird for two years and it is not over. We are 10 times bigger now than we were a year ago. Despite the political uncertainty, our business is doing well. It’s not a boom‑time market, it is terrifying – but our business and our colleagues in similar businesses are doing great in London during Brexit. EG: Why do you think some start-ups fail? AS: There’s a line from Tolstoy – “Happy families are all alike; every unhappy family is unhappy in its own way”. All failed companies are the same but each successful one is interesting and unique in its own way. A handful of explanations explain 95% of failed cases: nobody wanted the product, the founders of the companies couldn’t get along, or the investors and financial community wasn’t there. When companies do go well there’s never a recipe or formula or anything. Each company is a special story or a surprise, a thunderbolt from the mountain top. Knotel vs WeWork London 50 WeWork’s number of buildings 3.4m sq ft WeWork’s office space 18 Knotel’s number of buildings 240,680 sq ft Knotel’s office space New York 60 WeWork’s number of buildings 5.4m sq ft WeWork’s office space 100 Knotel’s number of buildings 2.2m sq ft Knotel’s office space To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette