Singapore-based co-working space Spacemob has closed $5.5 million seed funding round led by venture fund Vertex Ventures, specifically Vertex Ventures Southeast Asia. Other primary investors in this round inlcude angel investors in the property and hospitality industries and Alpha JWC Ventures from Indonesia, according to Spacemob.
The co-working space startup was started by Turochas “T” Fuad who also founded Travelmob, a vacation rental site that was acquired by HomeAway in 2013. It differentiates itself from its competitors by approaching co-working with a new business model and by developing proprietary technology to benefit members.
Vertex Ventures, which is a network of funds which Temasek Holdings backs as a limited partner (LP), typically invests in early stage IT and healthcare opportunities in China, Silicon Valley, India, Israel, and Southeast Asia. It has invested in firms like Waze, 91 Wireless, Grab, IGG, CyberArk, Reebonz, SolarEdge, Force10, FirstCry, Yatra and Changba.
Proceeds from this investment are to finance its vision of having 30 sites across the Asia Pacific by 2019. Last month Spacemob launched its first 15,000 sq. feet co-working space in Singapore on Claymore Hill. Another two Spacemob sites are due to open in first quarter of 2017 in Singapore and Jakarta.
Fuads’ business vision of how to run co-working spaces is set to be different, in terms of taking a management approach to co-working — where Spacemob works on a model not unlike that of a hotel operator — enabling an asset-light model while generating strong benefits for involved parties. Fuad claims this creates a financial model that is easily scalable yet lower risk in nature.
Commenting on this, Fuad says: “What this means is that the more successful Spacemob is, the more yield the property owners get out of the space. In an age where commercial and retail properties are finding it difficult to find tenants, Spacemob offers them a unique way to get the most out of the space that they have. This in turn benefits the new workforce who seek more flexible work environments. Think of us as hotel operators, just one that offers a co-working management service instead.”
This translates to a model where if Spacemob is more successful, it enables a higher yield for property owners, particularly at a time when commercial and retail properties are finding it difficult to find tenants.
“The idea is to allow our members to work at any of our Spacemob sites around the region, which appeals not just to frequent travelers and creatives, but also to SMEs and MNCs who wish to be more asset light — we add value by helping them to save on rental cost while allowing them to put their staff in a more dynamic and creative environment,” Fuad adds.
However, the addition of the latest co-work space to the growing network of spaces in the city-state raises the question of whether these coworking spaces can continue to remain viable. Will there be enough business ventures being formed and entrepreneurs being trained to meet the demands of co-work spaces?
An oversupply in office space has driven a sharp decline in rentals, with more office space expected to come onto the market in the coming years even as commercial property in the city-state currently faces a gloomy outlook.
According to one DBS research note, approximately 5.4 million square feet of office net lettable area (NLA) will be completed within Singapore’s downtown core between 2016 and 2018; translating into a 16 per centincrease in existing stock, or a three-year compound annual growth rate (CAGR) of 5 per cent.
Co-working is appealing, in terms of the financial and networking benefits for businesses based in a co-working space, as well as the working collaborations that can emerge from the business clustering the occurs when these companies interact.
SpaceMob seems intent on targeting both startup ventures and small & medium enterprises (SMEs), with its aim to be an Asia Pacific player. This is a positive development, given that the city-state is struggling with excess office space.
In fact, by establishing connections with new businesses and SMEs with regional ambition, Spacemob is likely to see dual growth emerge from this pattern, growing in conjunction with its tenants. In addition, its expansion both locally and regionally will offer landlords the opportunity to engage in renovation to rejuvenate older office properties.
According to Zuu Online, commercial vacancies in Singapore are predicted to rise again, growing from 7 per cent to about 10 per cent, due in part to companies in finance, commodity and chemical industries suffering from financial hits. However, this is not fully reflected in the real estate footprint of various enterprises yet.
Speaking on the investment, Chua Kee Lock , Group President and CEO, Vertex Venture Holdings, said, “Spacemob stood out from other co-sharing players in the market because of their business model and regional expansion plans. With Mr Fuad’s background and track record in the sharing economy, we are confident that Spacemob will be a rousing success story.”