NEW YORK (Reuters) - Coworking start-up Industrious said on Tuesday it raised $80 million to help double its number of sites to up to 60 this year and grow its roster of corporate clients as shared office space makes further inroads into U.S. commercial real estate.
Industrious said it expanded its footprint to 25 U.S. cities in 2017 and grew revenue by 150 percent annually over the past three years, and it now has the largest nationwide U.S. coworking network behind WeWork and IWG Plc (IWG.L), known formerly as Regus.
“The hardest thing in this business is to plant a flag in a new city. Everything takes twice as long and costs more to acquire customers,” Jamie Hodari, co-founder and chief executive of Industrious, told Reuters.
“If you look at the rest of the industry, they’ll go very deep in one city because it’s a lot easier than going and trying to do first-time locations,” he said.
Coworking is meeting the corporate demand for lower costs and more flexibility in leases, a workforce that is more entrepreneurial and tenants that care more about community and the environment, according to a recent study by Yardi Matrix.
Coworking firms typically sign 10-year leases and then offer short-term or monthly contracts to companies that want more flexible office space for their changing employment needs.
The industry is forecast to grow to more than 6,000 sites by 2022 from less than dozen a decade ago, according to Emergent Research and GCUC.
New York-based Industrious has now raised a total of $142 million after the Series C, or third round of fundraising, the most of any U.S. coworking firm besides WeWork, according to database Crunchbase.
At the moment, coworking accounts for just a fraction of U.S. office leases. But WeWork has been the largest leaser of office space in Manhattan the past three years, and large developers or building managers such as Hines and Equity Office, owned by the Blackstone Group (BX.N), are actively seeking coworking partners.
“Now is the time when people are picking partners. They’re going to pick which provider they’re going to double down with,” Hodari said, referring to corporations that over the past 12 months have experimented with coworking.
Industrious currently expects to have 35 sites open by April and from 50 to 60 locations by year’s end as it mostly expands within the cities where it is now established.
The firm plans to increase its footprint in New York, Los Angeles, Atlanta and Dallas, and expects to soon open multiple locations in both Boston and San Francisco, tech-centric cities that are not currently part of its U.S. network.
Lead investors in the latest fundraising round were Riverwood Capital and Fifth Wall Ventures. Investors also included Wells Fargo’s Strategic Capital, private wealth firm Schechter Private Capital and Rabina Properties, among others.
Hodari expects revenues to triple this year, and then double to triple in 2019, but he declined to discuss an exit strategy from the company’s fundraising. If the firm were to go public, it should be big enough to do so in two years, Hodari said.
Industrious has 135 employees and expects to hire 80 people this year. It counts Chipotle Mexican Grill, Lyft Inc, Fullscreen Inc, Hyatt Corp, Instacart, Pandora Media Inc and Square Inc as corporate clients.
(This story corrects to say revenue growth was annually in paragraph 2)
Reporting by Herbert Lash; Editing by Daniel Bases and Leslie Adler