For tech industry observers, coworking giant WeWork is the perfect symbol of the bubble that we may or may not be in right now.
The New York-based company—which operates coworking spaces in 12 U.S. cities, as well as locations in the U.K., Israel, and the Netherlands—raised $433.9 million in its latest funding round at a whopping $10 billion valuation, the Wall Street Journal reported in June.
That’s a colossal amount of money for any budding company, let alone one whose business is tied to both the real estate market and the fortune of startups. Those two sectors can crash quickly, as we watched play out in the 2008 financial meltdown and the popping of the dot-com bubble in 2000.
Take Boston. WeWork opened two locations here last year. London-born TechHub chose Boston’s neighbor, Somerville, for its first U.S. coworking space in March. Washington, DC-based Cove expanded to Boston last month with a space in the Back Bay, and it’s planning to open another one in Somerville’s Union Square this month.
All told, Xconomy found 36 coworking spaces located in the city of Boston and its two startup-heavy neighbors, Cambridge and Somerville. (See our map below.) That includes 25 offices open to individuals and startups in any industry. Eight spaces are focused on specific sectors or types of tenants, from fintech to healthtech, and from women-owned businesses to creative professionals tackling social justice issues. Finally, we identified three “makerspaces,” facilities that typically give hobbyists, engineers, students, and others access to 3D printers, laser cutters, computer-aided design software, and more tools they need to design and build products.
Click on the markers to view each office’s name, address, prices, and website. The offices are grouped into three color-coded categories: general coworking space, sector-specific incubator, and makerspace. (If we missed any, please drop me a line.) We also highlighted the subway system’s Red Line to show how many spaces are popping up along that route.
The classic coworking model allows freelancers, remote workers, small startups, and others to rent desk space or a small office, usually paying by the month. They get access to things like Wi-Fi, printers, conference rooms, coffee, and other office essentials without having to sign a more expensive, long-term lease. Sometimes the offices, like those run by WeWork, are tricked out with perks (think beer kegs and ping-pong tables). And one of the unquantifiable benefits is the potential for collaboration or sparking ideas just by working alongside people from different companies or backgrounds.
It’s not a new concept, of course, but these shared spaces are peaking in popularity thanks to technological advancements allowing for more people to work remotely, increased interest in entrepreneurship and working for startups, and, for those currently working from home or the corner coffee shop, an escape to a more stimulating environment.
The big question is, how long can all these coworking spaces survive? If and when there’s a pullback in VC investments, when startups die off and demand for shared offices dips, will we see more of them in Boston join the likes of Betahouse and the local outpost of Dogpatch Labs in the coworking space graveyard? (Yes, there were prominent coworking spaces in the area before the current wave.)
An economic decline could spell trouble for companies like WeWork, says Andy Palmer, a Boston serial entrepreneur and angel investor. He likes WeWork, and the company he currently leads, Tamr, housed its California employees in a WeWork location for two-plus years, he says.
But “the cost of these short-term leases is when there is a downturn and demand slacks off, these people can just leave,” Palmer says.
Smaller coworking spaces have less financial upside because they can’t sign up as many members or tenants, but the flipside is they won’t get hit as hard in a market slump, he says.
Palmer understands the economics of running a coworking space better than most. In 2012, he founded Koa Labs, a group of several small offices totaling 15,000 square feet in Harvard Square. The “startup club” allows companies to rent space and also houses companies that have received investments from Palmer.
Currently, Koa’s tenants include about 40 people working for three companies, Palmer says. He tries to break even with Koa, but “we probably lose money on a regular basis,” he adds.
“I’m not in competition because I’m just not trying to do anything scalable with Koa,” he says. “It’s a boutique thing.”
Palmer is a fan of smaller shared spaces like Cove. That’s because big ones can feel like a factory that’s trying to industrialize the startup process, whereas startups are more a “personal and idiosyncratic thing,” he says. “I just believe that startups are best done in these more intimate environments.”
Palmer thinks Boston would be best served by a series of spaces spread among different neighborhoods along the subway system’s Red Line, which touches the city’s busiest startup hubs, including Kendall Square in Cambridge and the Seaport District and Downtown Crossing in Boston. And if you look at the map, that strategy seems to be playing out.
Boston’s neighborhoods “all need good, solid coworking spaces because they all have startups and founders that want to do startups in these areas,” Palmer says. “It’s healthy to have these short-term lease options in every one of these areas.”
That’s essentially the model that Cove has implemented in Washington, DC, and will now try to replicate in Boston. The idea is to create a network of “neighborhood productive spaces” throughout the city that offer an alternative to working from home, a traditional office, or a coffee shop, Cove co-founder and CEO Adam Segal says.
“It’s about creating spaces where you live,” co-founder and technology advisor Jeremy Scott adds.
Cove likes to avoid using the words “work” or “office,” Segal says, partly because some of its members are working on fun side projects that they wouldn’t describe as work, and also because people associate coworking spaces with startups. “We want to be more inclusive of a large swath of society,” he says.
Walk into your neighborhood Cove, and you might see a lawyer doing some paperwork between meetings, a graduate student writing a paper, or, yes, a small team working on their startup. If you have business that day in another part of town, you can pop into a different Cove space because your membership gives you access to all of its locations.
One thing that could help set Cove apart from the crowd of shared-office options is its efforts to foster community among its members. Cove’s app allows users to see who has checked into each location, and it also has a social networking component that allows members to message each other. Furthermore, the company hosts events to encourage camaraderie, such as gatherings to pitch ideas and group outings to see local theater performances, Segal says.
“When you wrap everything together, it’s a different type of experience,” he says.
Segal declines to share membership numbers or financials for Cove, which has raised nearly $3 million from investors since its founding two years ago. But he says Cove has gotten a “really good response in Boston” and is continuing to expand in Washington, DC, with plans to grow from eight spaces to 10 there.
It won’t happen overnight, but the goal is to have a similar footprint in Boston, Segal says.
“We’re definitely a young business,” he says. “We’re looking to see where the demand is.”