Billions of dollars have already flowed to the purveyors of shared workspaces, and the investment spigot isn’t turning off yet.
CommonGrounds Workspace, a San Diego, CA-based company that operates flexible office spaces in California and Colorado today, announced Wednesday that it had raised $100 million in a Series A financing to expand its lineup to roughly 50 sites during the next two years.
The company says the new money comes from three investors: CommonGrounds’s seed-stage backer, a local real estate investment firm; an Emirati real estate magnate; and the family office of the founders of Davidson & Associates, a now-defunct educational software company.
CommonGrounds is headquartered in the San Diego community of Carlsbad, a North County suburb. It opened its first-ever flexible office space in 2016 in Bluwater Crossing, a luxury live-work apartment complex designed by San Diego-based real estate investment firm Pacifica Enterprises. Pacifica provided the company with its seed funding, and participated in its Series A financing, according to CommonGrounds. (The company has not filed any confirmatory documents with regulators.)
Its other backers are Mohamed Alabbar, founder and chairman of Emaar Properties, the Dubai, United Arab Emirates-based real estate company that developed Burj Khalifa, the world’s tallest building, and the Davidson Group, the organization that manages investments and philanthropy for Bob and Jan Davidson. The couple sold Davidson & Associates, the software company they founded in 1996—known for its best-selling online games for students, such as Math Blaster—and left the merged company about a year later.
Fueled by the fresh cash, CommonGrounds is laying plans to open more than 40 new sites by the end of 2020. That includes more in California, and new locations in Texas, Oregon, Utah, and Minnesota.
Co-working spaces have mushroomed in recent years in tech hubs around the world, and are often thought of as places for early-stage entrepreneurs to conduct business alone or with small teams—without being encumbered by a long lease agreement—before moving up and out to a bigger, more professional space. Some companies have pitched the potential for serendipitous meetings with other professionals as part of the benefit of working in close quarters with strangers.
However, many companies in the highly competitive sector also actively court established businesses, which are generally a more stable source of revenue.
WeWork (which recently rebranded as the We Company), is the best-known of the bunch. Its rapid global growth has been fueled by massive investments from backers including the Japanese conglomerate SoftBank, which WeWork said this month put in $6 billion.
In addition to shared workspace, WeWork advertises personalized spaces and private offices for “the world’s largest companies,” and its clients include the tech behemoths Salesforce (NYSE: CRM), Microsoft (NASDAQ: MSFT), and Facebook (NASDAQ: FB).
CommonGrounds says it can accommodate companies “of all sizes and growth trajectories,” but appears to be tailoring its pitch toward established businesses rather than solo entrepreneurs. In its prepared remarks Wednesday, the company described itself as an “enterprise-grade” business that offers “workspace-as-a-service” (yes, abbreviated WaaS). It has partnered with Tecna, an Italian company, to outfit its offices with easily movable wall systems so it can reconfigure the spaces as needed.
Its CEO, Jacob Bates, has extensive experience managing big portfolios of commercial property, having previously overseen the global real estate holdings of companies including San Francisco, CA-based video game developer Unity Technologies; Beaverton, OR-based athletic apparel giant Nike (NYSE: NKE); Bloomfield, CT-based managed healthcare company Cigna (NYSE: CI); and Los Angeles, CA-based commercial real estate investment firm CBRE (NYSE: CBRE).
Currently, CommonGrounds has four locations: three in California—in Carlsbad, Long Beach and San Jose—and one in Denver, CO. About a year ago, the company said it would have eight new sites open by the end of 2018, but since then has only opened three.
The company says it has already leased a total of about 260,000 square feet, and identifies eight locations on its website that will open this year or this winter. The offices are in downtown San Diego; the Los Angeles-area cities of Brea and Burbank; the Texas cities of Ft. Worth and Houston; Portland, OR; Salt Lake City, UT; and Minneapolis, MN. A company spokesperson said it will also add a third location in the San Diego area this year.
The company also said Wednesday that will use the new financing to develop 35 additional U.S. sites, although it didn’t reveal where. Those, it says, will open late this year and in 2020. Altogether, within two years, CommonGrounds says it anticipates operating about 2 million square feet of flexible office space.