By end-2019, just before the pandemic, the market for Coworking spaces was spread over some 30 million sq. ft, with 471,782 seats across the top seven markets in India, per JLL Research data.

In December 2022, the numbers grew to 50 million sq. ft and 750,000+ seats. In the next three years, the co-working space market in India is set to cross the 1-million-seats mark spread over 75 million sq. ft. WeWork India is the leading provider of flexible workspace solutions with almost 70,000+ seats across 44+ locations in India.

In this episode, we have Karan Virwani, CEO, WeWork India, talking about his experience of bringing and scaling WeWork in India, over the past 7 years. Karan brought WeWork to India in a partnership tie-up with his family’s Embassy Group. Starting business operations in the country with 100k sq ft, WeWork India has progressed to 6.5mn sq ft as of today. Within 6 years, WeWork India has grown from 2,200 members in WeWork Galaxy, Bangalore, to 44 locations across 6 cities in India today – Bengaluru, Mumbai, Gurugram, Noida, Hyderabad, and Pune

During the episode, Karan shares the ups and downs in their journey, especially during Covid, and how they tackled the situation which helped them build goodwill and scale back faster post things normalized. This podcast is for anyone who wants to have an insider view of India’s growing Flex workspace market.

Notes –

00:00 – Highlights of the conversation

01:34 – Intro to Karan Virwani, WeWork, and Global Co-working phenomenon

02:27 – Bringing WeWork to India

09:36 – Why not start under the Embassy brand name and why start with WeWork?

12:16 – Borrowing the DNA of WeWork Global to India

13:37 – Scaling to 40+ WeWorks and 70,000+ Desks in India

15:57 – Back into Growth mode post Covid

17:14 – Having multiple landlords for Pan-India growth

18:39 – Initial investment & roadblocks in their journey

24:43 – Plans for WeWork IPO in India

25:33 – Coworking customer segment in India v/s Global

33:16 – Coworking as a culture amongst Traditional & Legacy companies

34:05 – Operating in a certain price segment

36:44 – Partner-led approach during Covid

40:01 – Sector-wise demand of commercial real-estate

43:07 – Hitting $1 Bn revenue in 3 years

43:38 – Coworking as a % of Commerical Real Estate in India

 

Read the full transcript here:

Karan 0:00

We are finally back into growth mode after the pause that we took during the COVID. We’ve always had to take space from other landlords and today DLF, Prestidge all of these guys are some of our biggest landlords and we have great relationships with them. In June of 2020, actually, right in the middle of the pandemic, we got that 100 million dollars in funding, which honestly was like a lifeline to the business. We were in a very, it’s one of those near death scenarios that a lot of other startups go through. It is a reason why we are so profitable, we’ve been so focused on our unit economics from day one, when these large companies came in, and they saw Wow, my employees are really liking this. And I don’t have to worry about doing employee engagement because we were doing all these events for the building, we had pop up quizzes on Friday, we had free pizzas randomly on a Wednesday and the employees were very happy. Today a company’s workforce doesn’t operate in the same style that used to be the case before. It will be very different for SaaS companies, very different for banking services companies. And it’s very different for a startup that is being founded in 2023, versus a startup that was even founded in 2019.

 

Siddhartha 1:34

Hi, this is Siddhartha Ahluwalia. Welcome to our podcast. Today I have with me Karan Virwani, CEO of WeWork India, Karan welcome to the podcast.

 

Karan 1:42

Thank you so much for having me.

 

Siddhartha 1:43

So WeWork is a phenomenon that started in the last 10 years. WeWork in the global Coworking movement. People opting out of offices with free desks, and they can move out. The flexibility of having an office that you can scale and downscale at your wish. And today, in the last 10 years, it’s become a $16 billion global market. In India it is almost touching $1 billion by revenues in this market. And it’s been phenomenal how this market has grown, how people have adopted how enterprises have adopted, and I think the Embassy group started this with WeWork global to bring WeWork in India in 2017, you were one of the pioneers, let’s dive into the story. How did you get convinced to start WeWork in India?

 

Karan 2:33

So actually, more than the flexibility part of coworking, which is a flexible work, which is now what it’s become, I think the fundamental shift that was happening was Millennials or the new generation of people coming into the workforce felt like they needed something more from their work environment than just a row of desks or those cubicles that used to kind of be there, if you entered some of the older offices where no one was able to speak to each other people were very, like bifurcated. And the new generation actually started to want more about what was in the office. And so a lot of the large companies like your Googles, Facebook of the world, in those days started coming out with these really cool offices, you heard about, slides and like offering food and all of this other stuff in order to basically attract a lot of the good talent and the best talent to kind of be retained.

 

And these were the Silicon Valley offices, I think that was a trend that we saw or at least WeWork so early on, and was able to kind of create that into a model which allowed for a place that felt inspiring where you come into every day, you also have a community of other companies and people that you can connect with, so your time at work isn’t just about working and also has a social element to it. And the flexibility of it, with really smaller businesses or while building a business is unpredictable.

 

And you could have multiple cycles in different industries as well. Whereas real estate was the static type of product or asset class, which had you the only one way to consume it was long term leases, and landlords used to control a big chunk of how those leases are kind of structured and the tenant was almost at the beck and call of the landlord so when I was actually in college and in my last year of university or even maybe before that I’ve always been entrepreneurial in the way that I have loved working for the money that I got for some reason even though I’ve grown up in a pretty well to do background, but something about that always excited me as in a business family I got to see my father build a business from a small scale business to a really large business. So it’s always ingrained in me to have a little bit of an entrepreneurial edge.

 

So in my last year of university, I had already started working on my first business, which was a hospitality business. We have a bunch of restaurants around the city that continue to operate. And while I was doing that, along with a partner of mine, that’s when I really saw in India, the hardships, or like the difficulties of building a small business in India, from an infrastructure standpoint, we had to take a few desks in my dad’s existing Office, there are no offices that you could get, I used to do meetings at coffee shops, or rented apartments where these companies were working out where we would design, get someone to design a logo and things like that. And then I did that for a few years, and I then went to work with my father in the real estate space with the Embassy group.

 

There I got exposed to doing these large business parks for companies like Google, Microsoft, IBM, really large multinational companies. And there’s such a stark difference between the quality of real estate or the offices that these large companies were working in. And then in contrast, where a lot of the Indian startup ecosystem was working, and this was around 2013-2014. So Flipkart had just raised the $16 billion round and you could feel the energy, at least in Bangalore, of so many startups, so many stories, and like this crazy entrepreneurial vibe.

 

So that’s when the idea to set up small space within some of the larger developments that we have, and aiming for smaller businesses came up, and me being maybe, kind of new into very traditional business, and like just a little bit of young energy, I wanted to try to do something which was very different from whatever we had been doing in the company. And that’s when I made a presentation to our management team about this type of business model. And it’s also the same time I actually started to learn a lot about WeWork and what they were doing in the US. Through that journey, we ended up actually having to travel to New York for some complete other work. And we went into a WeWork for the first time actually, entered WeWork to see what it was about. And that was like a life changing moment, I got hit with this free beer. It was like you walked in, and it was something very out of the ordinary, you would never expect office to be like, people were really happy, there were events going on, there was like a buzz of energy, there was so many different interesting companies, I was just reading logo names, through the different offices, and there was just so many different companies that were there.

 

So it all caught me by a bit of surprise. And we knew at that time, it was me and my dad, who were the’re doing this walkthrough, and it was, I didn’t have to say anything, he didn’t have to say anything, we kind of knew that this is going to transform the way that office is done. And it was a lot of simple things that they were doing very differently, which a lot of people could have thought about, but no one packaged it and put it together that way. And that led to us, trying to convince them for a partnership. And what happened was that global WeWork was busy plotting out their international expansion.

 

So Europe had just begun. They were looking at Partners in China and we’re trying to expand in China. India was nowhere on the priority list as of right now. It was a developing country and the prices were never gonna be that high. There’s always this perception in the western world that doing business in India is so tough, you’re never gonna make money. China is a much bigger market, etc. So because of that, we had to finally come to what ended up becoming the first ever franchise model for WeWork where we say that we will take the plunge, we will invest money, we will grow the business under the WeWork brand name. And you guys will see that India’s a good market for this product. And so that’s what we ended up doing. And that was six or seven years ago. That’s how it all started.

 

Siddhartha 9:36

But your dad owned the Embassy group. So you could have done it under the Embassy brand name. Why did you get a WeWork brand name?

 

Karan 9:44

I get asked this question a lot. And especially now because of everything that’s going on or has gone on with WeWork but I think it holds good even today that many developers even in the country or everywhere else have tried to do this business or replicate this business and none of them have been successful is because I think it was easy for me to see that what WeWork has done is more than just building out space and renting it out, it was an entire DNA and cultural shift that needed to happen. So there was something about the way that design married with technology married with the hospitality and service layer that they had built, which I knew was very hard to replicate, it’s like saying why can’t you just operate four seasons brand under like a different brand and expect it to be four season, it is not ever going to be four seasons, because four seasons has that DNA, the way that you hire people is different, the way that your design ethos is different. And that was a very similar thing with WeWork.

 

And last thing, I think what I felt was going to be a huge value was the global network, that companies are going to want to be way more global. And my dream was that WeWork India should be able to allow Indian companies to become global by making the power of infrastructure, and like the convenience and the ease of building a business so easy that, becoming a global business was extremely easy, just through WeWork like, and we’ve had so many stories where companies have found partners around the world, they’ve found vendors for their products around the world, they’ve moved cities, even because WeWork was able to kind of provide them with an office there with easy access to infrastructure, or people or a network that could allow them to build their businesses globally, which earlier was not so easy you would have had to go to Singapore, find a small office for yourself, find a network of people you can trust. Whereas at the WeWork community, the network was already there. So the trust was kind of already there, the barrier of trust was built already, even between the companies that are within our space. So that continues to be a vital part.

 

Siddhartha 12:16

Were you able to borrow the DNA from WeWork global to India?

 

Karan 12:20

I think a lot of things we did, one of the things was, as very particular thing that I saw with other brands was that, just because it came to India, they used to automatically dilute the quality of the brand, even the way the store would look, all of that stuff just because India’s cheaper and so you have this free float to dilute it, we were very particular that the product and the service level that you get here will be almost exactly or better than if you travel to the original WeWork in New York, we focused a lot on hiring based on culture, and WeWork is and continues to be a very mission driven company.

 

So we focused on making sure that we hired strictly for culture, especially in the early days. And we actually also spend a lot of money sending people or having people trained in other markets for extensive periods of time before they even come and start working over here. So I think a lot of those things worked and credit to WeWork also, they had brand guidelines and entire things documented on how to do everything. And we were able to just kind of copy that.

 

Siddhartha 13:37

So the first WeWork you built in 2017. And how many seats was it, if you remember?

 

Karan 13:44

2200.

 

Siddhartha 13:45

What time did it take you to build the second and third?

 

Karan 13:47

The second and third were a few months after that. So we opened our first one in July of 2017. And by December we had already opened three in the country.

 

Siddhartha 13:56

Can you share the journey of scale, how many you have today and how many were built each year?

 

Karan 14:00

So the first year was three locations, and it was close to about 4000 desks in that year, the next year, we grew to 15,000 desks. So it was an almost 5x expansion, that was around eight WeWork I think, then it became 12 total that we had, then we grew by 35,000 desks. So 15 became 35,000 desks. That was another sort of 30 odd locations that we had at that point in time. And then from 35,000 we grew to 65,000 desks in one year. So it was pretty much doubling each year.

 

And for our business it’s not like app users or sign ons and stuff like that. This is physical brick and mortar, you have to go visit these buildings, you have to do due diligence on these buildings to make sure technical stuff is right, you have to negotiate the lease with the landlord, you have to design the building from the start. You’ve to do procurement for everything and then build it out, and then make sure it’s built out right where people can actually sit in it, and then sell enough that it makes sense. So it’s a pretty big process that takes anywhere between like seven to nine months to bring everything on. And we were doing 35 of those simultaneously with a very small and young team. So it was a lot.

 

Siddhartha 15:30

And today, how many WeWorks do you have?

 

Karan 15:31

We just opened up 44th. And we actually had brought on a lot of capacity right before COVID. And so due to COVID, we had to pull back a little bit. And so we’ve had a little bit of a back and forth journey there. But today, we have 44 locations close to about a little over 70,000 or desks in the country. And business is doing incredible.

 

Siddhartha 15:57

And you have just I think, in the last fiscal year, hit 1400 crores of revenue, 185 crores of EBITDA.

 

Karan 16:06

Last calendar year, actually.

 

Siddhartha 16:08

That’s fantastic. And you are expecting to continue the same growth this calendar year?

 

Karan 16:11

So we are finally back into growth mode after the pause that we took during COVID, we have as a business hit what is called as like operating leverage operating efficiencies, which means that we are sufficiently covering all of our costs, and also incremental cost that we might have for growth by a decent margin, business is upwards of 20% margins at this point in time. And we want to grow at a pace which is fast enough for a decent amount of expansion, because we still have a lot to penetrate in the market, but it isn’t too much that it ever risks the business margins, and we keep these healthy margins. So that’s kind of a balance that we’ve now figured out. And we’ll be adding about 20,000 desks year over year, which for us is like between 30- 45%, growth.

 

Siddhartha 17:13

And I assumed that every building that WeWork operated in was owned by the Embassy group, is that not the case?

 

Karan 17:21

No, that’s not true. Actually, Embassy as a landlord would be maybe about 20% of our portfolio. So another reason why we wanted to set this business up independently, we never wanted to do it under the Embassy Umbrella was we knew we had to take space from multiple landlords, we knew we needed to grow pan India Embassy, was a very regional player in the south, we didn’t have any, real estate in Gurgaon or Noida, or Bombay even for that matter. So we’ve always had to take space from other landlords and today, DLF, Prestige are some of our biggest landlords and we have great relationships with them, and we have multiple locations with them.

 

Nansi 18:08

Hi, everyone. Before we begin, I would like to share that this podcast is brought to you by Prime Venture partners, an early stage VC fund led by Amit Somani, Shripati Acharya and Sanjay Swami. Prime is often the first institutional investor in category defining tech startups in FinTech, SaaS healthcare and education, such as Markit Quizzes, Planet Spark, Bolt and Glip to know more about Prime visit https://primevp.in/

 

Siddhartha 18:39

If you could remember, what was the initial investment by you and your dad to make WeWork happen?

 

Karan 18:44

We’ve always put in money as the business needed. And we were fortunate enough that the traditional business was growing also and doing really well that we could pump into this type of thing. So we’ve invested almost 100-50 million of our own money in this business. That has been it over the last four or five years.

 

Siddhartha 19:06

I think last year, 100 million was the first external money that you took from WeWork Global.

 

Karan 19:11

Yes, in June of 2020, right in the middle of the pandemic, we got that 100 million dollars in funding, which honestly was like a lifeline to the business. It was one of those near death scenarios that a lot of other startups go through but we’ve been hit with multiple external events that have made our journey eventful, and definitely different from what has happened globally. But it is a reason why we are so profitable, we’ve been so focused on our unit economics from day one, and it’s also built this incredible team and culture that has been through so many kinds of challenges in a very short period of time that really we don’t feel that anything else can kind of come our way that will surprise us. In November of 2018, if you remember, like IL&FS crashed, which was the NBFC debt crisis of India which impacted us heavily, because we were just about to raise capital from an NBFC, and we had got a term sheet in our hand, literally two weeks before that, it was enough money to allow us to do whatever we needed to for the next three to five years, we wouldn’t have to worry, we could focus on growth.

 

It was gonna be dead, but it was structured in a way where it gave us time to basically grow the business without having to pay and it was kind of backhanded, like interest payment, and has given us enough time to raise equity and all of that stuff. So I had the term sheet, we were going to sign, I walked into the bank’s office, and I saw papers, and the boardroom was all over the place. And we’re like, Something’s definitely wrong here. This was just before the news of IL&FS crashing happened. And they had a very heavy exposure to IL&FS so they had to retract everything. And then from there, money went dry. And at the same time, we were in this massive expansion mode, where we were deploying capex money, we needed money to pay vendors, and all of that.

 

And so that was a very tough time, because I had given commitments to these vendors that we will pay, we had Members moving in, we had signed these leases, and credit to all of my vendors, I hope some of them are watching this, I still thank them for this period of time, but we had an exposure to the market of like, nearly 400-500 crores with no money in our bank at all, and just our word and our promise that we will make good. So that was a very challenging time. So that happened. And literally six months later, the WeWork Global IPO thing happened, which didn’t really impact us from a business standpoint. But from a fundraising standpoint, it impacted us a lot. Because this perception,

 

Siddhartha 22:31

The whole perception of the market changed, right?

 

Karan 22:32

Yes, it completely changed and I don’t think just for us, it suddenly started this domino effect for all growth companies, Uber had just gone public a few months prior, they didn’t do well. Lyft also had happened and got crashed during those years. So it had a cascading effect across the entire market. So that happened. And so again no money, but we managed to raise some money from here that we were able to tie through. And then when we started to raise money again, and finally, WeWork Global and saw that our business was doing really well. We have already touched profitability, we’re gonna be profitable. They really wanted to have a bigger part of this because we were one of the best performing regions and all of that.

 

So we started discussions in December of 2019, before the pandemic hit for this fundraiser, and we had an agreement with them. And literally while we were in the negotiations, all hell broke loose and global pandemic, no one’s in the offices, that time I was like, we were really stretched across the board. Luckily they were very good partners, and we were able to get the money done. And as soon as we got the money, the first thing I did was pay our vendors because I knew that, as tough as it is, it was very tough for them, their laborers and we had this huge outstanding with them.

 

And just by doing that one deed, bought us so much goodwill, because in the middle of the pandemic, when none of the other projects were paying the laborers, they were not allowed on site, labors were migrating out of the cities and all of that also, and suddenly they got this big injection from us immediately. And because of that, I think till today, they’re so grateful. We have this huge trust built with them. And I also built a good reputation with each of these guys. And we survived. And now we’re in a very, very good place.

 

Siddhartha 24:43

Are there plans of taking the WeWork IPO in India?

 

Karan 24:45

I would love to, I think that it’s business wise and the way that we are able to grow and just from the cash flow, the business generates the margins that regenerates and the amount of growth potential left in the market is immense, we would love to go down that journey. But again, I don’t think that we’d zero down on a path, or even a timeline. Right now, the business doesn’t require much external capital, we just completed a little bit of a raise, and we are generating positive cash. So external capital is really limited, but I do owe our existing shareholders some liquidity and some return on their capital. So I’ll have to figure that out.

 

Siddhartha 25:33

Karan when you would have believed that almost 80% of your portfolio would have been startups. And today’s just the opposite. 70% is occupied by enterprises. How did the strategy change in between? And what are your insights during this journey over the last five, six years.

 

Karan 25:49

I mean, it’s interesting how the entire segment had changed, originally the word coworking or it was, community working, which was really for freelancers, SMEs and some sort of mid sized companies or more in new age companies. I think that’s how it happened across the world. But when we open in India, on day one, even though we had designed and built a lot of this space, for the smaller companies, we actually started getting a lot of interest from larger companies, I remember, we did a deal for both Microsoft and Amazon in galaxy, which was unheard of in the flex space at that point in time. And these were for the innovation teams or it was an AWS outfit that Amazon was looking at. And for Microsoft, at that time it was some work on Microsoft 360, or something like that.

 

Some innovation team basically. And what happened was a very interesting kind of social experiment, to some extent, where these large companies started to see, the thing was the employees are the same, employee working in a small company and an employee in a large company, as a person is pretty much the same, he was between 22 to 35 years old, had very similar interests like going out, was interested in what was happening in the world. And wanted, what we spoke about earlier was much more from the Office, wanted a nice environment that they could come to, kind of everyday.

 

So when these large companies came in, and they saw wow, my employees are really liking this. And I don’t have to worry about doing employee engagement, because we were doing all these events for the building. We had pop up quizzes on Friday, we had free pizzas randomly on a Wednesday, and the employees were very happy. So that kind of caught on, where we were able to then show enterprises that look, this is not only flexibility in contract, but it’s actually a tool and a place that will allow you to retain and attract the best talent, and talent is actually going to love coming to work every day versus currently in your office they don’t. They started a fight with the employees who are allowed to work at WeWork and then in the old office, or the traditional office like, why do they get to work out of a WeWork, so that somehow was a clear shift that happened.

 

The other thing that we realized was happening was that a small startup wanted to become a large enterprise and a large enterprise wanted to act like a small startup, and there was no other place apart from WeWork that had that kind of happening, where just because of being in the company, or the smaller companies, and when employees started to have new ideas, they were able to connect with these startups that were building potential use cases for their own companies. So at that time when we had Amazon I know they used some vendors who are working out of a WeWork or some people who are building some stuff in e-commerce, they were able to actually use some of those products in Amazon. So it became a very interesting ecosystem.

 

And I think if you fast forward from there, post COVID where it became less about the community and the network, but then it became much more around flexibility and offering your employees the ability to work from anywhere or companies realizing I don’t need a central large office I much rather have scattered offices across the country, or employees themselves saying that I don’t want to come to the office every day just give me a place where I can go to work, when I need to work and the rest of the time I would like to work from home. That is now what we’re seeing as the reason for mass adoption across the board.

 

The other thing that happened, I think was that India has always had very low supply of Grade A commercial real estate or what these large MNCs would end up taking and the speed at which they can bring on real estate in their system, which means whatever we spoke about which is our seven to nine month process takes at least 18 to 24 months in large multinational system, because it has to go through multiple approval, it has to go through global and legal stuff involved.

 

And the speed at which these companies are hiring or growing is outpacing any speed that they could bring on supply. So our business model became so useful to them, because it was ready to move in space, it was plug and play, it was geographically well located in the best real estate. We have done all the upfront work, when it comes to diligence and making sure that these are buildings that are up to standard. And again, these companies have experienced WeWork in some other parts of the world. So it was also very easy for them to know exactly what the employees are gonna get when they walk into this office on day one, they know that it’s a standard offering, there’s a certain service level.

 

And so what you’re seeing now is that we move from innovation teams, peripheral teams to core teams that are now using our space and core units that are taking more permanent space with us. And we’ve also built a suite of products now that enable the workforce. So we’ve built a suite like a product which is like a day pass, WeWork on demand, which is for remote first workers where you can come into an office just for the day and we charge a company only based on what you used on that day.

 

And then we also have the wider end of the spectrum, complete end to end managed offices for large companies spanning across 1000s of employees for multiple years. What we’ve seen is that, today, a company’s workforce doesn’t operate in one style, that used to be the case before, they have teams that work remote, they have teams that are going to come in every single day in terms of like operational teams, they’re also teams that are kind of in between, and so they don’t need static real estate anymore.

 

They actually need a product or a service that can enable whatever way of working they as a company are gonna have, it will be very different for SaaS company is very different for, banking services company, and it’s very different for a startup that is being founded in 2023, versus a startup that was even founded in 2019. Very different mentalities and how people are even starting it up. So we want to be the one platform which enables all styles and you’re able to do that through us.

 

Siddhartha 33:15

And you see this trend growing up again, all the even legacy enterprises like banking, the HULs of the world.

 

Karan 33:21

I mean, we have like Khaitan and Company, which is a law firm which has been around for hundreds of years, they have their primary office with us now, when people were worried about privacy, and how can I have a law firm in here because my client doesn’t want someone to see that they’re coming to meet me or whatever, some public sector banks also in Bombay have taken space with us. And they have very strict regulations, RBI has certain laws on how and where they can take space. So, we’ve been able to even overcome a lot of that. So we’ve done every single sector, every type of enterprise, or any type of company basically.

 

Siddhartha 34:05

And I think you created the market by being a premium offering some WeWork open seats starting with 12,000 rupees today. And then it goes up.

 

Karan 34:13

It depends on the location. But we start even as low as 8000 bucks in certain locations, and we go as high as 40,000 for our dedicated private office and in some locations.

 

Siddhartha 34:25

So now individual small co-working spaces have come up. I think in the five, six ranges to cater to the lower tiers is creating, do you think that strategy works when you create the premium segment of the market, the lower and the middle and automatically creates itself?

 

Karan 34:41

Look, I think that everyone has a different strategy. We have certain peers or competitors who are focused purely on the lower price point and going like a volume game versus a price game. The thing with us is that we are very customer experienced, our member experience is our topmost priority. And we also are capturing the multinational cooperation or the top tier of Indian enterprise Indian startups as our primary customer base. And for them more than convenience cost and the cost saving, they’re very focused on their own employee experience. And they actually want to spend on that. Today because there’s a talent war they’re looking at retaining.

 

So we spend an X amount on our build out, you can really see the difference between a WeWork space and a competitor space, the quality of our services at a certain level, and you can see that through how many people stay with us. We have a net promoter score, and all of that stuff, that’s pretty high. So for the amount we spend, and for what we’re offering, it only makes sense for us to operate in this type of price range, if we were operating at a lower price range, either of two things would happen, we would be burning money and we wouldn’t have unit economics, or we would have to dilute the product and experience for our members, which we don’t want to do. I don’t think it all depends on what type of brand and what type of product you want to offer in the market.

 

Siddhartha 36:26

So how big is the WeWork team in India?

 

Karan 36:28

We’re currently about 470 people.

 

Siddhartha 36:30

Initially, were you around 40-50 people operating?

 

Karan 36:36

Yes. I think our first year, we were only like 45 people. We had gone up all the way even to like 550.

 

Siddhartha 36:44

During those two years of COVID, did you almost 10% occupancy or 5% occupancy?

 

Karan 36:49

It was zero. The first wave was like the worst, when everyone was in panic mode and government rules. And all of that also was in panic mode, we saw occupancy, like what is sold go from 77% at that point, down to 47% in like a span of 30 days, or like 45 days. And this was really because our value proposition was that if your business is not doing well, or if you need to scale back, you can, but it’s generally because industries have cycles and different companies have cycles.

 

So in so many different industries as a member base, it’s okay. Because today, let’s say tech is kind of scaling back. But BFSI and banking are expanding almost doubling more than what tech is kind of scaling back in some sense. So you always have that balance. But during COVID, it was like everyone scaled back, people didn’t know what to do, do I have to pay the rent? Do I not have to pay the rent? Should I negotiate the rent? Everyone uses it as an opportunity. So we were worried. But we took a very different approach than everyone else, we said that we are custodians to a lot of small businesses, in the sense that a lot of people are building their livelihood, their dreams, in our space. So today, we take a draconian stance and say that, nothing doing, pay me everything, I want it on this day.

 

People would have to choose between us and maybe paying the employees or taking care of what was more important, which was their home or their health, whatever. So we decided we’re going to take a very partner led approach where we said, listen, we’re gonna take a hit for you now, but we want some assurance or some more guarantee that you will stay with us longer than you originally expecting or that when things are good, you continue to expand with us or, stuff like that. And we also took a separate approach for large enterprises where we were operating some of those data servers, data space in our space versus a small company that was four or five people.

 

We took an approach based on how badly they were impacted. And I think that again, was one of those things that brought us a lot of goodwill in all of this time as soon as lockdowns lifted and even in the second wave, it was a much less of an impact, people didn’t scale down because they were more sure we were taking care of them. Third wave there was absolutely nothing, no one even flinched. We just continued to operate and then also the quality of our members got better because the healthier companies actually are the ones who came back, were ones who were able to manage their operations, came back and were able to grow and continue to then finally start hiring and get back to normal.

 

Siddhartha 40:01

So in a sense that you operate right now, the physical infrastructure in the cowork space of India, you would know exactly which are the sectors which are doing well, which are not doing well. Put some more light on it.

 

Karan 40:15

I think we mimic very much like what happens across the country in a microcosm within our space. So in India, generally about 60% of all commercial real estate demand comes from IT, which are tech companies, tech services, and that I think continues to be the case, even today, we have seen a scale down from a lot of companies that were at this bolstering pace, especially from 2020 to 22. So, we saw ed tech suddenly took a lot of space with us, then we saw they are the first ones to shrink. We saw and we continue to see E-commerce grow. And not just like the main guys, but there’s been a lot of vendor ecosystem created around e- commerce now, which is also growing. People are building SaaS tools for E-commerce for all across the supply chain. AI now is another massive thing that we’re seeing. AI and climate focused companies or a lot of companies focused on the ESG component and helping them to do that. So a lot of AI companies, a lot of these environmentally focused companies today.

 

And on the enterprise side, like I said, banking and media have started to overtake IT and IT services at least in this period of time. So we’re seeing a lot of companies like multinational banks and stuff like that, come into India, starting to grow their footprint, what we’ve seen also is that the type of work that is coming to India has changed drastically from back office, tele services, tele calling to now full fledged r&d, product development sites happening here in itself, in media a lot of animation happens in India, all of your CGI, a lot of those effects that you see from some of these bigger movies, actually, a lot of the work happens in India. So the work or the type of work also is changing in terms of what’s happening here, it’s definitely moving up the service sector.

 

Siddhartha 42:38

And this data also helps you to grow, so you can target which are the sectors to go after.

 

Karan 42:44

And it also marries well with what you see in the VC world, because almost the first place where the money goes is to either hire people or office space. So we benefit a lot from that. And you see a direct relation, whoever’s getting funded, is taking space and is hiring.

 

Siddhartha 43:06

What is the point that you think that WeWork, India could hit $1 billion in revenues?

 

Karan 43:12

Maybe three years.

 

Siddhartha 43:14

It would require it to grow almost double every year.

 

Karan 43:17

It doesn’t require us to double every year, but we do have to sustain a decent pace of growth, we’re already going to be close to about 300 odd million in terms of run rate very soon. So I think within three years.

 

Siddhartha 43:36

And right now, how much of the space like commercial real estate space in India is occupied by cowork?

 

Karan 43:43

Co-working right now, it’s like between 6 to 8% of all of commercial real estate. So Indian Grade a great supply is like 800 million square feet of all supply, coworking right now is just about like 40 odd million. And that’s only happened in the last five years. Just to put all of that in perspective, Manhattan has 800 million square feet of grade A supply. So Indian commercial real estate in itself has not reached any type of saturation or come close to that large scale and Bangalore has the highest amount of absorption in terms of real estate globally. In the last few years, when you go to the outer ring road, you see all those companies sitting over there. That belt itself is like 30% of the GDP of all India coming from that one road.

 

So, there’s still a lot of growth for the traditional side and we feel that coworking in the flex workspace industry will become at least 20% of all commercial real estate in a period of time. Or even if you say like, at least 20% of all companies’ workforce will work in a flexible model. I mean, I think that that’s now post COVID safe to say that. At the very least 20% Right now we’re talking about anywhere between 50% to 100% of a lot of the workforce is going completely hybrid and flexible, but you translate that into actual square footage is at least 20% So, there’s still almost a tripling of where we are currently, yet to happen.

 

Siddhartha 45:29

Thank you so much. It’s been such a wonderful experience recording with you to know the real estate side of the commercial real estate market and how much coworking contributes, at how much pace is coworking growing, what are the factors that are leading it.

 

Karan 45:43

It’s growing pretty fast right now almost 80% of all requirements coming in from companies are asking for flex as a working style, working option, which never existed. And we as a flex industry have become the third highest takeoff space which never used to exist, so it’s IT, banking and financial services. And then like flex there is taking a lot of space.

 

Siddhartha 46:14

So if a company will register 100 employees with you, and will take 50 seats, so any of the 50 employees can come?

 

Karan 46:21

Yes, it could be any different style of working.

 

Siddhartha 46:22

Thank you.

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