The coworking land grab remains in full effect, as Industrious today announced that it has raised $37 million in Series B funding. The round was led by Riverwood Capital, a Silicon Valley venture capital firm whose previous investments include Ticketfly and GoPro. Outlook Ventures, based in the Bay Area, and Maplewood also participated.
It’s raised $51 million to date.
Industrious, which is headquartered in Prospect Heights but originally launched in Chicago, has sought to go toe to toe with WeWork, widely considered the leader in the industry (and so funded it’s practically obscene). The company has locations in 11 cities including Atlanta, Chicago, and Philadelphia, whose opening our sister site Technical.ly Philly covered last year. It also has one location in Brooklyn, in Prospect Heights.
The raise reminds us of another venture-backed coworking company on the East Coast: D.C.’s MakeOffices, which has raised more than $14 million and has locations in three cities, with New York to follow.
Industrious’s revenue has grown fivefold in the past year, and its performance has been strong across its network, said Cobble Hill-based CEO Jamie Hodari: most of its locations have either reached capacity or are close to filling up. With the new round of funding, Industrious will open 12 new locations, including one in Los Angeles, as Bisnow reported. A Manhattan location will be announced soon, and another Brooklyn location is likely to follow, Hodari said.
“Our Brooklyn location is one of the strongest performers in the entire network and a really wonderful addition to the borough for those of us who live nearby and finally get a chance to walk to work like many Manhattanites have gotten to for so long,” he wrote in an email to Technical.ly yesterday.
Overall, Industrious has taken advantage of the industry’s shift toward serving more corporate customers. Its members include Lyft, Spotify, Chipotle and Hyatt. When we last spoke with Hodari, in July, he had plenty to say about this trend, including how he thinks it will play out in Brooklyn. Not many large companies have yet opened satellite offices in the borough, but he anticipates that more of them will in the next few years. One reason larger companies have begun to embrace coworking, he said, is because they recognize that for many workers the workplace environment is an increasingly important factor in choosing where they want to work — in some cases, even outweighing salary. Granting employees the option to work in a vibrant space closer to home gives them an edge in recruiting.
“Coworking is the greatest New York City perk you could provide,” Hodari said. “It’s better than a roof deck or a big holiday party.”
Another trend Hodari pinpointed: coworking’s expansion outside of the Brooklyn Tech Triangle. There are already spaces in Crown Heights, Park Slope and Prospect-Lefferts Gardens, to name just a few neighborhoods. So it’s very possible, he said, that there could someday be a space within walking distance for every Brooklyn resident. As a result, there may ultimately be a split in the industry between local players focused on neighborhood-specific needs and larger chains focused on signing up companies whose employees still need quick access to big city centers.
“The next wave of coworking will serve residents of specific neighborhoods, even if it’s inconvenient to get from there to Manhattan,” he said.
Though Industrious plans to expand in Brooklyn, it likely won’t be dabbling in the small neighborhood scene. The company prefers locations around 20,000 square feet, Hodari said, which is smaller than the typical WeWork location but much larger than many independent coworking spaces. One way the company seeks to distinguish itself from competitors is by emphasizing hospitality, akin to a hotel chain. He said he believes that brand distinction will serve Industrious well when the coworking industry inevitably consolidates. This year, Industrious has begun exploring some acquisitions, Hodari said, though talks are still in the early stages.
There have been hints elsewhere of turbulence within the coworking industry. WeWork, for instance, has reportedly begun to push toward longer-term leases amid financial strain. For his part, Hodari said that’s not a concern, given Industrious’s low turnover. And though it seems like coworking spaces are popping up everywhere these days, according to him, the market is far from saturated.
“We’re still in the phase as an industry where supply stimulates demand, which begets more supply,” he wrote.