Awfis' IPO Plans: Will it succeed or go the WeWork way?
Co-working space company Awfis is planning for an IPO. Will it succeed?
What if a company has no fixed source of revenue or a Godfather to fund them, will they be able to afford an office space? Imagine walking to an office space with the same set of faces daily. Boring, no? Now, imagine walking to a space where people from different organizations work together. Won't you feel more enthusiastic?
These thoughts gave birth to co-working space.
By the year 2019, Softbank backed WeWork had become one of the most renowned co-working spaces. But, as it filed for an IPO, the real face of the company was out in the public. It was a massive loss-making entity. Its valuation fell from $47bn to $2.9bn.
And, while WeWorks was falling, an Indian co-working space, Awfis, was growing. A month before WeWorks went bust, Awfis had managed to raise a funding ofINR 200 crores (Aug 2019). But, with the twin dangers of:
a) coworking space business model facing the heat and
b) a global pandemic looming,
Awfis could not go aggressive.
So, they had to optimize and innovate to generate cash flows to fuel their own growth. And finally by 2023, Awfis plans to go for an IPO!
Sounds like a cakewalk. But, it was not. Co-working is a tricky business.
You see, the primary risk for co-work players is the demand-supply mismatch. They have to take office spaces on rent for a longer term - over nine years. But, their customers occupy the space for a short term - one month to three years.
Costs are fixed, but the revenue is uncertain. Maybe that's why only 40% of all co-working spaces are profitable. So, how has Awfis managed to grow so much?
Because of its Managed Aggegration Model (MAM). In this model, the co-working players partner with various landlords who rent out their property. Landlords bear the cost of office fit-outs but are eligible to share in the revenue made by the co-working company.
But, how does this revenue-sharing help Awfis?
It can now get 4-5 seats for the same cost that other players use to set one seat.
Result?
Awfis claims to have been profitable from Nov 2018. And, they will soon be doubling their capacity from 30,000 seats to 60,000 (90% of which is going to be MAM).
And, with the pandemic the flexi-work trend has emerged even stronger. As per Mr. Ramani (Founder, Awfis), this is the demonetization-PayTM moment for co-working space.
But, the initial months of lockdown were not easy. Awfis was quick to innovate and launched Awfis@home, a work from home product. This helped them stay profitable even in times of crisis!
Mr. Ramani, the founder of Awfis, has spent 20 years building 8 ventures. Four of them failed. Success is not overnight. To build something big, one needs to persevere.
Will Awfis turn out to be successful? What do you think?
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