Shared workspace giant WeWork has a $16.9 billion market cap. Although the company is more of a real estate than a technology business, it is being priced like a technology company. It is therefore no wonder that other are seeking to duplicate its success. One of these is Israeli company Mindspace, which last week took a big step forward by raising $15 million in its first financing round.
Founded in 2014 by CEO Dan Zakai and chief business officer Yotam Alroy, Mindspace is already active in Israel and Germany, operating 15,000 sq.m. in workspaces. The company plans to double the space it manages to 30,000 sq.m. serving 5,000 people by the end of this year. The main investors in Mindspace's financing round were Israeli angel investors, with venture capital funds conspicuously absent from the list. Of these angels, the two best known are Yoav Harlap, vice-chairman and one of the controlling shareholders in Colmobil, Israel's leading vehicle importer (and brother of Shmuel Harlap) and Gilad Altshuler, co-owner of Altshuler Shaham Ltd., Israel's third largest investment house. Other investors included real estate developer Kobi Rogovin, one of whose best-known properties is the Sarona site in Tel Aviv, where one of WeWork's workspaces is located.
Zakai: "Yes, in general, we're like WeWork."
"Globes": Correct me if I'm wrong, but Mindspace, WeWork, and those like them are more real estate companies than technology companies, even though they are priced like technology companies.
"We're part of a global trend towards industry-changing companies. The office space industry is an industry that has worked for a great many years in the same way, and is now undergoing a change. The product, or more accurately the experience, we provide our users with works fairly similarly all over the world. If a company is able to do what it does well, it grows very rapidly in this fairly new market, so such companies don't have to be technology companies in order to be priced like them. There are quite a few such companies, which are part of a cooperative economy. Co-working companies like us are only one example. You could say that these are disruptive companies in the offices market."
Still, shouldn't these companies be priced more according to a real estate company business model than that of a technology company?
"I don't think that WeWork and Mindspace are real estate companies. First of all, the comparison between WeWork and us is flattering, but WeWork is on a completely different scale. These companies combine several capabilities and solutions besides real estate. It's true that real estate is our base, but other than that, the company offers operative solutions, content solutions, and life style solutions. It's not really a real estate project, because such a project is usually in the long term. We don't have any realtors. We have online, content, community, and creative experts. In other words, it's much more than a real estate solution."
What is the difference between Mindspace's workspace and that of We Work? Isn't is a matter of rent in the end?
"We believe that in this market and at this stage, there is room for many players. At the moment, our workspaces in Israel are fully occupied. A customer has a variety of considerations in choosing a workspace, such as location, design, social, etc. Our focus is on giving an experience in the co-working niche that is a very boutique experience. We carefully select the location of the space, our team, and take care to provide service at the highest level, so that we can serve not only the individual freelancer, but at the same time companies with over 100 employees."
In Israel, the company operates workspaces in the old stock exchange building at 54 Ahad Ha'am Street and at 45 Rothschild Boulevard in Tel Aviv, and stands to open two more spaces in Tel Aviv and Herzliya. In addition to Israel, the company is also active in Germany, with one space in Berlin and two more to be opened soon: one in Hamburg and one in Munich. Mindspace's customers in Germany include Barclays Investment Bank, the Hertha Berlin soccer team, and German Bank Hespa. "The high-tech industry in Berlin is developing, and this is the right market for us to develop in. It's a very natural place for us to begin our overseas development," Zakai explains.
The current financing round is designed to help the company enter the WeWork-dominated US market and other countries in Europe.
Zakai and Alroy, both 37, are childhood friends. Before Mindspace, Zakai was a cofounder of the G Systems Solar energy company and an analyst at the HSBC and Lehman Bros. investment houses. Alroy was VP business development at robotics company Roboteam and at SHL Telemedicine Ltd. (SWX: SHLTN).
Published by Globes [online], Israel Business News - www.globes-online.com - on January 29, 2017
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