Coworking spaces are set to boom in tier-II cities as the total space in this sector could reach about 6-10 million square feet by 2020. This augurs well for the entrepreneurial ecosystem in India.
By Mishu Ahluwalia
Metropolitan cities are witnessing exponential growth in coworking spaces as rentals soar sky high and the number of startups shoots up rapidly. The next phase of growth is likely to be witnessed by tier-II cities. The spillage is bound to happen as the number of entrepreneurs in these cities is humongous. As the businesses expand, a general space crunch will be felt and the best option is to embrace the concept of coworking spaces.
Reducing talent drain to metros
Tier-II cities are poised to house up to 50 per cent of the start-ups that are slated to come up by 2020. Nasscom expects 11,500 startups in the technology domain alone in 2020. A large number of these are bound to come in from the smaller cities.
This will, in effect, slow the talent drain to metros and create a smart talent pool in smaller cities. The burden on metros will ease. There will be an increased effort to build coworking spaces that will nurture these industries and create jobs and businesses in the process. The growth of the local economy will create shared talent pools that will be easily available at a sustainable cost.
Leveraging like-minded community
There is a space that is shared by entrepreneurs who have a common zeal. The start-ups have a common breeding ground of ideas and challenges. Soon a coworking area becomes a place to incubate ideas and nurture talent. The ecosystem in these shared workspaces creates a cocoon for communities that have a similar work culture.
The startup culture is full of challenges in terms of controlling costs, lack of experience and a relatively small idea of scaling up. When like-minded entrepreneurs come together, ideas and operations can be pooled and scaled faster.
Tier-II cities have ample space to create suitable infrastructure for coworking spaces that in turn will reduce rentals. There are large pockets of land in smaller cities that can be used to create coworking spaces with industry-specific provisions. Over time, this becomes a cost-effective launchpad for companies of all scale.
Other costs like manpower in blue-collar jobs and documentation are also lower. A shared pool of operations staff can also be a part of the ecosystem. This not only provides regular engagement to employees lower in the work system but also lowers costs by about 30 per cent when some services like security, front desk services, gyms, crèches and cafeterias are common to all the companies.
Easing scale up
Scaling up can be tough for start-ups. Commonly observed challenges not limited to the lack of capital and liquidity include lack of expertise and lack of good recruitment tools and resources. Coworking spaces allow a bootstrapper to start with a minimum commitment and grow within a coworking space by renting more space as the operations grow. So, essentially you can start as small as you want with minimal commitment of time and cost.
You don’t need to look for more space or build infrastructure when you start to scale up. The beauty of a coworking space is that it can accommodate any number of employees without having to change addresses when space becomes an issue in a growing firm. Parallelly, a rich community at a coworking space becomes a ready repository of talent for the company to tap into when looking to grow. Finding employees, mentors and the right people to help raise capital is an easier task as one has a larger network to tap into.
Easier winding down
The truth of the matter is that not all start-ups flourish. There can be some businesses which fail to take off. Winding down a business in a shared working space is much easier than in conventional businesses. The common facilities are on ad-hoc basis and infrastructure is leased. The cost of shutting shop is also lower than stand-alone start-ups.
Paradigm shifts in mentality have already revolutionized the way business is looked at by new entrepreneurs. Coworking spaces are set to boom in tier-II cities and are already a big business in themselves in cities like Ahmedabad, Jaipur, Kota, Indore etc. The total space in this sector could reach about 6-10 million square feet by 2020. This augurs well for the entrepreneurial ecosystem in India.
(Mishu Ahluwalia is the Founder & CEO at coworking company GoHive. Views are the author’s own.)