Without OYO-like backing, Innov8 couldn’t have taken on coworking giant WeWork, says expert

By: | Updated: March 18, 2019 1:07 PM

WeWork has scaled to 21 locations across Mumbai, Gurugram, and Bengaluru in just around 18 months since its launch in India vis-a-vis 12 locations in six cities where Innov8, now acquired by OYO, has expanded since its launch in 2015.

Innov8 has so far raised only million across 3 rounds, as per deals tracker Crunchbase.

SoftBank-backed OYO’s acquisition of Innov8 is the biggest acquisition deal in the burgeoning coworking market in India that is dominated by Innov8 itself apart from the relatively newer yet bigger brand WeWork and others such as 91springboard, Awfis etc. The deal was likely to happen as despite arguably being the top coworking startup in India, Innov8 would have required loads of capital to take on the might of WeWork.

WeWork has scaled to 21 locations across Mumbai, Gurugram, and Bengaluru in just around 18 months since its launch in India vis-a-vis 12 locations in six cities where Innov8 has expanded since its launch in 2015. Globally, WeWork has presence in 616 (current and coming up locations) in 101 cities.

Piggybacking Scale

Now with OYO entering into coworking space through Innov8, it is expected to get little easier for the latter to expand. The startup has so far raised only $4 million across 3 rounds, as per deals tracker Crunchbase.

“The acquisition deal will be announced in a day or two. The kind of experience that WeWork is offering is not possible (for Innov8) to offer without huge capital backing. OYO, which is backed by SoftBank, has big plans for coworking space in India as it would require lot of capital to expand in the market. It will be a big competition for WeWork. This is just the beginning of the war,” a source privy to the acquisition deal told Financial Express Online requesting anonymity.

Also, from the SoftBank’s perspective, it seemed obvious for OYO to foray into coworking market as SoftBank is also an investor in WeWork that had also approached Innov8 for a buyout. In other words, SoftBank is looking to have a piece of the coworking pie that is expected to have 13.5 million users by 2020, as per a report by JLL India.

“While WeWork also tried to acquire Innov8 in the past but the value it saw with OYO was much more than WeWork offered. It is like Amazon which is self-funded whereas Innov8 would be like Flipkart backed by a foreign entity. The two companies are expected to acquire more coworking players in next year,” the source said.

Innov8 is among the portfolio companies of seed fund and incubation platform Venture Catalysts. It also counts Redcliffe Capital, Freshworks’ Girish Mathrubootham, Google’ Rajan Anandan, Paytm’s Vijay Shekhar Sharma among its investors.

Natural Extension

From the real estate rental market perspective, coworking is simply an extension for OYO as it has already been into short-term rental space while coworking is also into rental space essentially.

In addition, OYO has experience of acquiring properties and creating great user experience that they are going to apply in coworking as well since WeWork too has been focused on great user experience and location to expand in the US. They also have great community approach.

“There are three parts in the rental market, first is serviced apartments, home space etc., and that is OYO’s main business. Second, is the coworking spaces which is mid-term rental but with higher profitability and third is co-living space. So for players like OYO who are in short-term rental space, it is a natural extension. Also, OYO too have a large community of people who only use OYO now and coworking will be additional product for them,” the source said.

Moreover, it is a win-win for both OYO and Innov8 as the latter has great product quality and great revenues than any other coworking player in India. With OYO coming on-board with huge capital, Innov8’s scalability will be huge, the source added.

Coworking space is now entering an era where consolidation will begin much like e-commerce around 2014 when deals like Flipkart-Myntra came up. The exits in coworking market have been few and far between so far due to lack of coworking only players.

Consolidation in coworking didn’t happen because there were very few serious coworking players like Innov8, 91springboard, Awfis etc., and others were driven by builder community. It saw the market more like a lifestyle business. In India, builders call coworking as a better asset class than the residential properties, the source said.

Comments from OYO and Innov8 on the matter will be updated as and when received.

To be updated…

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