WeWork China is reportedly buying Chinese shared office space startup Naked Hub for US$400 million as part of a continued expansion in the world’s most populous country.
The Naked hub was a famous shared office space startup in China.
Founded in 2015, the Shanghai-based Naked Hub has opened 20 co-working spaces in Shanghai and Beijing, and 46 locations throughout Asia.
Before this deal, Naked Hub has been a shopping spree to expand it blueprint overseas. In January, Naked Hub acquired a 70% stake in Gravity, a co-working space in Australia, as part of a grand plan to open more than 200 locations across five Asian countries by 2020. In the last year, it also announced its merger with Singapore’s JustCo, creating the largest premium co-working space operator in Asia to compete with industry leader WeWork.
Why Naked Hub will be sold to WeWork？
The deep reason for this deal is that Naked Hub is in a tremendous shortage of cash flow. The Naked Hub tried to get a round C investment since 2017 July, but the investment was said to be finished by 2018 February, reaching to $125 million to $175 million. In the last investment round in 2016, Naked Hub only got a funding of $33 million.
As it is, the funding round wasn’t an easy journey. In some degree, the Naked Hub had been struggled for the cash flow in a long time. In addition, the overseas expansion exacerbated the capital burden. Finally, the Naked Hub took a step back and sold itself to WeWork.
After the acquisition finished, the coworking market competition will be fiercer between WeWork and UrWork.
UrWork is the old competitor for WeWork China. Until now, UrWork has opened more than 160 locations in 35 cities around the world, servicing over 4,000 enterprises with an impressive occupancy rate of 85%. This number is closing to the number of WeWork（328 offices in the world）in an incredible fast rate of overseas location increasement.
In China, UrWork has more than 100 locations while WeWork China processes only 16 offices mainly in Shanghai, Beijing and HongKong. After the deal closed, the gap in China will be narrowed effectively, helping WeWork China to grasp market initiative, especially in the first tied cities such as Shanghai and Beijing. As a consequent, WeWork China will hits $2.5 billion valuation.
Looking back on the battle of WeWork China and UrWork, the potential of coworking space market is huge.
1.The trademark battle is the direct battle of this two companies.
Late last year, WeWork battled with another Chinese co-working company, then called UrWork. WeWork sued over trademark claims, and UrWork agreed to change its name to Ucommune.
2.The battle of resource integration is fierce.
At the beginning of this year, UrWork initiated a wholly-owned merger and acquisition on the Hongtai New Space(洪泰创新空间), one of the first brand space in China. On March 9th, it finished the merger of Wujie Space, a top 3 coworking space in China. Just on March 26th, the Wedo space was joining the river of M&A. UrWork is making every effort to build its dominance in China.
On the contrary, the pace of WeWork will be much caution in the M&A area. Naked Hub is only its second-ever acquisition of a co-working company. The first was Singapore-based SpaceMob in August. Undoubtedly, the acquisition of naked Hub would be WeWork’s first major move in China, which shows the company’s ambition to dominate China’s booming and increasingly competitive co-working market.
The battle between the WeWork and UrWork in China will be continue.
The coworking space industry is undergoing the shuffle stage.
With the decay of entrepreneurship fever in China, coworking space industry is undergoing a period of shuffle stage. The exiting coworking space providers are less and less. However, as we can see it in the youth working demands trends, it is infiltrating into the second and third-tier cities. Not only the first-tier cities should be layout，but also the second and third-tier cities.
