Industrious Buys Office-Sharing Startup PivotDesk, Raises $25M For Expansion
The CEO of one of WeWork's biggest co-working competitors is betting big that the future of office leasing is online, not in person.
Brooklyn-based co-working company Industrious has acquired PivotDesk, an online marketplace for short-term office rentals. Along with the acquisition, Industrious also announced it raised $25M through a Series B follow-up round led by Riverwood Capital.
Colorado-based PivotDesk will continue to operate its existing platform, which connects companies with excess space to companies that need it, as a subsidiary of Industrious, at least for the time being. Industrious is bringing over four employees from PivotDesk, who will continue to work out of the company's Boulder, Colo., office for now.
Industrious CEO Jamie Hodari said he plans to list his company's co-working spaces on the platform and may eventually consider changing the name, brand and user interface. Ultimately, Hodari plans to broaden the PivotDesk marketplace to create a wider range of office options.
"PivotDesk, or whoever wins in this sector, will have to be not only a marketplace for short-term space, but also a broader search platform for space," Hodari said. "Right now, you go on PivotDesk and all you see are companies leasing excess or flexible space via the PivotDesk platform. My suspicion as a customer is ultimately, in the ideal world, you’d see both that and other forms of flexible space that aren’t excess or short-term, but space that is being sublet through a broker."
Industrious, founded in 2013, has 12 co-working locations in 11 cities. While the vast majority of Industrious' tenants find them through word of mouth, or by visiting one of the locations, Hodari said the internet will inevitably be the primary way tenants look for space.
He had been considering building an online platform for sharing office space in-house. But when he began talking to PivotDesk's CEO last fall, he realized acquiring an existing platform would give him a big head start in what has become a competitive market.
"At some point, a lot of our customers will be coming to us through some sort of digital platform," Hodari said. "We might as well take a shot at being the one that builds the one that turns out to be the most successful."
Industrious raised $37M in its Series B round in September. With the combined $62M in investment, the company plans to expand to 30 locations by the end of 2017. Among the cities Industrious will open spaces in this year will be New York; Washington, DC; Birmingham, Ala; Pittsburgh; Charlotte, N.C.; Denver; Dallas; and Indianapolis.
Hodari said expansion so far has been successful, and the vast majority of its 12 locations are more than 90% occupied. Since the average Industrious space is just 25K SF, he said the company needs to expand to accommodate its larger tenants.
"Our biggest challenge is that as we continue to grow our presence with enterprise customers, they often don’t need space for five they need space for 40 people," Hodari said. "We’re running up against the fact that we’re often not able to deliver on that."