Worldwide, the number of coworking spaces is predicted to reach 41,975 by the end of 2024 — but who is filling these spaces? In the early days of the coworking industry, a majority of users were freelancers and digital nomads.
Now, however, technology companies are among the key drivers for the industry’s growth and solid demand which has returned following the effects of COVID-19. In a way, tech startups and coworking spaces are a perfect match, as both capitalize on innovation and collaboration and therefore share the same values.
A combined study by Colliers and CBRE Matrix shows that startups are expected to lease about 29 million square feet of coworking space between 2022 and 2024 — a 1.3 times increase from the 2019-2021 period.
As the number of tech startups continues to grow, and as budding entrepreneurs continue to prefer what coworking spaces have to offer, it is likely that this demographic will constitute a large part of the member base for many flexible workspace operators. Here are some of the main reasons why coworking spaces attract tech startups.
Reduced upfront costs
Tech startups require an office space, but oftentimes they lack the resources to rent, equip an office, and maintain the services and utilities it requires. Coworking spaces provide the perfect solution to this problem, offering a dramatic reduction in upfront costs.
By operating out of a flexible workspace, tech startup owners have the opportunity to start their businesses in a professional facility, with amenities such as meeting rooms, a trusted Wi-Fi connection, and ergonomic equipment at no additional costs. upGrad, an Edtech startup based in India, has found a home in IndiQube, one of the largest coworking providers in Bengaluru. While working from IndiQube, the founders were able to grow their professional network and expound upon their growth potential to new business connections, ultimately attracting venture capitalists to give $225 million in funding.
Additionally, a need for a ready office is crucial for startups that want to start hiring immediately. Office spaces in Los Angeles are helping business owners in this aspect, enabling them to onboard employees quickly.
Having a network of like-minded people is crucial to growing a business. Since coworking spaces are built on the concept of community, tech startups can leverage the networking opportunities available to them.
Coworking spaces bring professionals drawn from different industries and expertise to work under one roof. In addition, they have the ideal spaces for networking such as open workspaces, kitchenettes, breakout areas and more to encourage bonding and relationship building. Most coworking spaces even hold various activities such as open days, workshops, community breakfasts, and investor days with the sole purpose of networking.
Scalability and flexibility
While it is not easy to predict how a business will grow, having an office space that allows for scalability is important. Coworking spaces support scalability in an affordable way for growing tech startups.
When a business needs additional space for its growing workforce, all they have to do is ask for extra desks, eliminating the need to move to a different, larger office. Fiit, a fitness app based in London, is one example of a tech startup that has realized this benefit after growing from 14 people to over 40 employees. Working from London-based Plexal has provided the perfect environment for growth, which allowed Fiit to easily change their membership to include more desks for their 40 team members.
Moreover, in the current era of work, flexibility is a common term that everyone is looking for. People want to work how and when it suits them and from where they want. That is why many companies have embraced hybrid working where people can diversify their work week and split their time between home and the office.
Coworking spaces support hybrid work by giving startup owners and their teams an ideal alternative work environment. For Equisoft, a digital insurance distribution solutions provider, the Toronto-based coworking space Workhaus has provided them with just the right office size for key workers who want to collaborate or work in person.
Better work culture
A final reason why coworking spaces are in high demand among tech companies is that they offer an inspiring atmosphere for creativity, motivation, innovative thinking, and productivity. Many spaces do this by featuring innovative and vibrant designs and encouraging teams to embrace an overall better work culture.
In addition, the attractive workspaces bring positive benefits to tech teams, including attracting new hires. Millennials currently account for 35% of the total U.S. labor force, making this demographic the largest working generation. This makes it important for growing tech companies to offer benefits that appeal to Millennials, and a coworking membership is certainly high on the list for those that prefer flexibility, freedom, and a forward-thinking work culture.
The world is slowly moving from manufacturing economies and shifting towards service economies, which has led to the number of startups growing significantly. With a need to build their businesses in a professional environment while using minimal resources, tech startups are drawn to all that coworking spaces offer.
Additionally, coworking spaces offer various perks for tech firms including networking opportunities, easy scalability, and optimal flexibility. For these reasons and many others, it can be assumed that startups will continue to drive the demand for coworking spaces.