Knotel Crowned a Unicorn in Wake of Rival WeWork’s IPO Filing
Flexible-workspace provider Knotel became the latest start-up to reach unicorn status after it closed on a $400 million funding round, a week after rival WeWork filed for an initial public offering (IPO) with a preliminary target of $1 billion.
Knotel’s latest financing was led by the investment arm of the Kuwait government, Wafra, and the four-year-old company said it brings its valuation to more than $1 billion. Other participants in the fundraising round include Japan-based firms Mori Trust, Itochu and Mercuria and previous investor Newmark Knight Frank.
(Disclosure: Observer Capital, led by Observer Media Chairman and Publisher Joseph Meyer, is a Knotel investor.)
“Knotel is building the future of the workplace, and we are excited to welcome a group of investors who believe passionately in our product, vision and ability to execute,” Amol Sarva, the co-founder and CEO of Knotel, said in a statement. “Wafra will help us continue our rapid global expansion and solidify our position as the leader in a fast-growing, trillion-dollar flexible office market.”
Sarva told Bloomberg, which first reported the news, that it gave up 15 to 30 percent of the company in exchange for the new funds, which would give it a valuation of at least $1.3 billion.
In the statement, the company said it would use the new financing to expand to new cities along with adding more locations in existing markets like San Francisco, London and New York City. It will also grow its blockchain platform Baya and furniture rental business Geometry.
Knotel’s fundraising comes a week after its largest competitor, WeWork, released paperwork to raise $1 billion for its IPO, though that targeted figure can often fluctuate. WeWork reached unicorn status several years ago with the company valued at $4.8 billion in 2011; the coworking giant was valued at $47 billion in January, as Commercial Observer previously reported.
However, WeWork’s IPO shows the 9-year-old company has been losing money at a staggering rate even as its revenue surge. Last year, WeWork pulled in $1.82 billion in revenue but its net losses totaled $1.6 billion, with the number likely to keep growing.
In the first six months of this year, WeWork had $1.5 billion in revenue but posted a net loss of $690 million, an increase from its net losses of $628 million on $764 million in revenue during the same time last year.
Knotel has not released detailed financial statements, but internal numbers published by The Real Deal last year show its revenues are far behind WeWork’s.
In the first six months of 2018, Knotel raked in $17.6 million in revenues and had earnings before interest, tax, depreciation and amortization losses of $24.1 million, according to TRD. It had operating losses of $11.6 million during that time.
Knotel — which targets mid-sized, enterprise clients instead of freelancers — has raised $560 million since it was founded in 2016 and has more than 4 million square feet in cities including Los Angeles, Washington, D.C. and Paris. This summer, it nabbed space in its 100th building in New York City and brought its presence to nearly 2.5 million square feet around the Big Apple, as CO reported.
Updated: This story has been updated to reflect that Bloomberg Beta, a Knotel shareholder and previous investor, was not an investor in Knotel’s latest fundraising round.