For most businesses in the built environment, the pandemic was a nightmare. Not for hybrid workspace solutions platform Upflex, though.
Pre-pandemic, the platform, which was co-founded by Christophe Garnier and Ginger Dhaliwal in 2018, was struggling to gain traction. However, during the pandemic, the company carried out a playbook tech company move and pivoted from being an HR employee benefit provider to being a pureplay online marketplace for flexible workspace.
Cue rapid growth from 2,000 co-working spaces to 6,000 co-working spaces by 2022. The larger flexible workspace companies it had struggled to do business with before the pandemic were suddenly willing to listen to the company’s sales pitch. Upflex has now grown to more than 10,000 spaces in 1,200 cities in 120 different countries around the world and is targeting 35,000 spaces by 2025.
In an exclusive interview with BE News, Garnier reveals what prompted the change in tack, how Upflex managed to grow so quickly and why he expects the online marketplace to continue growing rapidly despite the economic headwinds.
Upflex’s story starts in the US. French-born Garnier moved to San Francisco following a spell in London in the late 1980s. Having worked in Silicon Valley for six years for a couple of European tech companies, he moved in 2005 to New York, where he set up a number of businesses, including a co-working brand.
“We were following more of the traditional co-working formula, so we were getting a lease and creating a physical space,” he recalls. “We opened a few sites and as we were developing this co-working brand, we realised that it was going to be very difficult to raise money given the saturation of the [flexible workspace] market in the US thanks to the likes of WeWork, Notel, Industrious and other great brands. That forced us to think about something more efficient. It forced us to think about a model that would be asset light without leases.”
Garnier and Dhaliwal came up with the idea of Upflex, which started life as an HR tech company, not a proptech company.
“Pre-pandemic, we created Upflex as an employee benefit,” says Garnier. “We looked very hard at Airbnb, Uber and a company in the US called Gympass, which has done really well. We launched a kind of a Gympass for co-working, which through a unique platform and a unique billing system enabled employers to provide employees with access to a fast growing network of co-working spaces.”
Then the pandemic started and Upflex lost all its customers because nobody needed this flexibility anymore as everyone was working from home. The Upflex co-founders promptly turned their attention to the supply side of their business – the flexible workspace operators and landlords of buildings.
“Co-working operators were suffering,” says Garnier. “They were losing everyone, so we took advantage of that situation to grow our network much faster during the pandemic, and to get the brands we couldn’t get before the pandemic. Before the pandemic, it was very hard for us to get the big brands.”
With the pandemic, that changed overnight. “It became easier for us to pursue those larger brands and tell them ‘we’re going to be able to help you get your customers back after the pandemic if you join us on the platform’,” explains Garnier. “So the platform grew and the network grew very fast during the pandemic. We quickly went from 2,000 co-working spaces to 6,000 co-working spaces and we grew to 500 different brands of co-working and, and we created a lot of buzz around it. And because of that, an unexpected party started getting in touch with us and that party was the brokers.”
Suddenly, the likes of Colliers, JLL, CBRE and Cushman & Wakefield started knocking on Upflex’s door, having heard about the network and how large it had become. ‘They understood that it would provide value to their customers, the very large employers who were seeking solutions to bring people back to the office, or solutions to meet the new requirements of their people,” says Garnier. “So that’s how we were transformed by the pandemic from an HR tech company selling to start-ups into a proptech company selling to mid-cap and enterprise.”
As the pandemic started to disappear into the rearview mirror, that growth continued. The company now offers space with 700 different flexible workspace brands in 120 countries around the world, and has an exclusive agreement globally with WeWork. Having started out as an aggregator of co-working space, the company deals with co-working and flexible workspace brands as well as landlords and even some hotel companies.
“We have three different components to our business,” explains Garnier. “We have the network. So we are a flex space aggregator and network mostly composed of co-working space, but now a lot of landlords are getting on the platform as well, because a lot of landlords are becoming flex operators themselves. Landlords have understood that they need to transform themselves in order to embrace the new demand [from occupiers] and the new demand requires a lot more flexibility.
“The second component is technology. We have built a lot of technology related to booking mechanisms and to data and reporting. We are tracking the behaviour of all users on the platform – anonymously of course – in order to tell employers how are their employees behaving, where they are going, where they want to book space, how they want to work together, who they want to work with, at what recurrence and in what countries?”
Upflex has been able to amass this potential treasure trove of data thanks to the size of its network, which continues to grow due in large part to the fact that it’s free for providers of space to list on the platform.
Users of the platform have two options. They can book space ‘on demand’ for things like meetings or to use a flexible workspace centre for a day, with Upflex taking a cut of the price paid to rent the space, which Garnier says is usually between 15% to 30% depending on the country and the quality of the space. Or they can book fixed, more permanent space ranging from a small private office with a handful of desks up to space with hundreds of desks, on licence agreements that might range from six months to three years.
“Most of the time we do a mix. A lot of companies want to have an HQ at WeWork or at The Office Group in London for 100 people and then they give access to the Upflex network [of flex space] to the rest of the company, so people can come and go between the HQ and the rest of the network in London,” says Garnier. “Many of the big customers that do that with us do that in multiple cities.”
He adds that one of the big trends the company has detected post-pandemic is that flex space has become part of the business strategy for large occupiers, with some even going so far as to move out of permanent office space on a conventional lease and into flex space.
“As everybody’s very careful about how they’re spending their cash, I think there is a huge opportunity for companies to figure out the right way to spend money on commercial real estate, to actually avoid having to let go of people,” says Garnier. “Commercial real estate spend is usually the first or the second line on anyone’s P&L – it’s a huge burden. In the meantime, human capital means growth. If you capture human capital you capture growth.
“So, what we want to do with Upflex in the next couple of years is to be as useful as we can to as many companies as we can. We want to help them to become smarter about how they spend their cash on real estate, because it’s a big spend for everyone.”
Garnier says he hasn’t set specific growth targets for the business. “The growth of the network is being mostly driven by the demand of our customers,” he reasons. “We have a great size already in terms of the network and we’re going to continue to grow the network and the number of customers we have. We’re growing fast and we’re going to continue growing.”
How Upflex rode out the collapse of SVB
This March, the tech sector was rocked by news that Silicon Valley Bank (SVB) was on the brink of collapse. The bank was popular with start-up tech businesses in particular and counted a lot of proptech companies as customers. One of those customers was Upflex. Christophe Garnier reflects on what happened during a turbulent period for the business.
“It was quite a ride for us following the collapse of SVB as we tried to navigate the fallout. Upflex had been banking with SVB since we raised our Series A a year ago. In fact, SVB actually participated in that fundraising round. From the day of the event — Friday March 10 — through Monday, we were in ‘war room’ mode with management and the board. The lightning speed at which the collapse occurred really was unprecedented. We were planning for the worst but still hoping for the best and designing an emergency plan to mitigate potential disaster.
We were just so grateful that Upflex’s board members and investors were ready to help, immediately. Not only did they help keep the business moving — they shared past experiences, which put things in perspective. The collapse meant our funds were immediately frozen — along with 37,000 other impacted small businesses that had deposits in excess of $250,000, not just in the US but worldwide.
The issue was amplified within the world of proptech due to SVB’s almost ubiquitous presence. SVB was very much the bank of choice for proptech and other young VC-funded tech start-ups, because they understood the early entrepreneur environment and provided the venture community with exactly what they needed in terms of banking and credit facilities.
We were on top of the situation right away, making quick decisions to set up multiple bank accounts elsewhere and thanks to our investors, our board and our management team, we were able to continue business operations. There are still a number of things to figure out, not least the fact that SVB offered multi-currency accounts that other providers will now need to fulfil, but we are through the worst of the storm.
What happens now? Moving forward, start-ups are going to take the lessons of the SVB collapse to heart, and things are going to be different. Start-ups will diversify their banking and credit facilities, rather than putting all their eggs in one basket — which was often the case for companies that had financial relationships with SVB.
To mitigate risk, these companies will need to spread out their funds across multiple bank accounts and turn to large institutions — and specifically, at least one bank that is considered ‘too big to fail.’
Fundraising is going to be more challenging, though, since SVB was one of the top providers of venture debt. It’s already a difficult time for the proptech industry, given the slowdown in the venture capital markets, so we can expect that that fundraising will take longer and become a more difficult process across the board.
I think we are going to see strengthened banking regulations developed after this as well. Part of the issue now — compared to, say, 2008 — is the speed at which information travels, thanks to the prevalence of social media among other things. This wasn’t the case in 2008. So, a CEO’s ability to respond in time to an event like this and avert disaster is much lower. Again, that means companies, however small, must have a robust business continuity plan in place to mitigate such risk – and review it regularly.
While we did bank with SVB, at Upflex, we were fortunate, because our primary offering is a solution that helps companies cut costs by way of reducing their property footprint in the shift to hybrid work. So, while we are in difficult times, we’re still seeing very healthy business growth — even in the midst of all this contraction. Not all businesses are in that position — especially not after this collapse.”
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