Knotel, a New York startup that designs and operates bespoke spaces for brands, today announced that it’s secured $400 million in funding at a valuation of $1 billion led by Wafra, an investment arm of Kuwait’s Sovereign Wealth Fund, with participation from Mori Trust, Itochu, and Mercuria. The capital infusion brings its total raised to over $500 million, and cofounder and CEO Amol Sarva says it’ll be used to grow the company’s footprint in existing markets and deepen its engagement with global enterprise accounts.
“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,” said Sarva, previously the CEO and president of neurostimulation startup Halo Neuroscience. “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.”
Knotel, which Sarva founded in 2016 alongside former Plated board member Edward Shenderovich and Observer Capital’s Joseph Meyer, provides spaces tailored to meet the needs of corporate customers like SeatGeek, Cheddar, Omnicom, Twilio, Monday, and Segment. Its in-house team of architects, interior designers, and workplace strategists not only works with landlords to secure and gut places, but fill and manage them, too, ostensibly reducing rent and related expenditures. Last year, Knotel reduced construction costs for small rooms and booths to as low as $3,000 from $15,000 in 2017, and buildout times from a day to two hours.
Clients choose between Knotel’s Agile HQ product, an office designed from the ground up, or On Demand, move-in-ready enterprise workspaces with amenities like stocked kitchens, coffee makers, Wi-Fi, and security services. Knotel helps to narrow down a location and devise a workplace strategy, optionally customizing and branding the space and providing ongoing facilities management.
Novelly, Knotel leverages Baya, a blockchain platform developed internally to facilitate data-driven acquisition decisions and further reduce transaction costs. Separately, it recently launched a subscription service — Geometry, which matches “flex-minded” clients with fit-out workspaces.
For brokers, Knotel provides a tiered program it says leads to higher commission rates on average, from $3 million to over $15 million. Members advise their clients on strategies and earn compensation on all expansion and renewal of business.
Knotel claims it now operates over 4 million square feet across over 200 locations in New York, San Francisco, Los Angeles, Washington, D.C., Boston, Toronto, London, Berlin, Paris, São Paolo, and Rio de Janeiro, and that its spaces host teams of 40 or more people with a typical lease lasting between one and three years. Additionally, it says its customer base is doubling every quarter, and that it’s the largest flex office provider in New York and soon London (its overall London footprint stands at 263,000 square feet across 63 locations).
Previous and existing Knotel investors include Bloomberg Beta, Invest AG, Rocket Internet, 500 Startup, Norwest Venture Partners, and Newmark Knight Frank.
Knotel’s growth comes as flexible workspaces remain on track to reach 30% of U.S. office inventory by 2030 (up from 5% currently), and as the coworking segment is anticipated make up one-third of the commercial real estate market in 12 years’ time. It has formidable competition in WeWork, which has a $47 billion valuation and managed over 46.64 million square feet globally as of 2018, and in Beijing-based Ucommune. It’s pursued acquistions to fend them off, last year acquiring Berlin-based workspace operator Ahoy!Berlin and in January nabbing Deskeo, the largest office space rental operation in Paris.