The common work space phenomena has taken over Israel.
Entrepreneurs have come to realize that instead of working from their basement, they have the ability to work in a vibrant, dynamic and beautiful work setting that will not only foster their ideas but also create invaluable business connections while still affordable. In the tech sector, companies used to lease old apartments in downtown Tel Aviv, or even parts of existing office spaces of legal firms in Ramat Hachayal. The notion of working out of the basement or the garage was not foreign to most entrepreneurs starting up and renting 50 square meters above a restaurant on Lillenblum or Hamasger st is still fairly common practice. Joining accelerators often requires shelling out some equity in return for a cool place to sit so there were not many alternatives to affordable spaces.
Israel has caught the eye of real estate players like Mindspace and WeWork, who are seizing the opportunity and taking over entire buildings at prime locations. Joining boutique solutions such as SOSA and WMN, it seems like there is a proliferation of co-working spaces, all in the race to create the best in class shared office experience in Israel.
Prime Real-Estate Play
Thinking about the very basic need for the entrepreneur, the co-working spaces are tackling the sheer necessity of a place to sit, and where should this place be. In a word, Location.
Mindspace for example, was the first classic real-estate shared office space that opened in Israel. It enjoys the ultimate prime location for their two buildings. With one at mid Rothschild Blvd and the other at the old building of Tel Aviv’s Stock Exchange, Mindspace is at the heart of everything that is happening in the startup and creator scene in Tel Aviv.
Other co-working spaces are located in suburban areas to support specific communities outside of Tel Aviv like SUBS in Bet Shemesh, MESH in Modiin or Capsula in Netanya.
The young entrepreneur is constantly looking for mentors and people who can provide more value. Co-working spaces provide just that.
For example, SOSA TLV resides in downtown Tel Aviv and its model includes an incubation element, as companies stay for a dedicated period of time only. SOSA brings into the space lectures from industry experts on a regular basis in order to engage and provide ongoing content. The space also has visiting hours with investors, which is incredibly valuable for startups. Rami Bracha from Pitango, Tal Barnoach from Disruptive, Guy Gamzo and Yanki Margalit are only a few of SOSA’s in-house advisory.
A defining characteristic of the Israeli startup ecosystem is that the local market is never the target market. Other key geographies are the game plan for most entrepreneurs from day one.
At some point, startup CEOs find themselves travelling back and forth, and having an office across the ocean starts making a lot of sense. The global positioning of WeWork (now a $10 Billion business with offices in 12 cities across the US including New York, San Francisco, Boston and Seattle, as well as additional offices in Israel, UK and Netherlands) is a definite plus.
Tenants are able to utilize the different offices worldwide and have the same rooftop to call their home. WeWork established two offices in Israel, with a third location expected to open towards the end of the year.
Startups that are scaling their operations are looking for cost saving measures, as well as synergies for their business. Companies providing CFO services, legal counsels, designers, copywriters, etc. set up shop in co-working spaces to try leverage the community for additional business development. This creates a dynamic where the community can self-support: many times, the startups right across the hall provides just the services you need. Sourcing potential business becomes as easy as booking a meeting room on the shared Google Calendars.
Co-working spaces go to great lengths to keep their community happy. There is something very special about Israelis and the fact that they want to hang out together all the time. You see this when you travel the world and Israelis always stick somehow together. Maybe the army has made us more willing to share confined space as we used to share food, showers and tents with one another. The sense of comradery escapes not another important element.
More often than not, the way to an entrepreneur’s heart is through his stomach. Kitchens are well equipped with Nespresso machines (also Elite coffee if we are on the subject of army service), fruit, popcorn and dog treats. Yes, many of the co-working spaces are a-man’s-best-friend friendly.
Almost every day there is something going on. At Mindspace there is Theme Lunch on a weekly basis, and happy hours every Thursday. SOSA created a coffee bar in the middle of the space. Community managers at WeWork take care of your every need. Generally co-working spaces are now competing on services beyond just physical premises.
WMN, a new co-working space located at the TLV port, is inviting only women entrepreneurs to join and have a dedicated space catering to their needs. SUBS, the new co-working space in Beit Shemesh, is targeting entrepreneurs outside of Tel Aviv. The two differentiate based on the community they are targeting.
This approach will probably only grow in the future as more dedicated spaces are created for sub groups, such as designers, architects, etc. This actually is the opposite of creating a single co-working space which can house many disciplines. It goes to show that sometimes there is merit in residing together with people who are more similar to you and have similar requirements.
Not only Israeli startups scaling up choose to house their operations in a co-working space, but also investment houses and angel investors. For example, Mindspace is the home of many investment houses. TLV Partners, the new fund by Rona Segev and Eitan Bek is planning to sit at Mindspace, joining other investors such as YL Ventures, Upwest Labs, Eilon Tirosh and other individual investors.
At SOSA, some members are actually angel investors who host their visiting hours or startup meetings at SOSA. Pitango for example, with offices in Herzelia, holds a weekly meeting there because it is an opportunity for them to see companies and meet other investors.
It appears that investors value coming in close contact with the ecosystem on a daily basis. Entrepreneurs can probably complete a funding round with investors and never leave the building.
Larger companies like to partner with these co-working spaces to get a chance to mingle with the hot new entrepreneurs who may go on to create the next big success stories of Israel. Microsoft Ventures, IBM, SAP, Meitav Dash, LeumiTech and others have partnered with key co-working spaces as everyone wants to enjoy the deal flow and potential business.
As a trend in Israel, this would only grow bigger and better. In the shared economy boom we are living in, renting out a larger space than you actually require and subleasing to others is a co-working space in the making. The talk of the town is that everyone wants to do it, but effectively only a few have been executing successfully on a large scale vision. The commoditization of the startup real estate business is coming to a point it will be the standard for funded companies. We will all find ourselves sharing instead of moving out solo. There are many merits to the concept which have made it a worldwide success. It would be interesting however to learn how larger companies might adopt the concept as well, allowing it will leave room to develop a personalized brand identity within the common space. Will the same economies of scale prove worthy to organizations housing 30 or 50 people in a shared space or will it remain a solution for scaling up businesses?