The acquisition of Innov8 by OYO, financed by SoftBank, is the largest transaction in the flourishing coworking market in India, dominated by Innov8 itself. Although it is undoubtedly the first coworking company in India, Innov8 would have needed a lot of capital to face the power of WeWork.
WeWork has expanded to 26 locations in Mumbai, Gurugram and Bengaluru in approximately 18 months since its launch in India, compared to 12 sites in six cities where Innov8 has grown since its launch in 2015. Worldwide, WeWork is present at 616 (current and upcoming locations) in 101 cities.
Scale of piggyback
Now, with OYO entering the coworking space through Innov8, it is expected that it will become a little easier for Innov8 to grow. Until now, the startup has only collected $ 4 million in 3 rounds, according to the Crunchbase transaction tracker.
"The acquisition will be announced in a day or two. The type of experience offered by WeWork is not possible (for Innov8) without a huge capital contribution. OYO, which is supported by SoftBank, has big coworking space projects in India, as it would take a lot of capital to develop in the market. It will be a big competition for WeWork. This is only the beginning of the war, "Financial Express Online told a private source of the acquisition agreement, asking for anonymity.
In addition, from SoftBank's point of view, it became clear that OYO is investing in the coworking market, SoftBank being also a WeWork investor who had also approached Innov8 for a buyout. In other words, SoftBank is looking to have a piece of coworking pie that is expected to have 13.5 million users by 2020, according to a report by JLL India.
"Although WeWork has also tried Innov8 in the past, the value it saw with OYO was much more than what WeWork offered. It's like Amazon that's self-financing whereas Innov8 would be like Flipkart backed by a foreign entity. Both companies should acquire more coworkers next year, "the source said.
Innov8 is a member of the Venture Catalysts seed fund portfolio and incubator platform. Other investors include Redcliffe Capital, Girish Mathrubootham, Google, Rajan Anandan, Google, Vijay Shekhar Sharma, Paytm.
From the point of view of the real estate rental market, coworking is only an extension for OYO, since it has already invested in rental spaces in the short term, while coworking is also essentially interested in rental spaces. .
In addition, OYO has gained experience by acquiring properties and creating an excellent user experience that they will also apply to coworking, since WeWork also focuses on a user experience and a exceptional location to grow in the United States. They also have an excellent community approach.
"The rental market consists of three parts: first the serviced apartments, the space for the house, etc., and this is the main activity of OYO. Secondly, coworking spaces are medium-term rentals, but with higher profitability, and third, living spaces. So, for players like OYO who rent short-term rental spaces, this is a natural extension. In addition, OYO also has a large community of people who are only using it now and coworking will be an additional product for them, "the source said.
Plus, it's a win-win solution for OYO and Innov8 because it offers superior product quality and revenue to any other coworking actor in India. With OYO engaging with huge capital, Innov8's scalability will be enormous, the source added.
The coworking space enters an era of consolidation, which will look a lot like e-commerce from 2014, when contracts like Flipkart-Myntra were concluded. Opportunities on the coworking market have been rare due to the lack of players working only in coworking.
Consolidation in coworking did not happen because there were very few serious coworkers like Innov8, 91springboard, Awfis, etc., and others inspired by the builder community. He saw the market more like a lifestyle company. In India, builders consider coworking as a better asset class than residential properties, the source said.
Comments from OYO and Innov8 on the subject will be updated as they are received.