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Mindspace is one of the fastest growing coworking space providers worldwide. But the market is highly competitive and real estate prices are skyrocketing. How does the Israeli startup tackle these challenges?
Forbes: How was Mindspace founded?
Dan Zakai: Mindspace was founded in Tel Aviv in late 2013 with the purpose of taking the co-working concept to a whole new level and becoming the first global boutique coworking provider in the world. As an entrepreneur constantly seeking for new venture opportunities, I came across the opportunity to take part in what I believed back then was going to be a meaningful disruption of the commercial real estate market. Our first location in Tel Aviv was a huge success. The excitement by our first members had given us a lot of confidence that we were doing things right and we kept on expanding across the globe without ever looking back.
Mindspace launched a location in Germany first in Berlin in 2016. What were the main reasons for it?
Deciding where to open a new location is always a combination of many factors that we take into consideration at Mindspace, and selecting our first site outside of Israel was a huge decision. Strategically, we wanted to expand into Europe, and since Germany is one of the largest economies in the world, we felt confident that the market dynamics will be favourable. We’ve identified the emergence of Berlin as one of europe's most appealing tech hubs which back then was a key factor in our decision-making process. Berlin showed some resemblance to Tel Aviv in terms of the ecosystem, the entrepreneurial culture and the international vibe, and the real estate situation in Berlin was solid right as well. As more and more companies, local and international, were looking to grow their presence in the German capital, we’ve identified a shortage in quality offices. The only coworking spaces that existed back then were “traditional coworking” – a very basic open space with Wi-Fi. Mindspace provides a totally different experience. Over time we’ve created a new standard for offices in the city of Berlin which allowed us to attract not only startups and small companies but also world leading brands that are using our services for their teams of hundreds of people.
... co-founded Mindspace in Tel Aviv in late 2013. Previously to that, he was Co-founder and Director of G Systems Solar.
You mentioned the real estate situation in Berlin. Rents are rising since years all over the city. Does it not affect Mindspace?
On top of the many benefits of using our services, we help companies save money by having their teams at Mindspace. The rising rents in Berlin and other cities in the world only makes our offering, which is highly cost conscious, more appealing to companies.
From a business point of view, rent is only one of many elements that we take into consideration when we analyze specific locations. We obviously need to be aware of that in order to make smart decisions, but when we choose to expand into a new city, we try to analyze the overall potential of the operation. In an expensive real estate market, coworking is a good solution for companies looking to be in a prime location but can’t or are unwilling to commit to long term leases. That leads to better awareness for coworking and allows us to attract more enterprise companies such as Microsoft, GoPro and Samsung, who fully understand the value they are getting from us.
How are the decisions made about the pricing at Mindspace?
Our pricing models and strategy have been developed over the years, and therefore cannot be shared in detail. However, I can tell you that we take into account many variables, including current rent prices, our operating expenses, levels of demand in the market and more, and what is most important to us is to strike a balance between a price that makes sense to our members, but allows us to deliver the premium experience they expect. Our goal is for our members and their employees to be happy, engaged and productive in our spaces, so they can focus on their business and thrive; our pricing is designed to allow us to achieve this goal.
What is the strategy when opening new locations?
We operate Mindspace in seven countries which makes us one of the truly global players in our industry. The strategy of opening new locations is comprised of many factors and considerations that our team is constantly evaluating.
As a first step, we identify and prioritize attractive markets and cities which we believe we can be successful at. We then get deeply familiar with the market by getting our launch teams on the ground. In some cases we launch new markets and in other we expand in existing ones. After we identify and source our new location the challenge is to make it successful, and in order to do so our launch teams are required to master multiple domains simultaneously.
How important is it to grow as fast as possible, for example to operate in markets like Asia and South America, right after those in Europe and the US?
Mindspace is a global boutique coworking provider, and as such we need to maintain certain values and standards in the coworking industry. Growing too fast could compromise or jeopardize this experience. However, we are a fast-growing company, so the strategy is to continue our growth in the European countries we already operate in, continue to be the leading pan European provider, all the while finding the correct opportunities to expand into new cities. 2018 we launched operations in the U.K, U.S, Romania and the Netherlands where we’ve made our first acquisition. We are not yet present in Asia and South America. But you never know what the future brings.
How did coworking change the urban development in cities?
Coworking is disrupting the traditional work model and is benefiting from the urbanization trend on one hand and supports it on the other hand: better utilization of space, improved work experience, and blurring the lines between work and life.
The urbanization trend drives more people to move from rural areas to cities and expands the urban development for both work and housing. It means that more people are working in or commuting to the city, creating more demand for office space and more pressure on transportation and infrastructure. Coworking is the beneficiary of that demand as we are able to maximize the utilization of space without jeopardizing the quality of work. As coworking provides a better work experience, demand for coworking solutions continues to increase, and since most coworking spaces are in urban areas, it reinforces the cycle of urbanization and creates more opportunities for additional development. We see more development of lifestyle services geared for the workforce at their place of work, such as gyms, cleaning services, wellness providers, quick-to-exit grocery shops, on-demand delivery services and other developments that are designed to fit better the urban lifestyle for both residents and the workforce of the city. Coworking and Office as a Service solutions both enjoy those changes, but also create them as they allow more people to work in the cities.
As you spoke about “office as a service“: which new services will Mindspace provide in 2019?
We have been very successful in creating excellent spaces and a very high level of customer engagement and satisfaction. The challenge of Mindspace is to continue our growth while maintaining the same level of service and experience. We will continue to add more services to make the workspace better, more enjoyable and more engaging. In 2018, we launched a mobile app for our members that allows them to engage with each other, shows local events and benefits, and enables meeting room bookings. In 2019 we’re exploring additional services that our members have requested.
Mindspace recently launched in the US. What do you expect there?
We started in the US with two locations in San Francisco and Washington D.C. in late 2018. Like any other market we operate in, we see the opportunity to bring to the U.S. our prime offering and expand further in this region. Our exceptional teams and experience allow us to deliver a consistent and high end experience all over the world which in turn makes our operation a successful one. Our goal for the US market is to continue expanding into new major cities and to cooperate with Real Estate landlords who are looking for top notch coworking operators.
Will coworking change more into a “hybrid“-system in the future, offering other elements than the workplace itself?
We think we are already providing more elements such as community, wellness programs, professional development activities and more. We are also reviewing and analyzing the potential of the other areas in the buildings in which we are already present. We could manage the community not only in our space but also in the rest of the building. There we could offer wellness programs, lectures or workshops. Additionally, in the near future we will see more real estate companies and landlords teaming up with coworking operators to provide the same community experience for their tenants.
Is Mindspace profitable yet?
We are profitable in most of our locations.