SHANGHAI (Reuters) - China-based co-working space startup naked Hub has purchased a majority stake in a smaller Australian peer and is in talks to expand to five more Asian countries as part of its plans to grow to at least 200 locations by 2020, its chief executive said.
Jonathan Seliger told Reuters in an interview that naked Hub, whose rivals include U.S. startup WeWork Cos and which is eyeing a Hong Kong listing, had taken a 70 percent stake in Australian peer Gravity, operator of three co-working spaces in Sydney, Melbourne and Brisbane.
“We have a three-year plan, so by the end of 2020 we’re looking at a minimum of 200 locations, just in Asia including Australia,” he said, declining to provide financial details about the Australian deal which it confirmed on Wednesday.
The Shanghai-based company, which currently has 46 opened and planned locations across mainland China, Hong Kong and Vietnam, is also looking at Jakarta, Kuala Lumpur, Bangkok and Manila, he said. This could result in joint ventures or acquisitions, he added.
“We’re currently in discussions with five potential partners in different countries, that includes India,” he said.
Global demand for co-working spaces in the world’s largest cities has surged in recent years, drawing billions of dollars in capital into the sector. The chief executive of WeWork, which is valued at about $17 billion, said in June that the startup was generating $1 billion a year in revenue.
In China, expansion by dominant players WeWork, naked Hub, UrWork and others increased the amount of co-working space in Shanghai and Beijing by 50 percent in 2017 over the previous year, according to real estate consultancy Jones Lang LaSalle.
Naked Hub also had plans to enter Singapore through a merger with Singaporean firm JustCo, which has four centers in the city state. Those plans, which were announced in July, have fallen through, Seliger said. The companies did not disclose deal terms at the time.
“The JustCo deal, for which we entered into a heads of terms with them, we’re reassessing that and we’re talking to potentially other partners in Singapore,” he said, adding that this was due to “cultural fit”.
JustCo confirmed that the deal did not materialize. “In the course of due diligence that was carried out in the past months, we realized there were expectations unaligned in key aspects of the conditional merger,” a spokeswoman for the firm said.
Seliger said firepower for naked Hub’s future expansion would partly come from avenues such as the company’s ongoing third financing round, which it hoped would close by February’s Chinese New Year holiday and raise up to $175 million.
In October, Grant Horsfield, founder and chairman of naked Group which is the parent of naked Hub, told Reuters that naked Hub would carry out a fourth fundraising round in 2018 and look to list in Hong Kong in a few years.
Seliger said the company may no longer need that so-called D-round of fundraising and that it had already hired auditor PriceWaterhouseCoopers to start preparations for that listing.
“The D-round might not even happen. The funds that we’re raising should carry us until we are cash-flow positive and we might be looking to list this business in the next 2-3 years,” he said.
Reporting by Brenda Goh; Editing by Stephen Coates