[Startup Bharat] How Ahmedabad-based coworking startup DevX kept going amidst the pandemic

In 2017, three friends felt the need for a platform and space that could help startups in Gujarat. 

The trio, Umesh Uttamchandani, Parth Shah, and Rushit Shah, had more than three decades of experience working with IT companies, and wanted to set up something in Ahmedabad, their hometown.

All three were unanimous that Gujarat lagged when it came to offering a lucrative startup ecosystem that would work as a launchpad for growth. 

This gap led them to start Ahmedabad-based DevX Co-working and Accelerator, a collaborative workspace. “Unlike many other players, DevX works on the managed/serviced office model with corporates to offer them best-in-class space solutions with top-notch customer service,” Umesh says. 

The founders also wanted to provide every startup with basic support, which is often difficult to find in Tier II and III cities. 

“Gujarat is one of the most developed states in India, but a strong push from established entrepreneurs was the need of the hour to create a concrete and collaborative ecosystem. That’s how the idea of DevX was born,” Umesh explains. 

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More than a workspace 

The DevX suite of services includes Collab, the coworking space; Accel, a coworking accelerator; Innovent, a corporate innovation initiative; HaaS, a hackathon management platform; and Consight, which offers business consulting services.

The accelerator and venture fund aims to bridge the gap startups face when it comes to funding. It provides an ecosystem for growing entrepreneurs to leverage the network and gain experienced mentorship while resolving issues regarding investment.

DevX is offering its managed/serviced office solutions to numerous clients, including a few global players who are looking to setup their base in India.

For foreign entities like these, the coworking startup acts as a one-stop solution – offering everything from space to hiring and payroll management services. 

“For example, for Mobile Tornado Group Plc, an Israel-headquartered entity, DevX played a pivotal role - from setting up their base, taking care of all legal formalities to fully implementing and delivering all allied services for their business needs.

"The primary focus has been to attract Global Capability Centres to set up business in India by providing them with end-to-end solutions and even going the extra mile by scouting innovations,” Umesh says. 

DevX operates eight centres in five cities in Gujarat and Mumbai, spread over 2,00,000 square feet with 4,000+ seats. It has more than 50 team members.

The first three centres were largely occupied in the pre-COVID-19 time, but the lockdown helped the founders work on improving technology and other services, and focus on delivering a safe and hygienic workspace. 

It may be doing well now, but streamlining operations and onboarding new clients was a huge challenge in the initial days, The idea was to merge hospitality, real estate, and technology to offer the best experience. 

“DevX’s tech stack is on offer not just to clients, but also asset management/ housekeeping teams and vendors. This ensures transparency across departments and enhances operational effectiveness,” Umesh says. 

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Model and the fund 

The larger chunk of revenues come from the managed office solution since every DevX centre, on average, has two to three anchor clients occupying 75 percent of the space. 

As in any coworking space there are three critical stakeholders — the landlord, the operator (coworking), and the Customer. Globally, most operators lease (rent) the office premises from the landlord for a longer duration, design fit-outs as per market requirement, and further sublease them to multiple clients. The industry plays on margins of 15-25 percent. 

“We've tweaked our business and revenue model. We adopt an open book policy with enterprise customers looking for 100 seats or more. We lease the space or get into a revenue-sharing agreement, ultimately resulting in higher revenues/wealth for landlords. Our EBITA margin is between 15-18 percent, depending upon the centre and its location,” Umesh says. The team refused to divulge their pricing. 

Umesh says their network of coworking spaces helps reach out to the right set of innovators and entrepreneurs and set up partnerships. Going forward, DevX intends to “aggressively support, mentor, and create a strong portfolio of startups”. 

“With a decent corpus branded as DevX Venture Fund (DVF), we have already made six investments into startups and intend to do eight to 10 more this year. Our portfolio includes Quixote Automotive Technologies, BigSpoon Foods, Financepeer, The Healthy Company, ExtraaEdge Technologies, and Intents Mobi.” 

DevX achieved positive traction in all verticals/business units and claims to have been operationally profitable from December 2018. 

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Surviving the pandemic

The COVID-19 pandemic and the subsequent lockdowns and restrictions brought the coworking industry to a grinding halt. However, change seems to be around the corner. 

According to ResearchandMarkets, the global coworking spaces market, which was expected to decline from $9.27 billion in 2019 to $8.24 billion in 2020 at a compound annual growth rate 12.9 percent, is “expected to recover and reach $11.52 billion in 2023 at CAGR of 11.8 percent.”

That said, the immediate impact of the pandemic was a huge dip in the number of coworking players. Those that survived had to showcase their resilience and flexibility. 

Umesh says three main factors helped DevX survive the pandemic: 

1. Managed office space performance: DevX is a managed space solution, with 70 percent of its client contracts running till 2022 and beyond. This kept the team comfortably afloat in the time of COVID. 
2. DVF investment performance: Umesh says the team is foreseeing an exit in two of their portfolio startups in the coming six months, generating a whopping 4X return in less than 24 months of the time frame, and one additional startup in the next nine to 12 months. “The overall portfolio is performing robustly, with most startups managing to raise their subsequent round of funding. This gives us even more confidence in our process of shortlisting founders and ventures.” 
3. DVF accelerator: "Our core expertise has always been rooted in understanding industry problems and weaving an accelerator programme around them. At the moment, we are planning to launch a D2C accelerator, partnering with various stakeholders, to aid rapid scaling to few selected consumer brands through Plug'n'Play support, capital infusion, and networking. In the future, we also intend to launch a proptech Accelerator catering to the specific needs of real estate use cases,” Umesh adds. 

What’s in the future? 

DevX raised its first round of $1 million from a Gujarat-based investor in May 2019 at a pre-money valuation of $6 million. The startup is now looking to raise an additional $3.5 million. 

This year, to pump up growth, DevX plans to open an AI and IoT lab. This will be initially launched at its headquarters in Ahmedabad and then replicated across multiple DevX centres to boost the AI-IoT accelerator programme. The team also plans to run an accelerator programme in the direct-to-consumer and fintech spaces. 

“This will largely be in line with our vision to boost innovation and make aggressive yet sensible investments in startups. We want to grow their tally from six to 15 in this calendar year,” Umesh says.