In just 3 years, this Chennai-based entrepreneur rented out 9k coworking spaces; aims to scale up cautiously

Started by Gurbinder Rattha in 2016, Workafella follows a cautious approach to scaling up. It offers 9,000 coworking seats, in Chennai, Hyderabad, Bengaluru, and Mumbai. Learn about its business model here:

Wednesday November 06, 2019 , 6 min Read

WeWork co-founder and ex-CEO Adam Neumann reportedly once took three company executives on to a skyscraper's ledge, hundreds of feet in the air.

Standing close to the edge of the unguarded space (which had no railings), he asked them to drink from an old beer bottle he found there, writes Amy Chozick in her The New York Times article 'Adam Neumann and the Art of Failing Up'.

The eccentric and daring Neumann hasn't stopped making headlines since the coworking startup's IPO fiasco, massive drop in valuation (from $47 billion to $7 billion in just around nine months), and the founder's enormous $1.7 billion exit package.

Neumann's thirst for rapid expansion and high valuations, and his spectacular downfall, has served as a guide on what not to do for existing and budding real estate and coworking space entrepreneurs.

"Success is running a profitable business model; it is not targetting merely high valuations. Good valuation is a byproduct of a profitable and successful business model," says Gurbinder Rattha, who is founder and managing director at Workafella, a Chennai-based coworking business.

But Gurbinder did not need the WeWork debacle to understand what makes for a profitable coworking business. He claims 30 years of experience with the Rattha Group, which deals in infrastructure and housing development, hospitality, coworking, healthcare, and more.

He is currently leveraging the group's management credentials, funds, and overall expertise as well as his own understanding of the real estate industry to run a profitable business model with Workafella.

Started in 2016, Workafella likes to be cautious and expand in a carefully-planned manner, Gurbinder says.

Workafella aims to make a decent margin at each of its coworking centres before thinking of leasing a space for a new one.

Gurbinder doesn't disclose Workafella's financials but says the company offers 9,000 coworking seats, or workstations, in Chennai, Hyderabad, Bengaluru, and Mumbai. Another 6,000 seats are said to be under construction.

gurbinder rattha — Gurbinder Rattha, Founder and MD, Workafella

How Workafella started

Gurbinder says his experience with the Rattha Group has helped him understand real estate.

"I saw that the real estate market for office spaces was changing. Earlier, companies wanted bare-shell properties (properties in which the developer only readies its basic structure and core facilities). Then, companies started wanting more, such as other facilities, add-ons, luxuries, and even serviced offices," he says.

Now, the demand lies in coworking spaces. In fact, India is the second-largest market for flexible workspaces in APAC, second only to China.

The coworking segment is growing and demand is pouring in not only from larger cities but also from the tier II cities like Chandigarh, Ahmedabad, Kochi, Indore, and Jaipur. There are over 179 coworking spaces across Tier II and III cities, according to YourStory Research.

Gurbinder sought to tap into this demand and bring in more revenue for the Rattha Group. He says he started Workafella keeping in mind the group's strength in real estate partnerships and its understanding of value addition in the same space.

Rattha Group funded Workafella, after which its first centre opened on TTK Road in Chennai in 2016. Its second space sprang up in Perungudi on the bustling Old Mahabalipuram Road, the zipcode of several marquee IT firms.

The coworking business also received bank support. "So far, we have not given out any public equity. We are good to go for now, although there are conversations happening about raising more funds," he says.

Business model

Workafella aims to create a complete business ecosystem for clients at its coworking spaces. Gurbinder says the company provides a 24/7 office space with no hidden costs.

Some of the basic offerings include private offices, dedicated desks, custom-built spaces, virtual offices, meeting rooms, etc.

Gurbinder says Workafella "understands Indian work culture," and that small things such as storage facilities, food services, and air conditioning go a long way in appeasing clients.

"Our clients are mostly small and medium businesses such as back offices and startups. A lot of times, they need help with administration. So we started helping them with recruitment and administrative tasks as well," he explains.

In 2018, Workafella also started providing CFO services for small clients, and went on to built infrastructure such as firewalls, server rooms, biometric and facial recognition systems, etc.

"We focussed on Chennai, Bengaluru,and Hyderabad because they have many IT-related small businesses and back offices. We broke the conventional business centre model by offering them 24/7 access to working spaces," he says.

Workafella's rates depend on two factors: location of the leased property and the target clients.

"For instance, in Bengaluru's Central Business District, our rates are higher. We could charge around Rs 14,000 per seat per month. In other locations, such as near the Outer Ring Road, we could charge around Rs 11,000 to Rs 12,000 per seat per month. On the whole, there is around 20 percent variation in price," Gurbinder says.

Outlook for the future

Coworking spaces were preferred mostly by smaller companies and startups, but today, large and medium-sized businesses have also jumped on the bandwagon, attracted by affordable infrastructure and imporved business opportunities.

Over 13 million people are expected to work out of coworking centres by 2020. Several corporates are expected to allocate 10 percent of their office portfolio to agile workspaces.

Many coworking businesses are looking to cash in and some of them are CoWrks, Awfis, 91Springboard, InstaOffice, and more.

"Workafella as well as its other players are educating clients on why coworking is needed. As larger companies use coworking spaces, the products and services offered are evolving. We have thus started offering enterprise models of coworking for larger clients," Gurbinder says.

Attracting these larger clients is done through the brokerage community and channel partners, but smaller clients are acquired through digital marketing.

"Companies which need less than approximately 50 seats, largely come through our efforts on social media and Google," he adds.

Despite Ratth Group's expertise in real estate, getting the right kind of real estate at the right price remains a tricky affair for Gurbinder. "This is fundamental to our business and it is a challenge to get real estate at a price that is fair to its location. Nothing bad has happened yet since we go in with a good plan, and also a backup plan," he says.

Workafella now wants to expand, at a controlled pace, and break into the top 10 or 15 coworking companies in India in two years. Gurbinder also wants to improve the role technology plays in the products and services on offer. A Workafella app is also coming soon, he says.

Website

(Edited by: Palak Agarwal)