Summary
With the rise of the coworking movement, the way we work is being completely reimagined from floor to ceiling. But white collar workers aren’t the only ones in need of a new way to work.
Though you probably couldn’t imagine an artist throwing paint in a small WeWork cubicle or a pottery maker spinning a wheel in the middle of an open floor concept, it doesn’t mean artist and makers don’t need a space to work.
That is why Rafael Alvarez and his team at B[x] spaces are building a new coworking solution tailored to this group. We already rated the team a Deal To Watch, now we deep dive with the founder to learn more about how this all came to be.
Funding Round Details
Rafael, how did you come up with the idea for B[x] Spaces and how does your background enable you to lead this company?
After 12 years as a civil engineer working on many of the New York’s major bridges, I decided to start my own business. I began looking for a functional space to act as an office, workspace and equipment storage. What I found was a lack of acceptable spaces that met my needs. Many advertised “workspaces” lacked basic amenities like heat, A/C, or bathrooms, much less amenities of convenience like internet or 24/7 access.
Not to mention the, fire hazards or otherwise substandard quality of construction in the buildings that I kept visiting in my quest for space. Office coworking options were becoming more common at the time, but choices for creators, makers, artisans, crafters, designers etc. were very limited up to that point. You could work from home or in a substandard, unsuitably designed or even dangerous industrial location neither configured for your needs, nor offered with the flexible terms common in coworking. Seeing a clear market gap, I built the first b[x] in 2008 catered to my needs, but knowing that there were many more like me out there and the business was born.
My technical background and engineering experience have been critical in refining the b[x] model to identify optimal target cities, neighborhoods and specific buildings for expansion. My personal experience in successfully iterating on this model with now three existing coworking locations and a fourth on the way gives us great confidence that our model not only works but is scalable.
For those that don’t know how does B[x] spaces differentiate from coworking spaces like WeWork?
In a phrase, we offer a different type of coworking experience in different locations and to a different category of customer than WeWork.
More specifically: REAL ESTATE: We do not compete with WeWork for real estate inventory. We build in factories and warehouses in less expensive class C industrial areas, whereas office coworking spaces are found in expensive Class A commercial zones.
CUSTOMERS: We do not compete with WeWork for customers. Our customer base is not welcomed at traditional coworking spaces. They don’t care much about, lounge areas with beer on tap, free coffee, foosball and huge printers. But they do care greatly for the amenities we offer such as utility rooms, slop sinks, exhibit/demo space, full height walls, equipment and materials storage options, and event programming tailored to the creator class.
CONSTRUCTION COSTS: Because our members care far more deeply about the functional utility of their space rather than the color of the lounge wallpaper, we design and build for efficiency rather than aesthetics. WeWork builds lounges with sofas, kegerators and foosball tables.
We build utility rooms with slop sinks, rolling ladders and carts. WeWork builds glass offices with sleek desks and accent lighting. We build enclosed workspaces with bare walls, workbenches and storage space. All of this translates into far lower construction costs to build a b[x] location than an office coworking space.
STAFFING: Our building staffing needs are far lower than WeWork’s. Our customer base is more low-touch and self sufficient than typical office coworking customers. As such, we can fully staff our locations without any compromise in service quality with a mere fraction of the labor costs and headcount of a WeWork.
What does your typical customer look like?
If you want to find a typical b[x] customer, look at businesses or individuals selling on Etsy, Amazon Handmade, or Kickstarter. There are millions of makers, artisans, and crafters with thriving small businesses selling on these platforms and they need workspaces to produce these products.
Some work from home, but that is commonly not by choice, but rather due to a lack of desirable alternatives. You can’t set up sewing machines for your denim startup company, or lye vats for your artisanal soap production, or a 3d printing shop, or a cosmetics micro-factory in a WeWork. But you can and will at b[x].
What is your marketing strategy and do you have a sense of customer acquisition cost?
Because we’ve built up significant brand equity in maker and creator communities, our acquisition costs are quite low. Many of our vacancies are filled by referral without any outbound marketing expense or acquisition cost.
Otherwise, we rely on customer experience, brand loyalty and the quality of our offering compared to the rest of the marketplace to ensure that our vacancies are rapidly filled. We rely on a variety of mostly digital marketing platforms to advertise vacancies, but frankly, they fill up very quickly and we don’t spend a lot.
Regardless, we are always testing different media and are confident that as we expand, the strength of our offering will engender efficient acquisition costs even in new markets.
Can you talk about the economics of a location. How many units and average price do you charge. And what do your underlying cost look like?
Unfortunately, there are currently some limits on how specific I can be in this forum because we have recently launched a Reg CF investment offering which is regulated by the SEC. For economic details about b[x], I would refer your readers to our campaign page at republic.co/bx-spaces.
What other types of services and offerings do you want to provide to grow the profitability of the business?
Our grand vision of b[x] spaces is a vertically integrated one stop shop for makers, creative entrepreneurs and artists.
As we reach a critical mass, we will expand our offerings to include additional pay-as-you go amenities such as fractional large industrial equipment use, add-on business services, retail sales space and other services that both augment the customer experience and boost our bottom line by upselling our loyal existing customer base.
We don’t just want to sell more to each customer, but more importantly, we want to make it undesirable and inconvenient for our customers to go elsewhere.
A more personal goal our team shares is to aid the resurgence of manufacturing in the US but in a micro-manufacturing format. I recognize its an ambitious goal, but if your vision does not bring doubters and naysayers, than it’s not grand enough. Our experience tells us that this goal is not only attainable but the market is already moving in that direction and has been for some time.
How long do customers typically stay at B[x] Spaces and what does the LTV look like?
Average membership length is 17 ¾ months. Our existing locations are operated under leaseholds, so LTV is not a factor in our current buildings.
How do you plan to grow the business beyond the current valuation?
Our current business constraint is that we need more workspaces to sell. With near full occupancy, our growth path lies clearly in expansion both in New York and in other markets. Even with our current success, we have only begun scratching the surface of this largely untapped market. Witness the hyper growth of WeWork and you may have a glimpse into the trajectory for b[x].
How will the capital raised in this round be utilized?
For that we have to direct your readers to our campaign page at republic.co/bx-spaces.
Do you see this as an acquisition target for larger coworking corporations like WeWork or will this continue to be a standalone business?
We haven’t gotten this far by tipping our hands. All I can say is that this is a very interesting business with a proven track record and ambitious goals. By squarely focusing on our growth plans, product offerings and member engagement we are confident of b[x]’s bright future in the coworking industry.
You’ve been around for almost 10 years. Why is now the time to grow?
To be frank, we’ve been growing for 10 years. With each successful new expansion, we’ve refined our business model, increased our offerings, built our team, and poised b[x] to begin this new chapter. More specifically, we’ve committed to an accelerated expansion plan because the market conditions are ideal for the industry to evolve into coworking 2.0, beyond the office.
The rent arbitrage model coworking model was actually pioneered well before WeWork, they have just done it much much better and at scale in the office context. We know b[x] isn’t the first creator coworking space, but we do it better than anyone else, and soon, on a much larger scale.
With strong market timing, an experienced management team, a track record in a challenging market and clear plans for expansion, we are bullish on the B[x] Spaces team.
Be sure to invest HERE.
