The co-working space sector may have come of age as rivalry heats up. But, industry leader Ucommune is unfazed. Founder Mao Daqing tells Edith Lu their huge client base ensures that they’ll stay ahead of the pack.
Mao Daqing, chairman of Ucommune, says co-working space cuts costs, and it’s not crowded. (ROY LIU / CHINA DAILY)
The outburst of the sharing economy may have lifted Ucommune — the Chinese mainland’s co-working space giant — to the zenith of its orbit but, with the industry seen coming of age, it is fast changing course, turning to “non-table” online services to keep its dominating stature.
And, overcrowded Hong Kong, where skyrocketing office rents have kept startups and small and medium-sized enterprises critically constrained, has served as an archetypal springboard for Ucommune — the mainland’s first co-working space provider to attain unicorn status — to push its “go out” strategy.
Mao Daqing, the company’s chairman and founder, calls his business “a part of the hospitality industry”, renting floors of commercial office buildings in urban centers and splitting them into rooms and public spheres for lease to small corporate clients.
“We pick locations in popular areas with convenient transportation and good facility services. The space provided should be large enough, otherwise we cannot build it as a community,” he says.
Founded in 2015 — the onset of the co-working space era on the mainland — Beijing-based Ucommune tapped into Hong Kong earlier this year, securing an entire floor at a primary location in Sheung Wan, a part of the island’s Central and Western district that has evolved from an area previously associated with only dried seafood into one of Hong Kong’s distinct commercial neighborhoods.
Competition in Hong Kong’s co-working space sector is fairly fierce, with dozens of local providers having joined the fray. According to serviced office space provider the Executive Centre, there were more than 64 co-working space operators in the city by November last year, and the number is still on the rise.
Mao is betting on Ucommune’s huge client base on the mainland as its “treasured sword” in the contest. “Our clients need working spaces in different cities. Those based in Beijing will be used to choosing our spaces in Hong Kong when they come here on business. The more cities we cover, the more clients we’re able to target accurately.”
The company aims to open up about five locations in Hong Kong — two in Kowloon and two or three on Hong Kong Island — by late next year, and its pool of locations worldwide is expected to reach 200 this year, including another in Mong Kok, Kowloon, and one in Taipei.
Ucommune has already taken a somewhat unassailable lead on the mainland as the largest co-working space provider with some 155 locations in 31 cities, and has found its feet in Hong Kong, Taipei, Singapore and New York, with Macao and other Southeast Asian cities coming within its scope.
Clear profit model
The company posted revenues of 300 million yuan (HK$371.62 million) in 2017 — its first financial year — and Mao is eyeing between 650 and 700 million yuan this year, and more than 1 billion yuan for 2019.
“The profit model of co-working space is quite clear. For a single location, it’s not hard to get profits from rents. Many of our locations are profitable. We improve sales per square meter as our clients share the reception, corridor and meeting rooms. Thus, sharing space cuts costs and promotes efficiency, but people will not feel that crowded. This is the basis of co-working space,” he explains.
“But, what we’re doing is not only this. The profit the industry can generate is far more than that. The key point is socialnomics.”
To redefine the co-working landscape, Ucommune has launched an integrated online platform, providing services like education, events, business information and e-commerce. People can also buy membership packages online for the right to use hot desks or meeting rooms, which is quite helpful when they’re on business trips to other cities. Mao sees these “non-table” services as the true revenue drivers in the co-working space business.
“At present, revenue from non-table services merely accounts for 12 percent of our entire income, but the ideal proportion should be about 60 percent. What we need to do now is to lift revenue from this part, and this actually depends on the internet. So the co-working space business is a part of the internet-plus industry.”
Within three years of its inception, Ucommune had turned itself into the mainland’s first unicorn in the co-working space arena, with a valuation of US$1.7 billion after a new round of funding last December, along with several mergers and acquisitions.
So far this year, the company has taken former rivals — Woo Space, Wedo Coworking, New Space and Workingdom — into its fold. Mao says these acquisitions will continue in the next two months. “We still need to carry out one or two more rounds of funding, but it’s for scaling up and development rather than for M&As.”
“Many of our competitors that were founded in 2014 or 2015 have exited the scene this year, which suggests the industry’s management system still needs improvement. It’s only normal that players come and go.”
Although many players have thrown their hats in the ring, Mao believes the co-working space business remains robust and has yet to saturate. “Unlike the pure-play internet industry, the co-working space business always welcomes new players. Their appearance implies people are confident about it. Also, different players have different features and provide different levels of products.”
“For Ucommune, we would like to become the ‘Holiday Inn’ in the co-working space,” he vows and, to achieve that, he has wooed franchising experts to be partners and turn his kingdom into a co-working space chain.
Talking about initial public offerings, Mao did not hide his dislike for discussing the topic, saying: “All the business operations aiming for an IPO are nonsense.” But, he admits that raising funds in Hong Kong can help Ucommune’s development and financing. Listing the company in the SAR might be possible in the wake of the city’s decision to embrace new economy companies with a dual-class shareholding structure.
Mao says he will watch closely how Xiaomi — the first mainland tech enterprise to apply for a listing under Hong Kong’s revamped listing rules — will perform and learn from its experience.
“But first, we should make our products and operations better.”
For entrepreneurs, it’ll be ‘a road of no return’
Born as the grandson of renowned Chinese mainland architect Mao Ziyao, Mao Daqing — chairman and founder of Ucommune — says city and property development has always been in his blood, and co-working office space is not his “final destination”.
“It’s normal for an architect to turn to the property and urban renewal-related business,” he tells China Daily.
Mao had majored in architecture at university and dreamed of rebuilding a cottage. “But, I know clearly that’s not business. If my business can match my interest a little bit, it’ll be good enough.”
After working as vice-president at mainland residential-property giant China Vanke for six years, he called it quits and set up Ucommune in 2015.
Early in 2014, after having been in the property field for more than two decades, Mao was apprehensive about a real-estate bubble taking shape, warning in a speech that a “real slump” was in the making.
“I was fully aware that we could not do property business like what we used to do,” he says. “All the choices I make today are in relation to that speech.”
He was thinking of trying out something new, but had no idea what to do. “At that time, I just wanted to turn these inefficient houses into something. But I had to grope for a way to work on my own venture.”
Prodded by angel investors and friends like Xu Xiaoping (founder of Beijing-based ZhenFund) and Shen Nanpeng (founding and managing partner of Sequoia Capital China), the former professional manager started his own business in his 40s.
For him, it’s an extraordinary adventure to build it from zero to one. “The progress in starting a business is something I had never experienced before. It’s all like bearing a baby — you have to look after it and make it look good. You know nothing unless you do it,” he says.
But, he’s convinced that a middle-aged businessman does have certain strengths in growing startups. “We have much more sense of edge like the bottom line of the law, of pressure and of risks. On the other hand, we have a better command of resource mobilization. We know where resources are and how to make good use of them.”
For young people aspiring to be their own bosses in business, Mao is curious about future entrepreneurs as they are a generation without “living” problems.
“Different from the generation of Wang Shi (chairman of China Vanke), today’s younger generation has dreams, plus opportunities and abilities to realize their dreams. I cannot describe what kind of entrepreneur they could become, but every generation is on a mission.”
Mao tells young startup owners to decide if what they’re doing can change the world and create new values, primarily for society. They also need to ask themselves whether they would like to build up a small company or a big enterprise. “Companies are built for profit, while an enterprise has social responsibilities.”
“It’s a road of no return as long as you decide to become an entrepreneur.” The startup owner never thinks of failure, he insists. “I cannot fail. I have nothing to do, but to move on.”
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