Hours after WeWork announced plans to move into Japan, one of the U.S. co-working giant’s chief rivals made a move to increase the competition in Asia.
Naked Hub, which was born out of China-based luxury resort company Naked Group, today announced a merger deal with JustCo, a fast-expanding co-working firm located in Singapore.
It also revealed that it is working to finalize a $200 million Series C round before the end of next month. That’s in partnership with power-broker China Renaissance, which backed Uber rival Didi among major Chinese tech firms, and it could value the firm at $1 billion, SCMP reported. Naked Hub closed a $33 million Series B led by real estate PE firm Gaw Capital last year, until then it had been self-funded by its parent firm.
Those figures may be a drop in the ocean for WeWork — which pulled in a massive investment of $760 million this month at a valuation of $30 billion — but they represent significant progress for a venture that is just two years old, and only expanded outside of Shanghai at the beginning of 2017.
Suddenly, we can see a major local brand potentially gaining the significance to cause a nuisance to WeWork.
That’s because today’s deal effectively unites two companies with a growing collection of co-working spaces in China and Southeast Asia. Naked Hub claims 21 spaces, most of which are in China but also Hong Kong and Vietnam. Five-year-old JustCo, meanwhile, has four spaces in Singapore and is in the process of opening centers in Thailand (Bangkok), Malaysia (Kuala Lumpur) and Indonesia (Jakarta) to gain a presence across Southeast Asia.
In Asia, WeWork is currently operational in China, Hong Kong and India. Aside from its plan for Tokyo, the company is expected to land in Singapore soon based on job vacancies it is hiring for. Overall, the company has a presence in 16 countries worldwide.
Beyond an expanded territorial presence, the coming-together will also take Naked Hub-JustCo past a runrate of $100 million per year, Naked Group CEO Grant Horsfield said.
“A merger with naked Hub is timely and makes perfect sense, with JustCo spearheading further expansion in Southeast Asia and naked Hub taking care of North Asia,” Kong Wan Sing, founder and CEO of JustCo, summarized in a statement.
Unlike WeWork, Naked Hub has utilized partnerships with real estate development groups to expand its footprint. In particular, it has alliances with China’s Vanke and Minghong groups and Empire City in Vietnam.
In an interview with TechCrunch last year, South African entrepreneur Horsfield played down direct similarities between Naked Hub and WeWork.
“We don’t try to mimic WeWork, we are a lifestyle brand that isn’t just about work,” he said. “We have an education business in Shanghai, for example.”
He said also that he believed that WeWork’s rental model and pricing makes it “completely unsustainable” and that, in the wake of many of China’s co-working spaces closing down, catering to startups alone isn’t enough to develop a healthy business.
“The whole objective is to create spaces attractive enough for orthodox companies to come in,” Horsfield explained. “I think there will be a massive fallout in the space [in China] very soon.”
He said he got into co-working on the advice of a friend having previously specialized in high-end resorts, including a stables and a castle in rural China. But after a debut location in Shanghai sold out of space in six weeks, he decided to “double down” and expand the business.
Now he plans to outsmart WeWork by opening more new branches than his U.S.-headquartered rival. WeWork is looking for a modest three to four new spaces in China per year, but Horsfield previously said his company should reach 37 in China alone by the end of 2017. Now there’s Southeast Asia, too, and the expectation 194 spaces across Asia by 2020.
Naked Hub isn’t alone in China by any means. URWork recently landed $30 million to ramp up its international expansion plan, which has already seen spaces opened in Singapore, London, Taiwan and New York.