Finding the right revenue model for office sharing

When it comes to the share economy and sharing physical space, Airbnb and its billion dollar valuation has stolen much of the show in the first act of a larger story about how consumers are choosing access over ownership. But the question remains whether a startup could build a successful business model not around sharing one’s home but around sharing office space.

A changing workforce

The technological trends driving the need for more flexible office space are well known and related to mobile and social technology. The number of employees working remotely at least once a week is steadily growing, and over half of companies surveyed offer “virtual work options.” The recession has also left a number of people with contract work, rather than full time employment. And a final, perhaps overlooked trend, is that as women have steadily entered the workforce, there’s a greater probability that a couple will move to the geographic work location of the primary breadwinner, be it the man or woman, leaving the other partner to work remotely.

The evolution and growth of coworking spaces has been analyzed here at GigaOM Pro. Coworking spaces are analogous to traditional car sharing.  Zipcar, for example, actually controls and manages the underlying asset being shared. And similar to the Zipcar story in which peer-to-peer car sharing startups like RelayRides and Getaround entered the market with the idea to build platforms to share the assets already out there in the world (everyone’s private car), startups are building platforms to see if companies are willing to share their excess office space. The idea goes: Why manage and put additional capacity into the market when there is available capacity that is going unused?

And the startups are jumping in, including Loosecubes, Liquidspace, Kodesk and Europe focused DeskWanted. Typically having raised anywhere from five to ten million dollars each, it’s still early in the race to figure out exactly what membership and revenue model will capture the market for remote workers that have tired from working at home or who are nomads in need of a desk for the day.

The elusive revenue model

Different startups are pursuing different revenue models. At first a strict percentage of transaction model, similar to what Airbnb uses, would seem a logical way to go, particularly if you’re the first mover and can create a critical mass around your service.

But Loosecubes, which has received some media attention, partially because AOL-founder Steve Case’s VC firm Revolution backed the startup earlier this year, is trying a different tack. After experimenting with a transaction based models, Loosecubes is transitioning toward a community membership model.

To access Loosecubes, members have to sign up via LinkedIn or Facebook. The reason for this is that Loosecubes wants to use those networks to allow its members to access office space, capped at 3 days per month, from those people in their network with the option to purchase a premium membership that buys access to office space from those folks outside of their network. Loosecubes will end up putting extra supply into the network by paying offices with 10 or more available desks to share those desks. Network effects will be critical for whichever company can stand out in this space and so far Loosecubes has 15,000 members and 1,000 office providers.

The ultimate idea here is to generate value for members, both hosts and renters, by allowing them to network and build connections with those in their industry, and one way Loosecubes does this is by allowing those offering space to select the types of professionals it wants in its space, whether it’s a writer or a programmer.

Selling to companies

Loosecubes founder Campbell McKellar described this philosophy to me as “bringing together local, professional and social in niche interactions.” And while there’s likely value to be had from bringing together similar professionals in a novel work environment a few days a month, the longer term vision for a company like Loosecubes is about being a B2B company that could ultimately sell to corporate accounts that want to offer their employees the possibility of working remotely a few days a month or to give those employees options as they travel. Asking a business to pay for a subscription should be more viable than asking individuals to make a new transaction every time they want to book space. Unlike Airbnb where a vacation is a one off transaction event, office sharing should become part of a regular work lifestyle.

No doubt the folks at LinkedIn and perhaps Facebook are watching this phenomenon closely since the conversion of virtual professional connections into physical connections is of immense value. LinkedIn co-founder Reid Hoffman has invested in Loosecubes’ main competitor LiquidSpace, noting to The Wall Street Journal that “people are interested enough to try transactions on both sides, but it’s early.” The question now is whether people will prefer individual transactions or whether the phenomenon is pervasive enough that professionals and businesses will want to pay a premium to become part of a community of office sharers.

Question of the week

Which model will prevail in the office sharing market?
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Adam Lesser

Cleantech Curator Gigaom Research

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