Kr Space, the Chinese co-working startup equivalent to WeWork in the U.S., raised $145 million in funding.
In an announcement first spotted by Deal Street Asia, Kr Space said the funding round was led by IDG Capital, Gefei Assets and Yixing Capital. Proceeds from the funding round will go to bankroll a new business strategy with the aim of becoming what it calls a full life-cycle enterprise office service provider. That means it wants to offer office space and manage space for others.
According to the report, as of April Kr Space operated 40 co-working spaces located in 10 major Chinese cities including Beijing, Shanghai, Hong Kong, Guangzhou, Hangzhou, Nanjing, Wuhan, Tianjin, Xiamen and Hefei. Outside of China, it is keen on expanding to Hong Kong, Singapore, Tokyo and other cities in Asia Pacific. In May of 2018, Bloomberg reported Kr Space was looking to raise around $200 million in venture funding. It had previously raised $94.6 million IDG Capital, Gobi Partners, UnityVC, China Minsheng Investment and Prometheus Capital.
That the firm will use the funding proceeds to shift its business model is not surprising, as co-working space operators in China are moving from expanding to offering services such as customizing office spaces. The shift comes amid rising vacancy rates. The report pointed to research from the China Real Estate Chamber of Commerce that found the number of co-working spaces in four top-tier Chinese cities jumped nearly 60 percent from the end of 2017 until October of 2018. Of those co-working spaces, 40 percent were more than half empty, the news outlet reported, noting that 40 co-working brands closed during the first 10 months of last year.
At the same time Kr Space in China is raising money, U.S. rival WeWork is gearing up to go public. According to report in Reuters earlier this month, WeWork — through its parent firm, The We Company — filed preliminary paperwork for an initial public offering (IPO). If it decides to go public by the end of the year, it would likely hold the title of the second biggest IPO of 2019. Uber holds the top spot with its $8.2 billion IPO.