Chandigarh-based Next 57 is a coworking space provider tailored to the specific needs of startups and entrepreneurs in Tier II and III cities. It is present in four locations at the moment: Chandigarh, Mohali, Ahmedabad, and Kochi.
From startups to small and medium enterprises (SMEs) and even some large organisations, everyone is looking at coworking as an option. It was something even Prashant Sharma and Mohak Goyal, now co-founders of Chandigarh-based Next57, were looking for after they graduated from PEC University of Technology, Chandigarh.
Like most engineering graduates, they wanted to start something on their own. Hence, after Mohak graduated in 2016, the duo set up their first startup. Prashant was still in his final year then. But they had to shut it down in just five months. While they were thinking of starting up again, they were also looking out for a space to work out from.
This is when they realised there weren’t many workspaces to cater to their needs in their town, and the ones present were very expensive. This led to the birth of Next57 in 2017. The Chandigarh-based startup aims to solve the problem of managed office spaces for the Tier-II and III market in India.
Speaking about setting up Next57, Prashant says: “The solutions in the market were really rigid in terms of their offerings. For example, if they have a four-seater cabin, they don’t even allow to change the layout. Few players do, but their prices are rocket high and totally unjustified,” says Prashant.
Setting up the space
Prashant says there are a lot of freelancers/remote employees and local businesses emerging out of Tier-II cities who look for flexible workspace with a minimum commitment.
“That is when we constructed our first space. As we didn’t have a lot of capital, we pooled in resources from family and friends,” says Prashant.
The founders also got into a profit-sharing model with their family and friends.
“We converted the space into a coworking area with cabins and an open workstation. Since all the money we had was from friends and family, for the first centre, we didn’t even install ACs unless someone came to occupy the place. Even to save the huge architect fee, we put in our engineer minds to learn to design on AutoCAD by ourselves,” says Prashant.
Focus on smaller towns
Eventually, the space started filling, and they were able to add two more floors. Prashant says it made them realise that coworking is the game of real estate. He adds that one can play it really smart by offering a flexible managed office space solution to the demand side.
Finding tenants for properties is a challenge in smaller towns. Citing an example, he says if a landlord has 4,000 sqft space in Mohali, it takes six months to a year to re-rent the property after a tenant vacates it. In contrast, in Delhi, it takes just a few weeks.
“Over nine years on an average, that leads to a loss of 1.5 to 2.5 years of rentable income. So, with coworking spaces, the landlord is ensured a continued churn,” says Prashant. Next57 is a team of 15 at present.
At present, there are several coworking players who are deep pocketed and well-funded.
As per GCUC (Global co-working Unconference Conference), there were a total of around 1.7 million coworking members around the globe in 2017, which is expected to touch the five-million mark by 2022. With its 203 locations across 50 cities, WeWork is one of the biggest names in the industry, and its market valuation is estimated to be around $18 billion.
Some of the major players in the space in India like WeWork, CoWrks, 99Springboard, and Awfis are all believed to enter the Tier II and Tier III cities soon.
However, the office space requirement is a lot different for Tier-II cities. They look for smaller team size cabins (team size less than 10) compared to Tier-I cities where the average team size is 15-20. A lot of teams have their founders sitting in the same space since these startups are led by local entrepreneurs.
And corporate clients look at the market as more of a testing field as they take the space for a shorter duration (six months), and are ready to pay a premium on per-seat prices, and later opt for a traditional office space once the market proves to be right. The average cycle of the client is somewhere between six and eight months as they look for more flexibility in terms of expansion of team size.
“We cater to clients from different verticals. There are doctors taking their counselling sessions, college kids taking workshops, lawyers, architects, people into sales, and IT professionals,” says Prashant.
Challenges and future
Like most startups, Next57 had its own set of challenges. However, one of the major hurdles for the bootstrapped company was to scale to multiple locations. Since it was a pure real estate business, even setting up a single centre required at least Rs 50 lakh upfront investment. Prashant explains the rental expense started from day one as it almost takes up to five months to fill the space up to operational profitability.
According to him, there are two costs associated to set up a coworking space – infrastructure cost of around Rs 1,000 to Rs 1,200 per sqft, and the rental expense. With Next57, the infrastructure setup cost was taken care of by the property owner.
Currently, the team charges anywhere between Rs 900 and Rs 1,000 for a seat per month, and is making revenues of Rs 50 lakh per month. Prashant says they are adding one location in every three months, further adding Rs 8 lakh to Rs 10 lakh revenue to the company every year.
Next57 is present in four locations in India – Chandigarh, Mohali, Ahmedabad, and Kochi – with 1,000+ seats. It aims to double this number by the end of this year.
“We believe there is a huge potential for coworking space in Tier-II cities, and no one is actually focusing on this. The market is already saturated for major cities, and so a lot of startups are looking to expand their operations into newer markets,” says Prashant.
Now, Next57 aims to be the biggest branded managed office space provider in Tier-II cities. The team plans to add 57 centres in total by the end of three years.
Read more here.
Join us November 12-15 for the Property Portal Watch Conference Madrid 2019.