Renting a spot in a co-working office space has proven a popular option for startups in China. This allows greater access to facilities while saving costs, and has the added advantage of proximity to other small firms and freelancers—potentially providing access to networking and even investment opportunities.
Influenced by the unicorn startup Wework in the US, many Chinese business people have started their own co-working spaces. As of the end of 2015, there were over 16,000 of these co-working spaces in China. URwork, with offices in 10 cities nationwide, is the market leader. Its founder and CEO, Mao Daqing, is the former vice-president of real estate giant China Vanke and he left the company more than a year ago.
In a talk with CKGSB Professor Teng Bingsheng, Mao explains why he quit his former job and started this relatively new business in China and how Chinese startups can benefit from this. He also elaborates upon the “sharing economy” and his thoughts on the future of the tech world.
Q. Traits of American co-working space startup Wework have come to the Chinese mainland. What’s the difference between American and Chinese co-working spaces?
A. I don’t think there is any essential distinction, co-working spaces in China and the US are like Didi and Uber [car hailing businesses]. How do you differentiate between them? They have the same essence—the sharing economy, they share resources in the internet era, that’s their starting point, and the business logic behind the sharing economy is to unlock those unused resources, reorganise them so they can be used for production and consumption.
I have visited many co-working spaces in other countries, and I realised that aside from Wework, most of them, whether it’s in London, Paris, Tokyo, Seoul or Tel Aviv, are only two or three years old. Israel is ahead of other countries [in innovation] but they only started utilising this business model in the last two or three years. They do have many incubators and they are older, but an incubator is not equivalent to a co-working space.
These co-working spaces are all located in economically developed areas with lots of start-ups. They are in some eastern and western US cities and big cities in China, co-working spaces wouldn’t do well in third or fourth tier cities. So I would say this business model emerged in metropolises.
The idea of URwork is to make use of little-used resources to connect people, creating a new form of community.
The sharing economy is presented in various ways including cohabitation and shared accommodation, shared medical systems and shared education programs, the core is to re- distribute social resources. So these co-working spaces are not just about building an office, they change the concept of the working area.
Q. Some people say co-working spaces are not new because the business model is simply dividing a big office into smaller ones and renting them to different people.
A. Regus has been in the leasing office business for more than 10 years, but it had limited innovation. But the co-working approach of today is way different from leasing an office space, modern shared office spaces were born in the internet era. People care about the content here, and people are willing to pay for the right community.
Q. Can you explain more about content and community?
A. People who come to shared office spaces are not just finding a place to work, they are trying to meet who they want to be friends with, like people who run similar business or people who have particular expertise. I’ll give an example here. Besides your family, who are your closest friends and where did you meet them? Mostly from school, right? At school, your friendship is not defined by interests or money, and it’s the same in a co-working space, people in difference industries, at the very beginning, don’t have conflicts of interest. For example, a music app and a sports start-up, they have less crossover in terms of business interests, so they are more likely to trust each other.
Leased office buildings have a simple model, you pay the rent and move in, sit in your own booth, with no cross-company communication. So in a co-working space, ‘paying for community’ is a very important part. Everyone shares something, “to share is to gain,” that’s one of the greatest concepts about the sharing economy.
All these have one premise: the internet, which makes communication more efficient and brings people closer together.
Last year I met the grandson of Thomas Edison, he said human society is entering a period when lots of innovation is emerging. The previous period of such bold innovation was 1870 to 1900, in that 30 years, many things were invented and changed the world, and the foundation of it all was electricity.
And I agree on that, so what is the ‘electricity’ of today that triggers innovation? It’s the way people communicate and exchange information, and that is called the Internet.
We don’t know how many people have attempted to invent new things like Edison but failed. Just like there are so many people starting companies today, and many of them failed eventually.
What I want to say, is that the most significant changes throughout human history are the changes in how we are linked to each other. From the oldest method of sending letters with horses to sending phone messages via telecommunications and today’s internet, I believe there will be another round of changes after the mobile internet. There are many possibilities, like brain waves. Maybe one day we won’t even need a cell phone to send each other messages. Perhaps we could even understand each other by sending and receiving certain kinds of brain waves or senses.
Q. So do you think that those mediums that we rely on to transmit information today will somehow be replaced in the future?
A. Yes, I think they will. Phones and mobile phones are likely to be replaced by different wearable equipment or even chips that could be inserted into the human body. In the future, people will receive a huge amount of information and I don’t know what it will be like.
Q. You were at a very senior position at Vanke, which is one of the largest property developers in China, why did you choose to quit and start this co-working space business?
A. Although I’d been working in property industry, I have varied hobbies and what I studied had little to do with real estate. For my doctor’s degree I studied people’s quality of life in urban areas and then for my post-doctoral studies, my research area was anthropology. At first glance, they don’t seem to be related to real estate, but they are. Looking at the property industry from a sociological perspective we can see many problems in this industry and I wondered whether there is any way we could make some changes. Then there came the sharing economy, which offers us a good chance to redevelop and reuse social resources.
Q. Is it true that everyone who sees the advantages in the sharing economy can start a business like this? For example, could any real estate agent run a co-working space business?
A. Any could start a business like this, but there are many details to be considered and those require all-round capabilities. For example, property agents are good at selecting neighbourhoods and have good knowledge of the commercial property industry, but they’re not capable of integrating resources (for co-working spaces) like investment resources, financing resources, and so on. They cannot offer proper services to companies (in co-working spaces).
To run such a business, there must be a team with varied capabilities. In URwork’s team, there is a wide range of talents from real estate, hotels, and retail chains. By uniting them we’ve been able to build a new industry.
Q. What are the differences between the needs of Chinese startups and US startups?
A. Chinese people have fewer “genes” for starting a business on their own. But young Chinese people are changing that. In the past, when someone said he or she is a “freelancer”, they think thought this form of “freelancer” basically meant “unemployed”. But there are more freelancers and self-employed people in China now. Starting a business is becoming trendy. People who were born after 1985 or 1990, compared to their parents, have less spiritual attachment to big companies. They have received both Chinese and Western education and have immediate access to information. They have also been granted more freedom in terms of both their personality and finances. All those factors make them more suitable for starting their own business. We should offer them a proper venue and provide them chances to link to each other and grow faster.
Q. At URwork, there are also functions similar to incubators. How do you make those functions work?
A. We buy stakes in good companies, but we don’t seek ownership. We want to be partners with them and connect their services to the companies in our space. As we have more investments of this kind, we will have more services and players on URwork’s platform and eventually, we will have an eco-system, within which companies can find themselves surrounded by services and partners they need.
Sometimes we will run into a new demand as we are developing, and to meet this demand, we go look for such a company, whether it is in URwork’s spaces or not, and we become a partner and connect it with our app, where you can find different services for companies.
Q. You said that in URwork, there is communications between companies, groups and individuals and that’s what different to traditional offices. Thus far, are you satisfied with the frequency of communications between people within URwork?
A. This is a gradual process and these companies are getting used to this co-working environment. Initially, we organised warm-up activities for them and now some of them have started to organise events by themselves and we rarely intervene as administrator, rather, we are there to provide the services they need.
I believe there will be an autonomous community. For example, a company will invite its neighbours to its press conference or when someone thinks of an idea, he or she can find a partner in this community.
Q. How did URwork contribute to these communication and cooperation processes between companies?
A. As I mentioned, there is an app for URwork and in it there are many services that companies can use, like booking a meeting room, finding a designer, etc. Many of those services are not offered by
URwork operators, instead, they’re offered by those who are working here. Any company that works in URwork can apply to be a service provider in this app.
We will also introduce an evaluation mechanism for this app, ranking the service qualities by users’ votes. The services that fail to meet our standards will be taken down.
URwork is primarily a co-working space that can provide basic services—property management, desks and chairs, network and stationery, etc. and then a platform providing in-depth services, which is the key to getting companies to remain in our co-working spaces.
This article has been reproduced with permission from CKGSB Knowledge, the online research journal of the Cheung Kong Graduate School of Business.