Electronic trader DRW's venture arm is jumping into flex-offices by leading $16 million in funding for real-estate startup SquareFoot
Courtesy of Jonathan Wasserstrum
- SquareFoot, a marketplace and brokerage for mid-sized office space, said on Wednesday that it raised $16 million in a Series B round led by DRW Venture Capital.
SquareFoot has had a busy 2019, beginning with the February acquisition of flexible-space marketplace PivotDesk from Industrious. In June, it announced its own FLEX product, which offers shorter lengths than traditional leases.
- SquareFoot had previously raised a little more than $13 million. New funder DRW Venture Capital is the venture side of Chicago-based trading firm DRW, and has historically invested mostly in fintech.
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SquareFoot, a marketplace and brokerage for mid-sized office space, said on Wednesday that it has nabbed $16 million in a Series B round led by DRW Venture Capital, the venture arm of Chicago trading firm DRW.
DRW Venture Capital, created in 2016, has historically invested mostly in fintech and enterprise tech. DRW meanwhile has invested in real estate since 2009, eventually creating its own real estate investment arm known as Convexity Properties.
Every investment made by DRW's venture arm hasn't necessary been in startups offering products or services that DRW can use itself, but they have tended to focus on areas of the market that the trading firm knows best.
SquareFoot founder and CEO Jonathan Wasserstrum told us that he sees a clear overlap with DRW's other investments.
"At the end of the day, real estate is just a financial contract," he said.
In addition to its investment, DRW will provide expertise in areas like risk management to help SquareFoot grow its marketplace and newer flex-office products, Kim Trautmann, head of DRW VC, said in a statement announcing the funding.
Previous investors in SquareFoot such as Triangle Peak Partners, RRE, and Rosecliff, as well as senior real estate executives also joined this round. The company had previously raised a little more than $13 million, and declined to provide a valuation tied to the latest round.
SquareFoot has had a busy 2019, beginning with the February acquisition of flexible-space marketplace PivotDesk from Industrious. PivotDesk allows businesses to put unused office space on the marketplace for others to book. And this June, SquareFoot announced its own FLEX product, which offers shorter lease lengths than traditional leases, a response to the rising popularity of flex offices.
The FLEX program is an iteration of the concept behind WeWork's meteoric rise (and fall) and large fundraises for companies like Knotel, Industrious, and Convene. FLEX is a lease arbitrage model at its core: SquareFoot leases space from a landlord, which it then leases out for a shorter, more flexible length to clients, cycling in another client once the original one leaves.
Flex-office space, which makes up much of WeWork's square footage, has received a fair amount of criticism as WeWork's planned IPO went up in flames - in part because of the challenge of balancing heavy lease obligations that come with running so-called lease arbitrage against the shorter-term rentals offered to customers.
Some flex-office companies, like Convene and Industrious, have moved towards managed partnerships with landlords instead of traditional leases.
SquareFoot's FLEX is a bet in the opposite direction. But the company doesn't offer any full-time staffing, and while it will help a client secure furniture or movers, it is also far from a serviced office provider. Wasserstrum plans to use the fresh funding to bring FLEX to more companies that want flexibility without the full amenitization offered by more traditional "space-as-a-service" companies.
"If they want that, we're happy to walk them down the street to WeWork or Industrious," Wasserstrum said.
He sees no larger indictment of the amenity-heavy flexible offices central to WeWork's fall from grace, citing landlords like Hines and Durst that have recently launched their own similar offerings.
"Everyone loves confirmation bias," Wasserstrum said. "Landlords that didn't like it said, 'I told you so.'"
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