Switchyards neighborhood work club in Chamblee, Georgia, an old Atlanta suburb.
A trio of technology venture capital firms placed bets on a startup that is putting its spin on coworking not through tech but as a pure real estate endeavor. This comes despite WeWork’s financial struggles tarnishing coworking prospects.
San Francisco-based Bullpen Capital lead a $5 million funding round in Atlanta-based Switchyards to fuel an expansion from 15 locations in Atlanta, Charlotte, North Carolina, and Nashville, Tennessee, to 200 or more locations throughout the U.S. South over the next five years. Existing investor Seattle-based Cercano Management, a spinoff from late Microsoft
Switchyards has raised a total of $10.5 million to capture the “one to two days a week across the globe up for grabs,” founder and CEO Michael Tavani says.
The company is among several startups that are raising money and expanding to offer a version of coworking that looks nothing like WeWork and is closer to home for remote workers.
Portland, Oregon-based Radious is about to close on another round of funding, says founder Amina Moreau. She already counts Robin Daniels, a former WeWork chief marketing officer, and Stanford University economics professor Nick Bloom, a remote work proponent and influencer for about two decades, as investors.
The model is similar to Airbnb but doesn’t involve overnight guests. Founded in 2020, it operates a marketplace that connects homeowners with remote workers.
Radious expanded from Portland to Milwaukee, Wisconsin, and then to San Francisco. In April, it launched a nationwide curation service to assist companies that have employees around the country who want an alternative location for working.
Meanwhile, London-based Jarvo, a similar concept to Radious, has become the latest entry into the U.S. coworking industry with a pilot project launched in New York City about a week ago. Daniel Hillman, Jarvo’s founder and CEO, started a marketplace in 2022 that has homes in neighborhoods around London and decided to set up a U.S. subsidiary because the market is so strong.
Jarvo users can find space in residential homes to use with short notice. “We’re more of an Uber
Why Hybrid Work Is Here To Stay
WeWork now is trying to survive bankruptcy after years of being the coworking behemoth. It has closed many locations across the U.S. after spending wildly for years on office leases and constructing space, putting financial stress on property owners who eagerly accepted the coworking company presence.
But the office properties took a drubbing during the Covid-19 pandemic after workers were sent home and companies began emptying space after reassessing needs. WeWork’s troubles only added to financial pressure.
Startups are banking on the permanence of the hybrid work model that Daley Ervin, who opened Cercano’s Atlanta office in late 2022 and was an early Switchyards investor, says started before the Covid-19 pandemic and accelerated during it. Daley described the change as a shift in how consumers want to work.
Last year, the hybrid model appeared to be losing its luster among CEOs. A 2023 survey of CEOs conducted by consulting firm KPMG showed 62% saying that employees would return to the office full time over the next three years. But the pendulum swung back in KPMG’s survey released in April showing that 34% now believe that employees will be back five days a week over the next three years. This year’s report found that 46% believe hybrid will be the alternative, up from 34% last year.
KPMG U.S. Chair and CEO Paul Knopp said in the report that CEOs are managing a tight labor market and that the “mental well-being of their workforce and preventing burnout remains a priority for CEOs.”
Neighborhood Concepts
A common theme runs through the target market for the startups. They are targeting remote and hybrid workers who want to get away from home distractions but don’t want to commute to the typical coworking space, which may be just as long of a commute as if going to the office.
“This is the future of work-life harmony,” Jarvo’s Hillman says.
Hillman launched his company in 2022 and has listings in several neighborhoods around London that users can access quickly.
Radious’ listings are mostly in suburban neighborhoods.
Tavani says Switchyards brands itself as a neighborhood work club and doesn’t use the term coworking.
“We look for the best, most iconic, buzzy, walkable neighborhoods” when searching for locations, he says.
The company then leases space in the most unique building it can find. Its most recent new Atlanta location is in the former laundry operations space in the Biltmore, a former hotel built in 1924 in city’s midtown neighborhood, which now is office space and owned by the Georgia Institute of Technology.
For the Biltmore, the Switchyards interior theme may be fitting. Across locations, the interiors are “built on the concept of a luxury hotel lobby,” Tavani says.
Members pay $100 a month, have coffee available, high-speed wifi and 24/7 access.
Switchyards’ locations are largely urban or early suburban neighborhoods in Atlanta, Nashville, Tennessee, and Charlotte, North Carolina. Future expansion plans include Florida cities, large metropolitan areas in Texas like Dallas and Houston and eventually smaller cities such as Birmingham, Alabama, and Chattanooga, Tennessee. Tavani says they also are looking to go deeper into the suburbs in cities.
Though the hybrid model seems to be holding up, potential investors in Switchyards had to see the space firsthand to understand the concept better and the members, 95% of whom the company learned had never previously used coworking space, he says.
Ervin says there “still is a hangover from WeWork.”
