Several US Startups Decided to Stop Leasing Office
Several tech startups from the United States reportedly flocked to choose not to continue their usual office rental. Citing CNBC, Tuesday (07/14/2020), one of the startups who chose to no longer work in the office is SoundCommerce. The startup rented an office in Seattle, United States, but during this pandemic, the company chose not to continue the lease that ended on July 31.
According to CEO Eric Best, this decision was taken after voting with employees. “They chose to remain at home,” said Best who built the company in 2018. Nevertheless, Best said, this decision was not long term.
“We are thinking about what we need to do for the next six to twelve months for team safety and company flexibility,” Best said.
For information, for startups that have about 20 employees or more, the option to not return to the office is quite large. This also happened in many areas, such as Seattle, Silicon Valley, and New York.
Renting a Building is Considered to be a Less Important Expense
They feel that renting a building is an expense that is not considered very important. While for companies with more employees, they usually close their facilities, then consolidate space and find new ways for employees to work flexibly.
Some of the big companies that have done so are Facebook and Twitter. The two companies are said to have taken a hybrid approach for their workers, so there are indeed workers who come to the office, but there are also those who don’t need to be there.
In addition to SoundCommerce, another startup that also lets their office leases expire is ChartHop. ChartHop founder Ian White said he would not continue office rental fees at WeWork.
Since this pandemic, Ian has asked nine of his employees to work at home. During that time, the team adapted to work by using Zoom and Slack, so they extended the time to work remotely.
On the other hand, this kind of decision turns out to have an impact on startups in the field of office rental, such as WeWork. One startup financial consultant said many of his clients stopped spending on renting rooms from WeWork.
WeWork Remains Optimistic for 2021
WeWork itself does not say much about this. But WeWork Chairman Marcelo Claure in an interview with the Financial Report did mention income during the crisis was fairly flat.
Only, according to Marcelo’s statement, several large companies such as Mastercard, Microsoft, and Citigroup continue their membership for the next few months because they need flexibility, so they turn to office space providers for these needs.
WeWork executive chairman Marcelo Claure said his company was on the right track to record positive cash flow and profits in 2021. This projection is faster than the initial prediction.
This startup has indeed allocated US$ 482 million to ‘burn money’ or promotions in the first three months of this year. However, the company also cut costs by less than US $ 4 billion. With this strategy, Claure is optimistic that he will be able to make a profit by the end of next year.
Although he has not yet reported second-quarter performance figures, Claure said his income was flat during the crisis due to Covid-19. Claure’s optimism came after SoftBank had set up a multibillion-dollar WeWork rescue package, although eventually Softbank was reluctant to continue the tender.
In addition to WeWork, Industrious which also has services in similar fields, states a similar trend. Industrious CEO Jamie Hodari said the percentage of companies renewing their membership was quite high in March and April, although now it has begun to return to normal.