Biruwa Spaces to Ventures Café – Lessons from Coworking Business Model

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Biruwa opened its first shared office space for entrepreneurs in August 2011 realizing that startups were facing difficulties finding and setting up their office space, thus making their launch process difficult. When we started Biruwa, coworking was still a new concept globally and very few people understood what it meant in Nepal. The idea was simple, a space where entrepreneurs could come together and work from. Additionally, they could learn from each other experience and create a community. By working from the same space, they could reduce the cost of starting a new business. But, the market and, as a result our intervention, has evolved significantly since 2011.

This is how Biruwa’s first office space looked that we set up in August 2011.

From late 2016, Biruwa began transitioning its shared office space business into a new model of coworkng through its new initiative – Ventures Café. This transition has been in the making since from November 2014 – when we judged that growing our business through the existing business model was not financially sustainable. The earthquake that hit Nepal in April 2015 gave our business a huge jolt as we lost both of our office buildings. From providing workspaces to over 15 enterprises, we went to subleasing space with one of our past clients.

The journey of growing our office space operations was exciting and making this transition has been tough. We learnt several lessons – which I want to share with here. It will not only explain why we are making this transition but also serve as a guide to other entrepreneurs launching similar businesses in emerging markets like Nepal.

  • We added partitioned workspaces in our second office space based on feedback from our users.

    Observation: Entrepreneurs in Nepal seek some level of privacy – When we opened our first space, we had a very open space with no partitions. We thought open spaces with encourage collaboration. Many entrepreneurs who came looking for workspaces told us that they prefer to have their own cubicles or even a small room that they can call their own. Some said that sharing space might not let them focus on their work. Some said that other might even steal their business idea.

    • Lesson: Coworking spaces need both open spaces – for when people want to mingle – and private spaces – for when people want to concentrate on their work.
  • Observation: Startups who like the space don’t want to leave, even when they grow – Running your own office space creates a lot of operational hassles, especially in a country like Nepal. You have to ensure you have adequate power backup, you have to hire a cleaner, you have to have adequate parking and security, ensure you have redundant internet, etc. But with a shared office space, the service provider deals with all the headaches associated with operating the office space. Startups prefer to grow with the space, thus limiting the space available for other new startups.
    • Lesson: Coworking spaces either need a policy to encourage teams to move out once they grow over a certain threshold or should keep on expanding their space.
  • Observation: Startups that have budget constraints find shared office space or coworking expensive – Shared office spaces or coworking spaces have to recoup the investment they have made in setting up the infrastructure, cover for all the costs associated with the operations and price it in a way where you can break even at less than full occupancy. When the service provider adds up all the costs, the eventual price an entrepreneur or a startup pays appears to be fairly high. Early-stage startups don’t have the cash flow to afford the price and those with decent cash flow prefer to have their own office.
    • Lesson: Coworking spaces should either find ways to subsidize the cost for early-stage startups or should have strong alternative revenue streams through events, consulting, food, investments, etc.
  • Observation: Early stage startups and entrepreneurs want more flexibility – When an entrepreneurs are just at an idea stage of her business, they do not necessarily need a traditional workspace to work from. They will work from home or from a café. They might just need a private space (or a meeting room) when meeting with potential clients or to conduct meetings. They might just share an office with a friend rather than paying a higher fee at a coworking space or a service office space. They may not even need to come to the space every day. Cafes and other alternatives may be able to provide this flexibility better than a coworking space.
    • Lesson: Coworking spaces need to make their pricing and packaging more flexible for aspiring entrepreneurs and early-stage startups.
  • Observation: Matured startups care less about the community – When startups are at early stages of their business, they like to have a community of entrepreneurs around them. They seek advice from mentors and other entrepreneurs in the space. However, once their business model is established and they start growing, the entrepreneurs want to focus on their work and don’t like distractions.
    • Lesson: Coworking spaces should know the market they are targeting and set up their spaces accordingly or find ways to separate these two different user groups so that they can get the services they need.
  • Observation: Growing your space does not mean more profitability – We started our office space with just 7 workspaces in 2011 and expanded to 110 workspaces by end of 2014. Our revenues increased from Rs. 470,000 in our first year to over Rs. 5,000,000 in 2014. As we grew, we expected economies of scale to take effect and our profit margins to improve. But that wasn’t happening. As we grew, we leased more space. So we were paying more rent. Rent and internet cost, which accounted over 60% of our operations cost, were growing at the same level as we grew our business. At the same time, our clients who were growing within our space were negotiating their prices lower, thus further reducing our profit margins.
    • Lesson: Coworking spaces can remain financially sustainable (or profitable) if they are able to negotiate good terms in their lease and set standard pricing per workspace and not negotiate with clients if they add users.

So we learnt some lessons. You may ask what are we doing differently now? So here is how Ventures Café is different:

  • A café with basic office amenities – Ventures Café is a full scale café, restaurant and bar. But yet it provides power outlets (with backup power) to its users. It has high speed internet, private meeting room and printing facilities. You will not only get coffee and other drinks at reasonable rate when you work but also don’t have to travel far to cure your hunger.
  • A more flexible solution to suit your needs – Entrepreneurs or freelancers don’t need to sign any contract to work from of our space. You just walk in and begin working just like you do in any other café. Basic internet is free but you can choose to buy high speed internet in customized packages. If you want to use the space regularly, you can subscribe to our internet packages that will allow you to use the packages whenever you choose to work from our space.
  • A place to affordably test your business model – All that an entrepreneur needs these days to start a business is a laptop and an internet connection. As this is an open space, you have better opportunities to interact with potential customers, suppliers or even investors. Once you feel comfortable enough to get more private spaces or your own office, you can find a space to their liking that fits your needs.

Biruwa did not start its workspace to become a office space management company. But that is what we had become to a certain extent. But, I am glad we took this journey. To support entrepreneurs, we had to become entrepreneurs ourselves. We had to feel the pain that entrepreneurs feel when their business model does not work as imagined. We had to be able to speak the language of an entrepreneur to help them. I am sure we will continue to learn as we move forward. We now proudly say that we can make difficult decisions when necessary – that is what all entrepreneurs should do.

Biruwa will continue to provide mentoring, business consulting and investment advisory services to entrepreneurs. In fact, our team at Biruwa can now focus more on understanding the problems that entrepreneurs face and help solve them.

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