Small Business Labs

The Power of Weak Ties and Coworking

LinkedIn's study A causal test of the strength of weak ties shows that weak ties - casual acquaintances versus close friendships - provide the most useful connections in job hunts.

This confirms Mark Granovetter's landmark 1973 study The Strength of Weak Ties 

As LinkedIn's article points out, Granovetter's study was conducted well before the era of big data and his surveys often had less than 100 respondents.

LinkedIn's study was massive. Key quote from their article:

"Digging deep this time, Rajkumar and colleagues tracked the modern-day connection-making patterns — and job-hunt outcomes — of 20 million LinkedIn members. The research was conducted on data from 2015 and 2019."

The reason weak ties turn out to provide the most help for job hunters is nicely explained in the LinkedIn article:

"When we connect with so-called weak ties — people we know only slightly — we gain access to job networks that stretch into unexpected areas. That lets us find people and opportunities we otherwise wouldn't know about. 

This is the magic of weak ties," Rajkumar says. "They bridge information flows. They help us navigate large spans of the labor market efficiently." By contrast, our best friends' contacts are so similar to ours that they don't help much; they're redundant." 

So what has this got to do with coworking?

The answer is simple. 

As we pointed out a decade ago in our article Coworking Strengthens Weak Ties, belonging to a coworking space increases the size and usefulness of members' weak tie business networks.

We also found that weak tie networks don't just improve job hunting outcomes. Weak ties also improve business development outcomes. 

This is especially important for independent workers (freelancers, etc.). who can leverage their coworking weak ties to win new projects and business. 

Like Granovetter's studies, our first studies on weak ties and coworking were qualitative and had relatively small sample sizes.

But since 2012, we've surveyed thousands of coworking members and interviewed hundreds more on this topic. And our findings have been consistent - coworking increases the weak tie networks of members, and that improves their business development outcomes.

LinkedIn's weak tie study doesn't directly confirm our work on weak ties and coworking. But it reinforce our study's findings by illustrating the power of weak ties.

Even as Coworking Takes Off Again, the Women's Coworking Space The Wing is Grounded

The Wing, a network of work and community spaces designed for women that raised over $100 million in venture funding, is closing.

Below is the email The Wing recently sent to members.

   

The Wing always saw itself as much more than a coworking space. They envisioned their firm as a lifestyle brand built to empower women in all phases of their lives. 

The New York Times described The Wing's vision in their lengthy 2017 article The Wing, a Chic Women's Club, is Going Wide as:

"... a locus of a mediacentric feminist movement, like Ms. in the 1970s, or a mass-scaled temple of "exclusivity," like Soho House, if Soho House wrapped itself in a marketing banner of she-power."

The Wing had 11 locations in 2019, with six in New York City. But as their email says, they struggled during the Covid-19 pandemic and could not recover.

The coworking industry, in general, struggled during the pandemic. According to Fortune's As the office goes extinct, the WeWork era rises again, over 800 coworking spaces shut down over the past two years.

But as the article also points out, the coworking industry is experiencing a post-pandemic boom. Key quote:

"Old coworking spaces are back to life, and new ones are popping up. The advent of hybrid work and the slow return of business travel has left both middle and upper classes seeking a place where they can take meetings, focus, and find companionship: a coworking space."

The future is clearly bright for the coworking industry.

But unfortunately, the rising tide of remote work-driven coworking demand was too late to provide lift for The Wing.  

And yes, we got a bit carried away with our flight metaphors.  

What is Entrepreneurial Tourism?

One of the most interesting trends we track is the mixing of business and travel. It's a long-term trend that's been accelerated by the pandemic-induced shift to remote work.

This broad trend includes several sub-trends, including the rapidly growing number of digital nomads and increased bleisure travel (combining business and leisure travel).

Entrepreneurial tourism, which combines starting a new business with travel, is another growing segment.   

Skift's Venture Capital Legend Tim Draper Looks to Franchise Hostels covers Draper Startup House: Key quote:

"Draper Startup House, the eponymous chain of 30 hostels across 25 countries that caters to both entrepreneurs and investors, offering them workshops, a digital community, and funding opportunities ..."

In other words, Draper Startup Houses blend startup programs, funding opportunities, and like-minded communities with accommodations and hospitality services. 

The Draper Startup House chart below (click to enlarge), shows some of their services.  

Draper is not the only firm pursuing this niche.

Earlier this year, we posted on the hotel group Selina teaming with Tech Arts to create an entrepreneurial tourism program.

And Skift's article points out that the large VC firm Andreessen Horowitz recently invested in Launch House, another entrepreneurial tourism company.  

Many coworking spaces around the world also provide startup programs.

The bottom line is that entrepreneurial tourism means startup founders can now choose to start their firms from a wide range of global locations and programs.

We've mentioned in the past that economic geography is a fascinating field. And the rise of entrepreneurial tourism is another example.

Hotel Group Selina Joins with TechnoArt to Create a Digital Nomad Support Program

Selina, a hotel group that includes coworking hotels and startup incubator TechnoArt has created a new startup program targeted at digital nomads.

TechnoArt@Selina is a new 12-week innovation and incubation program designed to help entrepreneurs start their companies.  

What makes this program unique is its support for digital nomads. 

As part of the program, entrepreneurs gain access to the coworking facilities at Selina's global network of more than 100 hotels. So program participants can continue their travels while participating in the program.

They also gain access to these communities, whose members are primarily remote workers and digital nomads. This provides a rich resource for startups building tools and services targeted at distributed workers.  

Also, according to Globetrender's article SELINA CO-WORK HOTELS AND TECHNOART CREATE DIGITAL NOMAD INVESTMENT FUND, participants can apply for venture funding through the program.

Coworking is a natural extension for hotels. And Selina is taking this even one step further with this project.  

And with the continued rapid growth of digital nomadism, the timing for this effort looks quite good.

The Post-Pandemic Rise of the 3rd Place

The Hill's The future of work: Not the office or home covers an academic study showing that more people are working from "3rd places", which is anywhere that is not a person's home or regular place of work.

As the study's chart below shows (click to enlarge), workers reported spending about 12% of their working hours in 3rd places in November of 2021.

In terms of 3rd places, public places (coffee shops, libraries, etc.) were the most popular, followed by "a friend's house" and coworking spaces.

Regular readers know we've long covered coworking and the increasing use of 3rd places, such as coffee shops, gyms, and other spaces people work.  

So the trend towards working in 3rd places is not new. But like many other trends, it's been dramatically accelerated by the pandemic-induced shift to remote work.

While we're on this topic, another interesting shift relates to one of our favorite trends - the paradox of place.  

The paradox is that even though the Internet and connective technologies have made working remotely easier than ever, people and companies have increasingly clustered together in fewer locations, mostly in and around major cities.  

Economists call this agglomeration, which proves yet again economists shouldn't be allowed to name things.  

This is another trend impacted by the pandemic. 

We're seeing signs that, thanks to the shift to remote work, the paradox of place is breaking down and workers and companies are geographically spreading out.     

We expect both the trends towards greater use of 3rd places for work and economic de-agglomeration to continue.  

Combo Social Club/Coworking Space Soho House Went Public

In a clear signal that coworking is coming back post-pandemic, the high-end combo social club/coworking space Soho House went public last week under the name Membership Collective Group.

Soho House is targeted mostly at creative professionals and has 30 current locations across the globe.  It's planning on opening 16 more over the next 18 months.

Austonia's Peek inside Austin's Soho House, a ritzy new club for creatives on South Congress, details the amenities at the Soho House in Austin, Texas. It gives readers a good sense of what you get when you join.  

Key quote from the article:

"From its garden-studded outdoor space and rooftop pool to its cozy-yet-luxury indoor bar and club, Soho House Austin has arrived."

The article picture below shows the pool area.

According to Reuter's Soho House IPO Sets High Price for Entry, the chain has 119,000 members and a waitlist of 59,000 looking to join. It also has attracted celebrities such as supermodel Kate Moss to their clubs.  

Not bad, given most Soho Houses were closed due to the pandemic.

Of course, belonging to a Soho House is not cheap.  Memberships run $3000 - $4000 per year and there are lots of extras.  Drinks at the Austin location, for example, run $14.  

But they are great places to relax, work and network.

Traditional city social clubs have long been a fixture in society. They've been places that combine social and work activities, but most have heavily focused on the social. 

But over the past decade or so, new combo coworking/social clubs - with Soho House being an example - have emerged.  These places provide a social side but are much more focused on work.

And that appears to be a winning combination.

Axios on The Rise of "Third Workplaces"

The pandemic has accelerated many work trends. But the dramatic and rapid shift to remote work has probably been the most potent trend impacting the way businesses operate. 

And as is covered in the Axios article The Rise of "Third Workplaces", the shift to remote work is not just a binary choice between your home and your office. 

People can work in many other places, including coworking spaces, libraries, coffee shops, hotels (in the lobby or rooms), private clubs, and even outdoors in parks and other public places.

Of course, the concepts around "the third place" are hardly new.  The term was popularized in the 80's and 90's. 

The idea of a third workplace is also not new. 

If you've walked into a Starbucks over the past decade or so, you know that even pre-pandemic coffee shops were popular workplaces. 

And, of course, the coworking industry was built on the idea that people need 3rd places to work.  

So we laughed when we read in the Axios article implied the third workplace was a new trend and that "There was a small market of remote or hybrid workers seeking out third places before the pandemic,"

Most research on remote work shows that at least a quarter of U.S. workers spent at least some time working in third place locations before the pandemic. That's not a small market.

But we agree with the article that more will do so in the future.

See our coworking section for more on third workplaces.  It's a pretty big section because we've been covering third workplaces for over a decade.

Will Coworking Be One of the "Big Winners in the Age of Remote Work"?

Business Insider has an excellent interview with Richard Florida, a leading expert on cities and urbanism and the author of The Rise of the Creative Class.

The interview covers a lot of interesting ground, and it’s well worth reading.

But one quote from Florida really jumped out at us:

Human beings are social animals. We require connection, we require human interaction. Remote workers who are by definition working outside of the office will require more of this.

People will gravitate to places where they can meet and interact with others outside of the home and outside of the office.

The big question of our time, which we are just beginning to engage, is what is the ecosystem that is required for remote work?

That ecosystem is a community, not just a technology equipped home-office. The places that can build that ecosystem or where that ecosystem arises organically will be the big winners in the age of remote work.

This reads like a sales pitch for coworking. 

And we believe coworking will become a key part of the remote work ecosystem and one of the big winners in the age of remote work.

Study Shows Most Want to Go Back to Offices, at Least Part-Time

Gensler, a large global integrated architecture, design, planning and consulting firm, recently released its U.S. Work From Home Survey 2020 report.

The survey was done between April 16th to May 4th and the respondents "were required to be working full time for a company of 100 or more people, to have worked in an office environment prior to COVID-19, and to be currently working from home." 

In other words, Gensler's surveyed nicely captured the views of people who typically work in an office who are currently working from home due to the pandemic.

The key study finding, as the report chart below shows (click to enlarge), is only 12% say they want to work from home full-time.

The main reason workers want to return to their offices is to interact with others.  Key quote from the report:

"When asked what they miss most about working from the office, three out of four survey respondents said “the people”. Workers also report that certain activities, such as collaborating and staying informed about what others are working on, are harder to do at home, underscoring the value of physical presence."

The report chart below shows the top 3 reasons the respondents listed for going to the office.

Because of our research focus on small businesses and independent workers, we've long studied remote work and work from home.  And we know from our research - and the research of others- that most people find working from home full-time leads to social isolation and loneliness.  

We also know that because of this, many independent workers and remote workers join coworking spaces to overcome these problems.

We covered another study a few weeks ago with similar results - which is most people want to work from home but don't want to do it full-time.

Because of this, we expect to see most companies adopt a highly flexible, hybrid approach that allows work from anywhere, but includes time spent in the office.  We'll have more on this in the near future.

What WeWork's Troubles Mean for the Coworking industry

WeWork's troubles seem to be going from bad to worse.

They lowered their target IPO valuation from their last private funding round value of $47 billion to under $20 billion - and maybe as low as $10 billion.

But after reading about WeWork's huge losses and highly questionable corporate governance practices in their S-!,  even that wasn't enough to attract investors. So they postponed their IPO. 

And this weekend various media outlets are reporting WeWork's board is considering replacing their flamboyant CEO, Adam Neumann. 

But despite WeWork's woes, the coworking industry is doing just fine.

As we pointed out a few months ago, the coworking industry continues to surge and WeWork's problems won't change this. 

Coworking rapid growth has been driven by 3 waves of customers. The first wave consisted of freelancers and independent workers who were coworking's first customer base. Quickly following them were startups and micro-businesses. More recently large corporations have embraced coworking.

In other words, firms of all sizes and shapes are increasingly using coworking spaces. And going forward we also see a fourth wave emerging. This wave will be driven by niche and vertical market growth and geographic expansion. 

And despite coworking's recent rapid growth, it still has a lot of room to expand.

According to a recently released CBRE study, there currently is 71 million square feet of flexible office space in the 40 U.S. markets it studied.

This is just 1.8% of the office space in these markets.

CBRE is forecasting that this will grow to roughly 600 million square feet, which is about 13% of total office space, by 2030. 

Having said all that, WeWork's problems will impact the coworking industry. 

In the short run, there will be a lot of negative press and coworking's naysayers (and there are quite a few) will suggest the industry is not sustainable.

This will result in potential customers becoming hesitant about committing to coworking. This will be especially true for large corporations. 

But this will pass and WeWork's current struggles mean it will likely have to focus on profitability, which will be good for the industry in the long run.

It's also important to point out that while WeWork is the industry's largest firm, it is only 1 of over 700 coworking and flexible office space companies operating the U.S. 

So even in the unlikely event that WeWork fails, there are plenty of coworking firms ready to pick up the pieces.