DTC Era   /   March 15, 2019

‘Very special gloves’: WeWork is mentoring retail startups as it extends services

By Suman Bhattacharyya
Presented by

For Jurrien Swarts, co-founder of 3-year-old reusable housewares brand Stojo, his office space at WeWork’s New York City Dumbo location is more than just a place to work. It’s a gateway: Through his company’s relationship with WeWork, Swarts can get help securing funding and scaling his direct-to-consumer company. Stojo is part of WeWork Labs, a mentorship program from WeWork that helps grow early-stage startups, including direct-to-consumer retail companies.

WeWork invited Swarts to join the program six months ago, and he said through it, he’s cemented crucial relationships with venture capitalists through WeWork connections. He said the program also helped him navigate other startup growth challenges, like marketing and legal issues, through meet-ups with experts from both within and outside the WeWork member ecosystem.

“The idea was to identify startups that would be seeking to raise capital, and have services or products that are not necessarily consulting or freelance operations but actual businesses that will grow and add staff over time,” he said. “I saw it as an opportunity as I prepared to raise capital — from a strategic standpoint, it made a lot of sense to get involved.”

WeWork Labs is part of the company’s bigger plans to move the business beyond co-working. WeWork’s parent company, The We Company, has in recent years moved into furnished apartments (WeLive) and schools (WeGrow). Now, it’s focusing on retail as a way to develop services offerings that build off the 9-year-old company’s physical locations and the network effect of its 400,000 members.

With the rush of interest in direct-to-consumer retail startups in recent years, WeWork sees an opportunity. It’s a space that’s getting a lot of attention from investors. According to recent research, last year, direct-to-consumer startups garnered more than $1 billion in funding. WeWork is sitting on a trove of direct-to-consumer companies it already has in its ecosystem, and catering to upstart retail brands brings possibilities for broader services offerings. It also serves as a point of differentiation from other co-working businesses, through networking and connections with funders.

The company’s efforts to grow retail startups is served through two primary vehicles: WeWork Labs, which offers direct-to-consumer companies mentorship; and placement of WeWork member companies’ products in WeWork’s on-site stores, through which WeWork offers informal advice and support through events and networking. As its efforts in the retail category come into focus, WeWork is growing its startup mentorship possibilities through other programs, including a food tech accelerator that launched Wednesday, and a creator’s fund for “future of work” startups that rolled out last September.

A fine line between an incubator and accelerator
WeWork Labs launched in 2011 out of two New York City buildings; the program was re-launched last year as part of an effort to scale it globally. Labs is housed in a dedicated section of participating WeWork locations, currently offered in 49 locations across 32 cities and 15 countries. Companies can reach out to WeWork expressing an intent to participate in Labs, and WeWork in some cases reaches out directly. Companies sometimes pitch for a chance to be part of the Labs program. Labs participants don’t pay anything to participate beyond their WeWork rent dues.

Unlike traditional incubators or accelerators, Labs follows a loose structure, with each company pursuing specific objectives, and regular networking events. Companies also have the opportunity to connect with others in the Labs network through a Slack channel, according to Swarts. Through Labs, WeWork is laying a foundation for an ongoing relationship with the new brands. It has no time limits, unlike traditional accelerators. Companies also get opportunities to connect with investors, though WeWork Labs’ head of programming, Osnat Benari, said WeWork doesn’t invest in Labs companies. In January, however, the company held a Labs pitch competition where winners received investments from WeWork, with the first-place winner getting a $150,000 prize. Swarts, who won a $75,000 investment from a second-place result in January’s pitch competition, said WeWork is taking some equity in his company, but WeWork declined to comment on the specifics of the funding arrangements.

“We see WeWork Labs as a way to incubate a number of different startups, with the hopes that they will grow and stay with WeWork in a variety of different ways,” Benari said.

The long game
WeWork’s attention on retail isn’t just happening behind the scenes through its internal Labs program; it’s also tapping brands for its own retail program. Wallet and accessories brand Dynomighty is not part of WeWork Labs, but it won a pitch competition to get its products featured at WeWork’s on-site stores. It said WeWork is a valuable resource for advice, particularly regarding scaling and marketing.

“I feel like I’m treated with some very special gloves — they’re taking care of me,” said Terrence Kelleman, founder of Dynomighty. WeWork facilitates introductions to other WeWork member companies that specialize in fields that help grow his online business, like SEO, and WeWork facilitates opportunities to connect with the media, he added.

Those efforts should benefit WeWork in the long run. According to Swarts, the opportunities brought about by WeWork’s mentorship are a powerful influence on companies to stay with WeWork and continue to partner with it as the businesses grow.

“By supporting all these companies, and if [WeWork] has a hand in their success, [the thinking is] as long as WeWork provides me with space and services, I’m going to stick with them for a while,” he said.

The startup incubation will hopefully be added value for other startup retail brands to consider locating in a WeWork and deepen their relationship with it.

“Ultimately, it’s a lead-generation tool for people to fill desks in WeWorks,” said Andrew Murphy, managing partner at Loup Ventures. “The strategy makes a ton of sense — on the Labs side, they offer connections with startups that are going to grow and fill desks, and on the store side, it’s a great way to utilize retail space that is going for pennies on the dollar.”

But scaling services offerings is challenging, and yet another unproven new area in its expansion of business areas. The We Company has ambitious goals to grow into a multi-armed services company, but it’s not going to be a seamless transition.

“They’ve got to try services because it’s an obvious next step, and time will tell if they’re successful in transitioning to a suite of business services,” said Murphy. “It’s really hard for a business like that that’s grown so rapidly on one core skill to leave its core DNA and build a new one.”

WeWork, however, said the follow-on results of the mentorship are the core objectives of helping to grow retail companies that participate in its programs.

We’re using the retail platform as a way to celebrate stories between all these makers [of products] and simultaneously provide an in-real-life network of idea sharing,” said EunJean Song, global vp of retail, food and beverage operations at WeWork.

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