Amol Sarva, co-founder and chief executive officer of Knotel Inc.,
© 2017 Bloomberg Finance LP
Knotel, a rival to WeWork that leases office space to larger companies, has laid off 30% of its workforce and furloughed another 20%, becoming the latest venture capital-backed real estate firm to bow to the impact of coronavirus.
The workforce had totaled about 500 earlier this year and was 400 at the start of this week. With the cuts, about half the workforce, or 200 people, have either lost their jobs or are on unpaid leave, the company said.
“Business as usual is over,” Amol Sarva, Knotel’s CEO and co-founder, said in a statement. “Knotel has decided to take sharp action to prepare for the worst case — a long health and economic crisis.”
“This means a large change in our team. Half the roles in the company were removed today.”
It follows steps taken by other venture capital real-estate companies to cut costs. Convene, another office space company, laid off 150 employees last week and closed its 28 locations. Residential brokerage Compass, which has received an estimated $1.6 billion in funding from investors such as SoftBank Group, said earlier this week it had laid off almost 400 employees.
Founded in 2016, Knotel has dozens of locations in 17 cities that provide subleased office space to corporate clients. Like its larger rival WeWork, the company has grown at a rapid clip and now leases more than 5 million square feet of office space; more than 1 million square feet was added in the second half of 2019.
However, it has faced headwinds and in January it laid off two dozen employees in its New York offices.
In February, Sarva told reporters that his firm had “profitability very much in sight” and that it had $350 million in contracted annual revenue for 2020. On Friday, Sarva said that Knotel has now “revised down our forecast for the year” but said the firm still expects to be profitable this year.
Providing a backstop, the company has raised large sums of capital. In August it completed a $190 million equity funding round that valued the company at $1.6 billion, according to Pitchbook. Its investors included Wafra Partners, a subsidiary of a Kuwait sovereign wealth fund, Norwest Venture Partners and commercial brokerage Newmark Knight Frank. In addition, the company also entered a $250 million joint venture fund with Wafra.
Employees wrote about losing their job on LinkedIn. “Myself, along with so many of my colleagues at #Knotel lost their job today due to #covid19,” posted Derek Theaker, a workspace manager. “No time to sit idle and dwell on what happened.”
Another employee, communications staffer John Sumpter, wrote: “This experience has been both humbling and sad.”