To say it’s been a big year for co-working provider Bizdojo would be an understatement. The company has spent it planning rapid growth, running into growing pains in the process (such as the liquidation of subsidiary company Bizdojo Auckland) and now, it has just been sold to one of the world’s leading workspace providers, IWG. Bizdojo co-founder Jonah Merchant sat down for a chat about the highs and lows of the past year.
BizDojo co-founders Nick Shewring and Jonah Merchant met way back when in the innovation team at Air New Zealand while under the guidance of Rob Fyfe.
Fyfe played a key role in transforming the business to have the culture that the airline is now renowned for, and that proved to be an inspiration for the pair’s future venture – BizDojo.
Founded in 2009, BizDojo’s premise was simple: change the co-working model so that residents could exist within a community that catered to their strengths and work, learn and grow alongside one another.
L-R: Jonah Merchant and Nick Shewring
Fast forward seven years and the model turned out to be a success, with the co-working provider spreading fast across Auckland, Wellington and Christchurch and plans to launch in Queenstown.
But 2017 turned out to be a year of massive highs and excruciating lows. Merchant sums it up as “interesting”.
“Interesting covers a really broad spectrum of situations. In terms of BizDojo, the last year has been at once, the most rewarding in terms of what we’ve been able to achieve but also the most challenging, and ultimately a little bit bittersweet,” he says.
“There’s some fantastic things we achieved and there’s clearly some things that didn’t quite hit the mark. It’s a tough mix, so I use the word interesting to cover all of that – or super stressful, crazy, and everything in between.”
These struggles weren’t apparent in 2017 – to the outer eye, the company looked the picture of success due to the rapid growth it was undertaking. It opened BizDojo Takapuna and subsequently announced new sites very quickly in succession: Ponsonby, Sylvia Park, Queenstown.
But behind the scenes, he says one of the key problems that BizDojo ran into was limited capital.
Merchant says New Zealand investors didn’t understand the opportunity with a co-working space rather than a technology play, while commercial real estate players didn’t take the proposition seriously until recently, with Precinct Properties’ investment into Generator showing attitudes are changing.
However, he says the problems the company ran into were a result of aggressively expanding.
“I think hindsight is 20/20 for sure, we’ve definitely grown too fast,” he says.
But he says there was sound reasoning behind the decisions to move quickly. The BizDojo team was looking at what was happening to co-working spaces on a global scale, and looking at where it was at in New Zealand, while thinking about where it wanted to go next.
On an international scale, it looked to WeWork – the co-working behemoth acquiring sites around the world at a rapid pace. In 2017, it opened co-working spaces in 90 new locations, doubling its global membership. This year, its goal is to create one million square feet of new space each month.
“We thought we had an 18 to 24-month window to secure a strong position in New Zealand before a very well-funded international operator was going to come in here,” Merchant says. “For us, we had this decision to make as founders: ‘Do we keep our business BizDojo relatively small and niche in New Zealand, have an impact but a limited impact, or expand?’ We made a decision that we wanted to be able to scale our impact, bust out of that niche kind of space and have a bigger impact internationally, and do that before the big guys came in.”
But financially, not everything fell into place. Merchant says an investor overseas was rocked by change in the financial markets in Hong Kong, and subsequently didn’t come through with the money.
And when another one or two things didn’t go BizDojo’s way, it was left vulnerable.
“If that capital had come through when we wanted to, it would’ve been a pretty smooth process,” Merchant says.
“It was calculated risk, but the risk was weighted too far in one direction and we didn’t have enough bases covered if more than one thing didn’t go our way. The entrepreneur is always glass half full – ‘It’ll be fine, it’ll be good, we’ll plow on through.’ You need that kind of optimism for sure because we set ourselves some pretty aggressive objectives last year, but equally, we overexposed ourselves.”
The most noticeable consequence of this is BizDojo’s subsidiary company, BizDojo Auckland, being placed into voluntary administration on December 6 due to it owing $341,000 in unpaid rent to ATEED.
BizDojo Auckland was formed in 2016 to sublease space from ATEED in GridAKL’s Lysaght building in Auckland’s CBD. The secured creditors, ATEED and Robert Walters, voted unanimously for BizDojo Auckland to be liquidated on January 19.
ATEED said it was inappropriate to comment for this article while the liquidation process is still ongoing, but it remains focused on supporting start-up resident businesses at the GridAKL Lysaght building.
BizDojo spokesperson Paul Brislen said BizDojo Auckland was a subsidiary company that only looked after the relationship with GridAKL, with the rest of the BizDojo sites unaffected. Merchant wasn’t able to comment on the situation due to the liquidation process being ongoing.
However, speaking about the last year, he says the pressure cooker situation BizDojo was in made it interesting to try secure an acquisition with the world’s largest workplace provider.
“They’re a FTSE-250 listed company and have an extensive due-diligence process and you’re trying to complete that in a timely fashion – you’re trying to complete that through growth pains. It was a pretty challenging ride,” he says.
BizDojo Group also changed its name to BDG Group on January 19. Merchant says this was an administrative move due to the acquisition by the IWG brand.
A new chapter
IWG is the owner of a number of workspace companies including Regus, Spaces, No18 and Basepoint. In total, it has over 3100 locations worldwide in over 1000 cities and 110 countries.
Merchant says BizDojo has always been in contact with IWG’s local team due to moving in the same industry circles.
One conversation led to another, and then last year, Merchant and his fellow co-founder Nick Shewring flew to meet IWG founder and CEO Mark Dixon at his chateau in France. Their visions for the future of working aligned, and so the two companies came together.
IWG New Zealand country manager Pierre Ferrandon says the company is pleased to support a New Zealand company that built its foundations from the ground up.
“BizDojo has gained a significant following over the years,” Ferrandon says. “Bringing it into our network offers New Zealand businesses greater variety, with more, character-filled locations.”
Merchant doesn’t think there’ll be any major changes to the BizDojo brand with the sale. He says each of the brands under the IWG umbrella brings a different approach to their workspaces.
BizDojo is unique in the way it’s an open-plan, community focused approach to co-working, he says, with a connected ecosystem and very engaged community.
But the acquisition also gives BizDojo the global backing it needs to take its ‘secret sauce’ to the world.
“The opportunity for us is to prove what we’ve created here in New Zealand can actually be scaled into new markets offshore and we can still deliver that community approach to co-working,” Merchant says.
“That’s something I think various operators have done to greater or lesser degrees of success. WeWork’s done some of that, but I think there’s an argument there that what they do is very much private studios and offices, so I think that’s an exciting thing for IWG to help us prove what we do is very unique. If you can do that on a global scale, that’s a very compelling proposition.”
Samsung offices inside a WeWork coworking space
The real challenge, he says, is to take the cultural and community aspects of what BizDojo does and figure out how to adapt them to new countries.
“How you keep the secret sauce? It’s not just a desk and a chair, that’s pretty straightforward. It’s people and relationships and community and helping people grow their business in a way that’s successful in Asia in the way it’s successful in New Zealand. It’s a great opportunity but a chunky challenge.”
And reflecting on the tumultuous year BizDojo has had, Merchant says he wonders that if it hadn’t have happened, there might not have been an opportunity with IWG.
“Would we have had the same opportunity now with IWG if we hadn’t grown as quickly last year? Possibly not. That’s the trick. We just created a lot of stress and pain for ourselves [in the process].”
Onwards and upwards
On the not too distant horizon, Bizdojo Wellington is due to open its new site in Market Lane in the old Xero building in one month’s time. With the likes of Xero and Trade Me nearby, the emerging tech precinct will continue to blossom.
Sites that were also in the pipeline last year – such as Queenstown, Ponsonby and Sylvia Park – are being worked through with IWG in the acquisition process, Merchant says.
Merchant says the support Bizdojo has received from staff, residents and partners through its difficult period has been incredible, and now it’s a matter of looking out for them.
“With everyone that’s supported us through a challenging time, we want to make sure everyone’s looked after while setting ourselves up for the future. We genuinely want a great outcome for the community we work with,” he says. “There’ll be a lot of value we can create.”
Merchant and Shewring have always been transparent about the plight of founders, especially on issues such as mental health.
Merchant says this will continue to be a key focus when they go global, especially after the experience of the past year.
“In terms of founder mental health, it’s been an interesting 2017 because it’s something we’ve always been interested but we’ve lived and breathed the pressure that comes with that,” he says.
“This isn’t our big exit, this is a big milestone, and we’ve still got a lot to do and prove before our big exit. The pressure that’s on us to do that as a founder – there’s very few situations I can think of like that. It’s rammed through the point about mental health home for us. We don’t give that enough attention – not just in New Zealand, but internationally.”
And if Bizdojo gets the model right and international expansion proves to be successful, Merchant says it will fulfill a big, hairy, audacious goal: being in the top-tier of global operators alongside WeWork.
“It’s a really exciting opportunity for us as founders, it’s the holy grail in being able to prove what we created here is worth taking globally.”
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