- Knotel, a flexible-office company that wanted to overtake WeWork, has brought in new funding, CEO Amol Sarva said at a Monday all-staff meeting, according to a source familiar with the matter
- Sarva had said over the summer he had raised $10 million and he was seeking to bring in a total of $100 million by the end of August.
- The company struggled financially well before the pandemic, and lawsuits over unpaid rent have continued to stack up.
- Knotel planned a major downsize for 2020 and 2021, per an internal November presentation previously reported by Insider.
- Visit Business Insider's homepage for more stories.
Knotel has brought in more funding as lawsuits over the company's legal battles stack up and the pandemic continues to upend the office market.
CEO Amol Sarva told staff on Monday that the company had secured some funding, per a source with knowledge of the virtual all-hands meeting.
Sarva did not specify the amount of capital raised, or give any more details about the nature of the recent fundraising – if it was debt or equity, who participated, and if it changed the company's valuation, according to the source, who declined to be named because they weren't authorized to speak with the media.
A Knotel representative declined to comment.
In July, Sarva said he had raised $10 million and that he was seeking to raise $100 million by the end of August. That funding round could cut the company's valuation in half, Forbes reported at the time.
Knotel until now did not announce any subsequent fundraising, internally or externally.
In August 2019, the company said it raised $400 million in a Series C round of funding and Sarva implied a valuation of at least $1.3 billion at the time. Of that round, $250 million was set aside for buying buildings on behalf of lead investor Wafra, an effort that never materialized.
Investors in that 2019 funding round included three Japanese investors — Mori Trust, Itochu Corp, and Mercuria Investment Co, as well as returning investors Newmark Knight Frank, Norwest Venture Partners, and New York City real-estate firm Sapir Organization.
Knotel's issues started well before lockdown
Even before the pandemic, Knotel struggled with tens of millions of dollars in unpaid bills to vendors and had missed rent payments to multiple landlords, Insider previously reported. Lawsuits continue to stack up in multiple cities from landlords over rent nonpayment.
Knotel took on empty offices in older New York buildings and in less desirable locations in an attempt to beat WeWork on its home turf, but much of that has been empty for months, former employees have told Insider.
In November, Knotel said in a slide from an internal presentation viewed by Insider that it would seek to cut back its global portfolio of 4.8 million square feet by 60% in the next six months and would aim to shed over 80% of the 3.4 million square feet it leases in the US and Canada.
By seeking to downsize its presence in the US and Canada so dramatically — to around just 500,000 square feet — the firm indicated that it hoped to reduce the rent it owes in those markets from $15 million a month to $2 million.
Other flex-workspace firms have also struggled, and nearly all the big names have been sued over rent nonpayment at various locations.
Breather, a brand that focuses on small spaces that can be leased to users for short periods of time, hired investment bank Moelis to help it explore its options, including a sale of the company or investment from an outside party. In December, the company laid off most of its staff and planned to shutter its 400 locations.
WeWork, meanwhile, threatened to send nonpaying members to collection agencies, Insider reported in October.
Get in touch! Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a non-work phone, email at [email protected], or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.)
Learn more about the financial services industry.
Source: Read Full Article