How the founder of a major Chinese tech news site is building a co-working space empire
Liu Chengcheng, the founder of 36Kr and spin-off Kr Space, predicts demand for co-working office space in China, the industry’s biggest market, to help drive growth for these businesses over the next decade
When Liu Chengcheng taught himself computer programming at the age of 12 with the aid of books and slow dial-up internet access, he knew his lifelong passion would be technology. He had little idea, however, about what entrepreneurship in this industry entailed.
Now aged 30, but still fresh-faced and soft-spoken, Liu has proven his business acumen by establishing in 2010 technology media company 36Kr, which became one of China’s biggest digital tech news site operators. It has evolved into a bridge that links domestic start-ups with investors, while separately building one of the largest co-working space operations in the country.
“We chronicled what Chinese start-ups were doing by reaching out to them one by one at a time when there was limited information online about this community,” said Liu, the company’s chief executive. “Many small companies also came to us to learn more about foreign business models.”
Backed by e-commerce giant Alibaba Group Holding, 36Kr estimated it had amassed a global readership of more than 150 million and published a total of 50,000 stories online as of last year even as it competed against rivals, such as Huxiu.com and TMT Post. 36Kr is often likened to TechCrunch in the US.
As more start-ups and investors went to the 36Kr site for news, the company seized the opportunity to link investors with the relevant companies. Its successful matchmaking, in turn, fed the news site with exclusive information to build up the authority and authenticity of 36Kr content.
About 58 per cent of early-stage firms covered by 36Kr managed to raise funds from institutional investors, according to the company.
Liu, however, is focused on increasing 36Kr’s portfolio of services for both start-ups and larger companies. The other services it provides include Jing Data, a subscription-based venture capital and private equity database similar to US service PitchBook, and Kr Space, an incubation programme-turned-co-working space provider that was spun off as an independent business in 2016.
Kr Space now aims to raise US$300 million in a new funding round, weeks after it closed a US$200 million financing that put the value of the company at US$1.3 billion, according to a Bloomberg report. Existing investors include IDG Capital, Gobi Partners and Prometheus Capital.
“Small businesses are increasingly taking up a bigger role in the economy,” Liu said. “The rise of e-commerce platforms, such as Alibaba’s Taobao Marketplace, has made it possible for a small team of five people to start their own business and sell to markets across China.”
New York-listed Alibaba is the parent company of the South China Morning Post.
“The Chinese ecosystem today is unique enough to nurture various companies which cannot be found anywhere else in the world,” Liu said.
That has also made it imperative for more businesses to run a distributed organisation with offices in various locations across the country, he said.
Start-ups currently account for 20 per cent of Kr Space’s co-working space clients, while the rest is evenly split between companies in business for five years or more, and those operating for less than five years, according to Liu.
Kr Space currently runs co-working space centres in 11 Chinese cities, including Beijing, Shanghai and Guangzhou. The company aims to run more than 40 centres nationwide by August this year, providing 36,000 total workstations that will make it the country’s biggest co-working space operator.
Liu’s efforts with Kr Space reflect how the concept of co-working has taken hold in China over the past few years.
One of the many industries to emerge from the so-called sharing economy, co-working office spaces enable people from different companies, projects or industries to work collaboratively in a shared area.
Surging demand for co-working office space was created by the growing number of technology start-ups, as well as millennial workers who prefer flexible working hours and a more relaxed work environment. It has also been bolstered by Beijing’s ambitious goal of turning the mainland into a global innovation powerhouse.
The global market for co-working office space is forecast to reach 30,432 locations and 5.1 million members by 2022, according to co-working conference organiser GCUC. Those numbers are up from 14,411 co-working space locations and 1.7 million members last year. The GCUC estimated the Asia-Pacific to continue growing rapidly over the next five years, with China becoming the world’s largest co-working office space market by 2022.
Liu said Kr Space was on track for its global expansion, with Hong Kong as its first location outside the mainland.
The Beijing-based company has rented seven floors – between the 11th and 19th – of the One Hennessy building in Wan Chai, which is expected to open next year. It will pay about HK$6.6 million per month for an area of 83,000 square feet, worth more than HK$80 per square foot.
While One Hennessy is expected to be completed early next year, Kr Space is actively seeking other premises on both Hong Kong island and Kowloon.
“As plans for the Greater Bay Area pushed forward, we saw increased demand from our clients to set up offices in Hong Kong,” Liu said.
The proposed Greater Bay Area master plan aims to integrate Hong Kong, Macau and nine cities in southern Guangdong province.
Beyond Hong Kong, Kr Space said it was looking at opportunities across the Asia-Pacific, with plans to open new co-working spaces in Japan and Singapore next year.
“Kr Space is a fast-growing player in this field,” said Yan Hailun, a senior research manager at IDC China. “Its affiliated business in tech media and financing has given Kr Space an edge in securing a big client pool for co-working space.”
But competition among major co-working space providers is intensifying in China, with global leading service provider WeWork expanding fast into the market.
New York-based WeWork, counted among the world’s most valuable start-ups at about US$20 billion, recently agreed to pay US$400 million to merge with three-year-old Chinese rival Naked Hub. That deal adds co-working spaces in Shanghai, Beijing, Hong Kong, Vietnam, Australia and London to WeWork’s portfolio, and puts it on a collision course with the Chinese market leader Ucommune.
Mao Daqing, Ucommune’s chairman, said in April that no more new players will enter China’s crowded co-working office space market as the pace of consolidation has picked up.
Beijing-based Ucommune operates in more than 160 locations across 36 cities and has an estimated valuation of US$1.7 billion. The company has raised a total of US$525 million from more than 10 rounds of financing.
Despite the increased competition, Liu believes the huge demand from China would continue to fuel Kr Space’s growth through to the next decade. “China is the biggest market with 400 million people working in offices, which should be enough for us to grow for another 10 to 15 years,” he said.