Spacious was a startup that transformed vacant restaurant spaces into coworking areas during the daytime. Founded in 2016, it gained traction quickly and was acquired by WeWork in 2019. However, just four months post-acquisition, WeWork shut down Spacious amid its financial struggles and cost-cutting measures.
What Was Spacious?
Spacious transformed vacant restaurant spaces into coworking areas, offering a flexible and cost-effective workspace solution. Its unique value proposition lay in repurposing underused spaces for productivity. Notable achievements include a $42.5 million acquisition by WeWork and raising $10 million in funding, marking its impact in the coworking industry.
What Happened to Spacious?
The story of Spacious is a compelling tale of rapid growth followed by an abrupt decline, influenced by several key factors:
Founding and Initial Success: Spacious was founded in 2016 by Chris Smothers and Preston Pesek. The startup quickly gained traction by transforming vacant restaurant spaces into coworking areas, offering a unique and flexible workspace solution.
Key Milestones: In July 2019, Spacious faced regulatory hurdles that led to the shutdown of its San Francisco locations. Just a month later, in August 2019, WeWork acquired Spacious, marking a significant milestone in its growth.
Challenges and Setbacks: Regulatory issues were a significant challenge, particularly in San Francisco. Additionally, a whistleblower complaint alleged that WeWork executives pushed through the acquisition without a thorough review of Spacious's financials.
Factors Leading to Decline: WeWork's broader financial troubles and cost-cutting measures played a crucial role in Spacious's downfall. The lack of a thorough financial review during the acquisition process further complicated matters.
Eventual Closure: WeWork announced that Spacious would close its doors on December 31, 2019. The entire staff of 50 employees was laid off, and members were offered prorated refunds and discounts on select WeWork memberships.
When Did Spacious Shut Down?
Spacious shut down on December 31, 2019, as part of WeWork's cost-cutting measures. The entire staff of 50 employees was laid off, and members were offered prorated refunds and discounts on select WeWork memberships.
Why Did Spacious Shut Down?
Cost-Cutting Measures: WeWork's financial struggles led to significant cost-cutting measures, including the shutdown of Spacious. The decision was part of a broader strategy to focus on WeWork's core business, resulting in the closure of several acquired startups, including Spacious, to streamline operations and reduce expenses.
Insufficient Financial Review: A whistleblower complaint alleged that WeWork executives did not conduct a thorough financial review before acquiring Spacious. This lack of due diligence raised concerns about the viability of the acquisition and contributed to the decision to shut down the startup.
Regulatory Hurdles: Spacious faced significant regulatory challenges, particularly in San Francisco, where it had to shut down its locations. These regulatory issues hindered its operations and growth, making it difficult for the startup to sustain its business model.
Employee Layoffs: The closure of Spacious resulted in the layoff of its entire staff of 50 employees. This drastic measure was part of WeWork's broader efforts to cut costs and streamline its operations, further highlighting the financial difficulties faced by the company.
Customer Disruption: The shutdown of Spacious caused disruptions for its customers, who were offered prorated refunds and discounts on WeWork memberships. This move aimed to mitigate the impact on customers but also underscored the challenges faced by the startup in maintaining its customer base.
Lessons Learned from Spacious's Failure
Thorough Due Diligence: Ensure comprehensive financial and operational reviews before acquisitions to avoid unforeseen liabilities and challenges.
Regulatory Compliance: Prioritize understanding and adhering to local regulations to prevent operational disruptions and legal issues.
Financial Prudence: Maintain a sustainable financial model to withstand market fluctuations and investor pressures.
Adaptability: Be prepared to pivot or adjust business strategies in response to market and regulatory changes.
Employee Communication: Keep staff informed and engaged to maintain morale and productivity during transitions.
Customer Focus: Prioritize customer needs and provide clear communication during operational changes to retain loyalty.
Strategic Acquisitions: Align acquisitions with core business goals to ensure seamless integration and value addition.
We Shut Down Startups
Spacious's failure underscores the complexities and challenges involved in winding down a startup. At Sunset, we handle all the legal, tax, and operational burdens, ensuring a smooth and efficient closure process.
Don't let the stress of shutting down your startup weigh you down. Book a demo with Sunset today and move on to your next venture with confidence.
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