The question that why doesn’t Iran startup ecosystem have co-working spaces could be a mystery to many. Co-working spaces are a key element of a startup ecosystem when it comes to providing startup needs in seed stages. Co-working spaces also act as the main community hubs in every ecosystem.
What Are the Typical Models of Co-Working Spaces Around the World
New business models of co-working spaces are often seen when they’re tailored to the local. There are non-profit and for profit co-working spaces which both have many similarities. In non-profit co-working spaces the goal of earning revenue is simply maintaining the organizations and the business sustainable, where in for profit there should also be a main focus on growth.
International co-working spaces like Tech Hub, a London based company which has established its space in 7 cities and counting, which is a non-profit focusing on empowering the local startup community and startup teams. Tech Hub is a non-profit with a non-compete policy, making it easier to expand and accepted in different cities they go.
Co-working space’s revenue comes mostly from renting tables (fixed and flexible) to teams, renting meeting rooms and providing venue for events. In some non-profit co-working spaces like Tech Hub, donation and sponsorship are one of the main sources of money. Companies can buy mugs with their logos printed on it, sponsor a meeting room and getting the meeting room named after the company for 12 months as well as other sponsorship opportunities.
We estimate there are over 2500 co-working spaces around the world and almost one opening every day.
Value Co-Working Spaces Hold for Teams and Startup Communities
Co-working spaces are the holy temples of startup community builders. As mentioned before co-working spaces also gain revenue from events held in their venue, this brings more value than just money. As the co-working space gives value in providing the venue it helps the local community in general. The teams nesting in the co-working space also benefit from the networking power they get from the events which makes a win-win situation for everyone.
Why Doesn’t Tehran Have a Co-Working Spaces?
Short and main answer: Real estate in Tehran! Tehran is the main startup hub of Iran and this 14 million inhabited city is known for its high priced real estates. Rent is high and buying venues could be called insanity. Due to the fact that co-working spaces don’t earn fortunes, investors also don’t think of this investment logical.
Though there is demand for the space from the startups side, business models that provided sponsorship packages for firms and cooperates haven’t yet succeeded in being convincing for investment or partnerships. Saber Sayadi has been seeking to open a co-working space for startups in Tehran for months. “Due to the high inflation in the past 40 years, 80% of nations wealth is in real estate. This is higher than the global average which is 30-35%. This has caused the prices of venues and houses to increase over time,” Saber said regarding the reason behind the high price of real estate in Tehran. Currently there are 1.6 million empty apartments with a total value of $20B in Tehran alone, according to minister Akhoondi. “It is really hard to convince an investor to invest in a co-working space when they can easily leave their money in an Iranian bank and get 20% of annual interest or simply invest in a different industry where there are more return and less risk,” said Saber.
Saber also talks about the government side. “The concept of co-working space is really new and sometimes uncomprehending for officials as it was for accelerators 2 years ago,” continued Saber. High prices of real estate and the problem of making the business sustainable leaves governmental arms and investors in tough spot.
Saber and Arsalan (his partner on this project) searched for different models to localize. They researched about different models of co-working space around the world and went into meetings for months to convince investors, companies and governmental arms of this new concept. Interestingly, VCs weren’t interested in their non-profit model. They started changing the model from time to time but it failed. “The need of a working space exists from entrepreneurs, but there has yet to be a model convincing for investors, as it doesn’t generate the money an investor is looking for. We went with a non-profit model that has a non-compete policy and we pitched it to governmental and semi-governmental organizations, VCs and investor firm and there were still troubles when it came to the costs and regulation issues.” Saber said.
The headache it brings to reach the break even point wasn’t attractive for investors, as they would prefer to invest in many industries where the return is more promising. “Interesting to know, when we were doing our cost analysis and benchmarking versus other locations, we found out that the cost of rent in Iran is even higher than Berlin! The cost of rent in Berlin’s most expensive district is around 23 euros per square meter, in Tehran’s Vanak is about 60 dollars. And this is not the most prime district in Iran,” said Saber on the subject of renting costs.
Saber expressed that corporates, especially telecom companies around the world start accelerators and co-working spaces to add and create a value chain to their business.
And regarding CSR (Corporate social responsibility), companies prefer to put money in charities to get more brand recognition rather than a new concept that never existed in Iran.
There is one co-working space in Tehran though!
Bank Ayandeh’s fintech arm E-Farda, piloted a co-working space project with a 75 meter square space in the company. The project was piloted for a year to access the potential it may hold. E-Farda provided the space for free and around 7 startups were working in this space, which 3 of them got invested by local VCs. Following this success, E-Farda is launching a Fintech accelerator and a co-working space named Finnova which they well add a revenue generating model to the co-working space. E-farda has acquired a new venue to start this project. We will be sure to get more updates on Finnova once it launches.
Launching a co-working space has its challenges. We will definitely hear launch announcements of co-working spaces though it has challenges. “Once the concept gets known publicly there will be more sponsor/invest interest,” said Saber Sayadi. Telecom companies and banks can create co-working spaces either as an extended value added chain to their business or as CSR. Non-profit co-working spaces with the concept of getting sponsors form corporates like telecom companies may also have a chance in reaching this goal.
Overall, the lack of startup co-working spaces can be felt in Tehran as more and more seed and pre-stage startups pop up and are looking for cheap and affordable places to work. Typically we have seen startups working in university libraries and cafes to bring down costs. We hope to see co-working spaces in Tehran and companies getting inspiration from Ayandeh Bank to start such projects.