Knotel’s 2019 Year in Review

Knotel Co-founder and CEO Amol Sarva recently shared details about the company’s market outlook, finances, and growth opportunities for the near-term future. He spotlighted Knotel’s performance across a range of key indicators in 2019 and outlined the business’s prospects for the year ahead.

Here are some of the key highlights from the call.

Global Footprint

Over the last 12 months, the company increased its global reach:

  • Knotel surpassed 5 million square feet of global office space in 2019, with more than 250 locations
  • The company expanded its global footprint to 17 cities across 10 countries
  • Managed space rose to more than 500,000 square feet
  • Europe now represents approximately one-third of all business
  • Knotel completed its first Asia deals last year, starting in India and Japan
  • Top markets improved by 10% to 50% in sell-through in the last 90 days

Customer Demand

Knotel continues to focus on customer relationships and new deals:

  • Last year, 180 new customers were added—from LA to Boston to London to Frankfurt to Delhi to Tokyo—marking a 124% increase in Knotel’s global portfolio
  • The average customer contract size doubled in 2019
  • Customers signed longer-term deals, averaging two years, a 50% increase from 2018
  • Knotel now completes real estate deals with owners in 3 to 4 months on average, down from 6 months in 2018, and a fraction of the typical market time of 9 months
  • The number of properties taken with a customer signed up simultaneously has increased by 300% from the start of 2018
  • In terms of customer retention, there is less than 10% revenue churn per year
  • According to internal estimates, Knotel is saving customers $200 million in their current relationship term compared to standard leases
  • Activity with Fortune 500 and Global 2000 customers was up materially in 2019, especially in the second half of the year

Revenue and Reorganization

Sarva outlined the company’s core financial performance and organizational shifts:

  • Knotel posted $350 million of contracted annual revenue at the start of the year, with total contract value nearly double that amount
  • Gross margins are approximately 40% across the portfolio when it comes to realized price vs. cost of real estate
  • The number of employees grew from around 100 in the second half of 2018 to between 450-500 today
  • There have been organizational changes in some areas: 24 employees left the New York market, while 10 new employees joined. The Technology organization separated from the Product organization, Marketing combined with the Product team; Finance leadership changed; and there was a redesign of customer delivery teams in many markets to focus on enterprises

The Flex Market

Knotel is in a position to continue expanding its market share in 2020:

  • The overall commercial real estate industry is looking healthy, with JLL, CBRE, and Newmark Knight Frank stocks all up strongly since Q3 2019
  • "Flex" has become the new narrative, and Knotel is becoming synonymous with flex as every major brokerage house's research mentions Knotel directly
  • Although flex represents only 2% of global office space, it could reach 30% in 10 years, according to JLL
  • 54% of executives say they chose flex to save money, according to Newmark Knight Frank

Investing in the Future

Sarva also disclosed information about Knotel’s financing and support from investors:

  • Knotel has raised over $550 million in total investor equity since its inception, with $80 million in debt financing
  • Knotel has raised over $300 million of direct investment equity since inception, including $190 million in the 2nd half of 2019
  • In summer 2019, Knotel launched a joint venture with a financial partner and acquired $250 million of equity capital that can be deployed through the joint venture
  • The company plans to be cash flow breakeven in 2020. Some markets, including San Francisco, Paris, London, and NY plan to reach that goal in the first half of the year

Sarva emphasized that Knotel is staying disciplined and ready to make difficult choices when necessary to serve as an engine of progress for companies around the world.