The total number of coworking spaces worldwide is estimated to be 26,000 by 2022, a 42% increase from 2019. Salaryo provides financing options at coworking spaces to help tenants with security deposits as well as credit lines to fuel their businesses. The company, founded in 2017, is the first, fully digital platform to provide security deposit financing for flexible office spaces. It takes only three minutes for customer onboarding, underwriting, and payment. Salaryo charges a base fee that starts at $10/month for every $1,000 in funding for both deposits as well as credit lines.
AlleyWatch chatted with Yair Levy about being the first company to offer financing options for coworking security deposits, the company’s expansion plans, and latest round of funding.
Who were your investors and how much did you raise?
Salaryo raised $5.5M in equity and debt funding from Ruby Ventures and Michael Ullmann investments group. This brings the company’s total funding to $6.3M to date.
Tell us about the product or service that Salaryo offers.
Salaryo is the first financing option for office security deposits. We help freelancers and entrepreneurs rent in flexible office spaces such as WeWork, Industrious, Office Evolution, etc. By financing the security deposit and providing flexible credit lines to grow their business, we are lowering the barrier of entry to the benefits and perks of a shared office.
We were freelancers and entrepreneurs who worked in the same coworking space and experienced first-hand how challenging cash flow can be for entrepreneurs. We wanted more people to enjoy the same opportunities we had and realized coworking members require custom financial services. We’ve seen great growth in the last 2.5 years and recently learned that WeWork started toying with a similar concept (the so-called “WeBank)” that has yet to be launched. It definitely looks like a promising path.
How is Salaryo different?
Salaryo was the first company to offer security deposit financing in flexible workspaces. We are the only fully digital platform in our category, featuring a 100% automated financing experience that takes only 3 minutes for customer onboarding, underwriting, and payment experience. We specialize in anticipating the financial needs of freelancers and entrepreneurs who work from flexible office spaces, which isn’t done by anyone else yet.
What market does Salaryo target and how big is it?
According to industry sources, by the end of this year, almost 2.2 million people are expected to work in over 22,000 coworking spaces worldwide. Salaryo offers digital financial services at the intersection of two fast-growing categories that feed off each other: flexible workspace and freelancers/entrepreneurs. The former is the fastest-growing segment in commercial real estate and the latter is the fastest-growing segment in the job market. With WeWork valued at $47 billion heading for an IPO and its competitor Knotel reaching unicorn status, these trends in real estate and income patterns are redefining the professional lives of our customers.
Who do you consider to be your main competitors?
Salaryo was first-to-market and we started offering office security deposit financing in early 2018. Back then, we only had indirect and larger competitors such as banks and small business fintech lenders. In the past few months, however, we’ve noticed companies who have traditionally operated in residential real estate, now eyeing the workspace category. Needless to say, if WeWork ends up launching a “WeBank” in the near term, that would make our competitive landscape much more challenging.
What’s your business model?
We have two basic services, security deposit financing and flexible credit lines, both services feature a base fee starting at $10/month for every $1,000 in financing. For new tenants, we enable them to avoid a lump sum security deposit payment of thousands of dollars. For companies who are already established in an office space, we offer a flexible credit line to fuel their growth. Additional services are currently being tested and we plan to launch them next year.
What was the funding process like?
Any funding process requires a lot of work, especially for a young startup like Salaryo who raised both debt and equity funding in the same round. Most startups have to deal with raising equity alone. These are two different types of capital, each with its own structure, unique terms, and practices. It definitely helped to have professional and experienced investors such as Ruby Ventures and Michael Ullmann investments group in this process. Both bring years of experience and expertise in debt and equity funding, as well as hands-on experience in lending, technology, and real estate.
What factors about your business led your investors to write the check?
The market played a part and so did the technology, but the most important factor was our team.
What are the milestones you plan to achieve in the next six months?
We are planning to continue our expansion across the U.S and form more partnerships with coworking space providers. We plan to widen our offering into additional banking services towards mid next year and we will start branching out to provide more diversified offerings to our target audience.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Join an accelerator program, Salaryo is a Techstars alumni (Barclays-Techstars Fintech Accelerator 2017) and going through this program gave us a great boost.
Where do you see the company going now over the near term?
We’ll be strengthening our position in NYC and then expand into new markets to meet growing demands, such as Washington DC, Denver and Austin.
What’s your favorite restaurant in the city?
The hand roll sushi place on 28th and Broadway called KazuNori.