Yesterday’s news about Loosecubes closing caught the New York tech scene by surprise. The company, one of the early movers in shared office space, just raised $7.8 million in venture funding back in June. They’d been a little quiet in recent months, and the coworking business is a competitive one, but no one figured Loosecubes was on the fast track to the deadpool. It was the kind of company that even non-techies easily understood and appreciated.
So the sudden shutdown, besides bumming out fans, left two nagging questions: What went wrong? And where did all that venture capital go? When we called, Loosecubes’ office number had already been disconnected. An email to their press team returned only a canned response from cofounder Anna Thomas:
Thanks very much for your note. The information regarding the shutdown on our website and blog is what’s currently available. We aren’t speaking with the press at this time, but will certainly follow-up with you directly if we share additional information.
The blog post offers up some specifics about cancelled reservations and the like, but there is no mention of how the company spent its capital–hard to believe on 16 employees–or whether capital will be returned to investors.
There are, however, a couple of theories floating around.
Let’s start with Loosecubes’ emphasis on free spaces. The company started out as an Airbnb for office space–a peer-to-peer marketplace matching unused desks with free-floating workers. Companies charged, and Loosecubes got a cut. But sometime this summer, the model shifted a bit: Loosecubes became a big network. Offices offering space got access to unused desks for their own rootless employees. The plan was reportedly to eventually introduce subscriptions, but they don’t seem to have materialized.
That could certainly speed up your burn rate. Loosecubes’ FAQ provides just a TBD on making money: “We’re trying to change the way people think about work and office space, and will eventually implement a monetization strategy that achieves those goals.” (But it hasn’t been updated since June.) Many of the people seeking office space are probably either freelancers or startups–not exactly the kind of folks who can reciprocate by offering desks in another city.
However, we received a tip yesterday related to the Loosecubes funding. An anonymous tipster reported, “Loosecubes didn’t go out of business because the company wasn’t doing well. From whispers around the streets, they apparently never actually raised the funding they originally announced. It was pulled for some reason.”
We weren’t able to find a Form D for the round but given that companies have an entire year to file, it’s possible they just never got around to the paperwork (companies have to file for an extension if they’re going that route). Loosecubes is listed as a portfolio company on the New Enterprise Associates website, but it’s not listed on the sites of Revolution or Hamilton Investment Partners, the other firms listed as new participants in the June round. Messages left for NEA yesterday were not returned, but we’ll update if we receive any additional comment.
Cofounders Anna Thomas and Campbell Mckellar polite rebuffed questions related to the unconfirmed rumor.
There’s also the matter of Loosecubes’ going invite-only, starting in July. The move was explained in terms of their shift to the network model. The company claimed at the time: “Now it’s time for our network to grow, and we believe the best way to do this is for our current members to bring in new respectful and productive coworkers and hosts.” (The announcement also mentions soon-to-come pricing tiers that would never arrive.) Fair enough, but it’s unusual for a company to try stuffing that particular genie back in the box.
It’s also worth noting that, as even as Loosecubes was shifting its business model–when a clear and forceful argument for social exchange was most important–the company’s promotions took a turn for the impractical. Coverage focused on one-offs like this workspace under the Manhattan Bridge and these shipping containers at the Dekalb Market.
But as New Work City’s Tony Bacigalupo notes, one founding team’s disappointment is another’s opportunity: “LooseCubes’ departure leaves a vacuum at the top of the world of workspace sharing.” Step right up, folks.