The founders of CoCo, the original Twin Cities shared-workplace pioneer in 2010, were starting to feel boxed in last year.
CoCo shared-workspace founders got 'fueled' for the future of 'Fueled Collective'
July 15, 2018 at 7:00PM
"After eight years, we looked around the corner and saw all these well-funded competitors everywhere and here," recalled CoCo co-founder Kyle Coolbroth. "We had bootstrapped CoCo's growth with operating earnings and private debt.
"And we had started when it was kind of a 'fringe' movement."
They were now swamped with competitors in the Twin Cities.
Coolbroth and Don Ball, two digital-business consultants who saw the co-working trend accelerated when companies laid off hugely during the Great Recession of 2008-2009, opened their first shared-workplace of the "gig economy" in Lowertown St. Paul in 2010.
Many of those folks, working out of makeshift offices, were trying to make a living on their own. And some were determined not to go back to the corporate rat race, even if they received a rare offer in the slowly rebounding years of the since-roaring economic recovery.
"The shift was underway to the 'gig economy,' " Coolbroth said. "Home offices. Coffee shops. Some folks didn't want to go back to corporate jobs. But people also wanted a sense of belonging. Socialization."
Then-Minneapolis Mayor R.T. Rybak talked them into opening a CoCo shared office in the long-shuttered trading floor of the Grain Exchange downtown in 2011.
CoCo's founders, buoyed by their growth to 35 tenants in St. Paul, offered a part-time spot for as little as $50 per month to multi-chair "campsites" for up to $2,750 a month.
Rybak, a great marketer, dubbed the open, attractive space, complete with free coffee, the "Brain Exchange."
By last year, CoCo boasted four locations in the Twin Cities and one in Chicago; 1,200 active members were working on their own companies or working for small businesses. CoCo said its members added more than 1,000 employees to their emerging businesses last year, and those member companies surveyed said they had raised a total of $126 million in debt and equity.
Coolbroth said CoCo, the organizer and landlord, employed 24 last year and posted positive cash flow on revenue of about $5 million in 2016.
CoCo was the local spark in a national movement that has grown from fewer than 500 spaces nationally to something approaching 20,000, led by nation-spreading giant WeWork, which has a downtown Minneapolis location.
Other big competitors in the Twin Cities include Spaces, a Dutch-based workspace provider; and a women-only co-working space. Meanwhile, developers are throwing co-working spaces into reconstructed and new buildings, such as the refurbished Osborn370 tower in downtown St. Paul.
Surrounded in their home market, the partners considered raising up to $5 million a couple of years ago from outside investors.
"We would have doubled our size but we're still nobody," Coolbroth said. "We also would have had to give up majority control."
Coolbroth, 48, and Ball, 50, didn't want to sell.
In May, they rolled out a new name, Fueled Collective.
It's a franchise model with three partners, including deep-pockets private-equity firm TPG Capital of California.
There is no majority owner, but the venture offers a much greater opportunity for successful growth thanks to strategic and financial partners, Coolbroth and Ball said in a recent interview.
Coolbroth is CEO and Ball is "chief social officer" of the merged firm that hopes to soon announce its first franchised location.
Fueled Collective hopes to transcend the limitations of the quickly commodifying co-working business by also offering event-and-meeting rentals, including catered events, and social memberships that include an after-hours bar.
In addition to TPG Capital, the partners include St. Gregory Development Group, a Cincinnati concept development firm, and Fueled, a New York-based mobile design and development firm. In addition to the five former CoCo locations, there are Fueled Collective sites in New York and Cincinnati.
The first franchisee has yet to be announced.
Coolbroth said franchises will sell for about $50,000 apiece. The franchiser, Coolbroth, Ball and their new partners will receive 7 percent of a franchisee's gross revenue.
TPG, which has funded some of St. Gregory's concepts, liked the Fueled concept enough to invest an unspecified sum in the Fueled growth plan.
"Our approach is very local," Ball said, suggesting locally based Dunn Brothers Coffee as an example. Most of the stores are franchised, and each has its own look and personality developed by the owner based on location.
Coolbroth said he and Ball are talking to property owners and entrepreneurs around the country.
"I think we will be 200 to 250 locations nationwide [in five years]," Coolbroth said. "I want to see an authentic brand that brings the sense of community we built in the Twin Cities."
Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at nstanthony@startribune.com.
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