A Silicon Valley billionaire has become a major shareholder in Second Home, the iconic London-based company known for its funky architecture, ill-fitting vintage chairs and high-profile investors.
To take a controlling stake in the company, Los Angeles-based private equity firm Global Asset Capital invested £7.8m – at a valuation far short of Riyad Valani’s. £130m price tag The eight-year company was held once.
The deal wipes out most of Second Home’s stellar cast of angel investors — a roster that looks like someone from London’s early startup scene: including the likes of Wired’s founding editor David Rowan, whose pay fell on the closing day. Errol Damelin of lender Wonga and Alex Chesterman of online car retailer Cazoo.
But it protects Second Home from the fate of another popular co-working space — New York’s The Wing, which announced last month that it was closing its remaining locations for good.
Robin Klein, co-founder of VC firm LocalGlobe, Martin Lau, chairman of Tencent, Russian-Israeli billionaire Yuri Milner, who renounced his Russian citizenship this month, and major European VC firms Index Ventures and Atomico are also from the company, which in The year it was established, have supported. 2014 by Rohan Silva, former senior policy advisor to former British Prime Minister David Cameron.
For Silva, giving up a controlling stake may be worth it. Second House, which has raised more than £60m and has spaces in London, Lisbon and Los Angeles, has more or less been plagued by over-construction projects since its launch – and that’s before the It was covid. Losses rose to £22.7m in 2020, up from £15.6m the previous year.
“When Covid broke out, I didn’t think the second house would survive.”
Despite the fact that “the valuation set was very low” and his stake in the business has been reduced, Silva insists that this Not A salesman: “Honestly, I’m relieved and glad we fought another day, because when Covid hit, I didn’t think the second home would survive.”
“This is not a sale.”
“Second Home is now wholly owned by an American entity,” Silva explains in a call to Sifted.
Before the new deal, the largest shareholder was Jim O’Neill, the former head of Goldman Sachs asset management and a peer of the House of Lords, who owned 34.5% and took a controlling stake in May last year. At the peak of the company’s valuation, Silva’s shares were worth £15.5 million.
In 2021, Second Home received £5 million in investing from Future Fund – A Container financing For high-growth private companies affected by the pandemic — he matched three investors: O’Neill, Valany and Robin Klein. Klein was the first investor in Second Home and owned 1.8% of the stock before shareholders withdrew last week.
These investors, along with Silva himself, are the only ones to have received shares in the new US entity so far.
Silva says the deal is set up to protect the fund’s future share of the business — and that Klein and O’Neill’s stake is partly protected because they, unlike other investors, were part of the convertible loan round the fund participated in.
Second Home declined to confirm what percentage of Silva, Klein, O’Neill and Future Fund they own – but clarified that Valani, who was an early investor in e-cigarette startup Juul, is a major shareholder. Klein told Sifted that he is not aware of the size of his business or the future fund at this time.
Silva tells Sifted that other longtime shareholders — including Chesterman, who already owned 0.6% of the business, and Damelin, who owned 0.4% — have the option to reinvest in a second (smaller) round. US business unit to invest in proportion. which he expects to be held before Christmas.
“I think a lot of them are going, which is great,” says Silva. Sifted spoke to one who said they were unlikely to do so and more or less ruled out the business. Sifted reached out to several other people who did not respond to our requests for comment.
Last week’s shareholder resignations were anticipated by Sky July news It has been reported Silva had told the shareholders that if the proposed deal is done, their investment in the company will be zero.
Dream
Silva started Second Home with entrepreneur Sam Aldenton and opened its first site in a former carpet factory in East London in 2014. Aldenton left in 2019.
Silva is a former civil servant who later took a job advising David Cameron and then Chancellor George Osborne on their technology strategy. He has also been an entrepreneur at Index and continues to be a columnist for the London Evening Standard.
Spanish architects SelgasCano designed the first space in Spitalfields that, the team was always proud to point out, had no straight lines. It looks like something out of a 60s apartment meets a botanical garden and a children’s play area. At one point, the cafe became a restaurant run by Louis Solly, the former head chef of London’s Ottolenghi Institute.
Its schedule of events includes talks by artists and astrophysicists and writers such as Alain de Botton, Rene Addo-Lodge and Michael Pollan. A bookstore, Liberia, opened in 2016 right across from the site. It’s a magical space, with mirrored walls and books organized by subject, not author.
Second Home was interesting, different and looked amazing – but in practice, sometimes it wasn’t to work.
At the Clerkenwell site where Sifted was once based, lifts stopped working for months. The chairs—handpicked, unique—were often backbreaking, and tenants (including Sifted) weren’t allowed to change their office chairs. There were no glasses for making tea – just mugs – and baristas often refused to make lattes if it was past noon.
that in 2017, Second Home opened a second London site in the luxury residential area of Holland Park, and in Lisbon, in a space above Time Out Food Market – a popular tourist area. In Portugal, they took herbs to a new level. Design blogs used it – But it opened Six months late
The next site, in the trendy neighborhood of East London, London Fields, was due It will open in spring 2017did not openil 2019. Another, in the central London office district of Clerkenwell, also opened in 2019.
A rope around his neck
Several shareholders and former employees told Sifted that the company’s biggest mistake was its LA project.
Work on The two-acre Hollywood site broke ground in the summer of 2018. The site was first launched in November 2019.
Silva told Sifted that the problem with unlocking it is with the developer. “Construction was done on time, but the deal we made was a deal we’ll never make again. The guys who bought the site committed to spending a certain amount of money to transform the building, and then it was all up to us. “Within a few months, the budget exceeded that amount.”
“It was really difficult because we were not in charge of the construction.”
It’s more like a college campus than a co-op site. 60 outdoor “envelope” offices, 6,500 trees and plants, and a 1960s building designed by Paul Williams (the first African-American to be inducted into the American Institute of Architects, Silva tells us) with some of the There are more traditional.
The complex has won architectural awards, however Second Home says the site is not yet complete or profitable, but is expected to be finished “early next year”.
“It was definitely easier to stay in London – our group operation in Europe was profitable for about three months before Covid,” says Silva. “The very easy thing to do would be to open 10 more in London.”
But as an entrepreneur, you always want to climb the next mountain.
This was a contract that we should not have signed.”
And that was it.
“It’s the hardest thing I’ve ever done,” says Silva. “And I’ve been really open with the investors — it was a deal we shouldn’t have signed.”
The pandemic was also hard on the second home, and Silva says he didn’t think the business would survive. Occupancy was down to around 10 or 20 per cent, he says – although fortunately many tenants had signed 12-month contracts, so the impact wasn’t felt overnight.
Second House decided to take the future fund money “because it was there and we qualified,” says Silva. “The round came together very quickly.”
what then
As part of a new plan to own some of its sites, Second Home says Global Asset Capital (GAC) – a private equity company in which Valani is a general partner – It has pledged to commit “tens of millions of pounds” to buying new – and existing – properties.
He says there is an offer for one of the existing sites – but won’t say which one.
If the deal were to go through, Silva confirmed that GAC would receive an additional stake in the business in exchange for its capital commitment.
“You do things and learn from them.”
Further expansion in London and Los Angeles is on the way, and Silva says he would like Second Home to work on three new projects in 2023 and buy one or two existing buildings.
Despite Second Home now being a US-controlled entity, he hopes to be able to put British taxpayers’ money back into the future fund, he says. This is something I work really hard on. All our numbers are looking really good.” Silva also plans to return to the UK by the end of the year.
All the London sites and the Lisbon site are now profitable (including rent, staff and operating costs), he says. The average occupancy rate is above 80% and the company expects to achieve group profitability in 2023.
And the seats?
Silva says the old chairs no longer exist. “You do things and learn from them.”
Freya Pretty is a reporter at Sifted. He tweets from @FPratty and writes the weather technology newsletter Sifted – You can register here.
Amy Levine is the editor and host of Sifted The Sifted Podcastand writes high round, a weekly newsletter on VC. He tweets from @amyrlewin
The article was amended to reflect that Yuri Milner renounced his Russian citizenship earlier this month.
