John Zimmerman — co-founder of ReadySpaces, a warehouse storage provider for small businesses — was working in the self-storage market when he came up with the idea of producing a product that was self-storable but had the capacity of a traditional warehouse. Mainly by corporate customers. His partner, Kevin Petrovich, had a separate company that was a client of John’s in his first “beta” position in the 90s. The two began working together to grow ReadySpaces — formerly CustomSpace — into a national business.
Today, ReadySpaces operates 32 warehouses and services a customer base of more than 2,000 businesses. The startup, which closed today as part of its universal debt financing, impressed investors who pledged $20 million. Bringing ReadySpaces to a total of $40 million, the new funding will fuel expansion, Petrovic said, as ReadySpaces prepares to offer new services.
Why did you opt for debt as opposed to equity? Petrovic said it was a “very efficient capital structure for growth” given its current financial situation. It’s certainly true that equity is hard to come by these days, with appraisals declining and debt financing slowly gaining popularity.
“We have a big growth plan for 2023 and this capital will allow us to become a leader in shared warehouse,” Petrovic told TechCrush in an email interview. Some pandemic-related pressures have eased, such as major ports, but we see our business model continue to resonate every day for established businesses and small companies.
While ReadySpaces have been around in some form since 2013, co-warehousing has only become more popular in recent years. Epidemic supercharged co-warehouse, which allowed material businesses (such as manufacturers of home products and building materials) to store inventory without having to purchase a facility to address supply chain challenges.
In a shared warehouse arrangement, multiple companies can use the same warehouse space – eliminating the need for the companies to invest in their own infrastructure. For example, ReadySpaces offers rooms ranging from 200 to 5,000 square feet, each with power units, loading docks and forklifts, Wi-Fi, industrial workstations, and shared private offices and conference rooms.
A view of the ReadySpace facility in Tukwila, Washington, with the startup’s main hub. Image Credits: ReadySpaces
Petrovic explains that shared warehousing allows businesses to insure against economic uncertainty and busy periods like the holidays.
“The importance of small warehouse space is not limited to small businesses,” Petrovic said. We have worked with many Fortune 500 companies to provide a short-term surplus position. The key is to take a slow moving and generally difficult to operate asset class and make it absolutely seamless.
Certainly, ReadySpaces competitors have shown interest in shared warehouse. Saltbox, a company that provides co-working and warehouse space for up and coming e-commerce businesses, recently attracted a $128 million investment from real estate investment platform Fundrise to expand its footprint. And last year, private equity real estate firm Capstone Equities launched Portal Storage, a flexible warehouse solution offering small spaces and shared facilities, which it plans to expand to cities including Los Angeles, Brooklyn and Las Vegas in the coming months.
As for ReadySpaces, Petrovic says the Los Angeles-based company — which employs about 50 people — is “comfortably profitable,” with revenue growing about 50% year over year.
Since our last announcement, we’ve opened several new locations and in a few new markets as well. For example, Queens, New York; Kearny, New Jersey; Saddle Brook, New Jersey; and Round Rock, Texas, are all recent new sites,” Petrovic said. “We don’t have a burn rate…Nationally, we’ve seen demand grow 375 percent over the last three years.
One point of concern is the slowdown in consumer spending linked to inflation, which could reduce sales at retail and, by extension, demand for warehouse space. Some experts say the warehouse industry is at risk of oversupply, as developers invest heavily in warehouse expansions. In Q2 2022, 613 million square feet of warehouse space was built in the U.S. – likely to double the construction pipeline in 2019.
Petrovic acknowledges headwinds, but insists that Redispace is in a position to deal with them.
“There are many major changes taking place in the industrial real estate market due to strong demand and high development costs,” he said. “Our focus is on successfully navigating these market changes so we can continue to offer products that we know customers will love.”
