This is an installment of Startup Year One, a special series of interviews with founders about the major lessons they have learned in the immediate aftermath of their businesses’ first year of operation.
This year began auspiciously for The Coven, a Minneapolis-based women’s coworking startup that aims to be an inclusive, middle-America rival to The Wing. Then almost everything went awry.
Founded by four women who met working in advertising, and who bonded over that industry’s failures to create equitable and inclusive workplaces, The Coven opened its first location for women and nonbinary and trans people in 2018. By late January, the startup had opened a second location in neighboring St. Paul and was eyeing an expansion to Nashville later this year.
Cue the pandemic, which temporarily shut down The Coven’s two existing locations and undermined its ambitious growth plans. CEO Alex West Steinman and her cofounders quickly pivoted into digital memberships and events—which have been popular, if not as lucrative as they once hoped 2020 would be.
“We’re still in the middle, and it looks really messy,” Steinman told Fortune earlier this month. “It’s not even like we’re stepping back into anything that looks familiar. We’re stepping forward into something brand-new.”
In the past few weeks, after George Floyd’s killing in The Coven’s hometown launched anti-racism protests across the nation, The Coven has also stepped sideways into community organizing. The company is using its closed Minneapolis coworking space to collect food and other donated items for locals affected by the protests and police violence.
“It’s a painful time here,” says Liz Giel, another cofounder and The Coven’s chief growth officer. “It’s been helpful for all of us to know that we’re supporting the community.”
She and Steinman say that The Coven’s close ties to community organizing have helped create an inclusive and racially diverse customer base—and to avoid some of the criticisms flung at its national coworking rivals. (For every five memberships The Coven sells, it donates one to someone from an underserved community.) Most recently, The Wing has been the subject of employee complaints over mistreatment, racism, and failing to live up to its feminist ideals. This month, cofounder Audrey Gelman stepped down as CEO, and most of The Wing’s remaining employees joined a digital walkout.
In an interview after Gelman’s resignation, Steinman called The Wing’s reported problems “obviously disappointing on many levels.”
She added that at her company, “our job is to continue plowing forward in conversation with our community…and being open to accountability. I think that’s one of the most important things of this era: being held accountable, and then showing action.”
Steinman and I first met last summer when I edited Inc. magazine’s 2019 Female Founders 100 list, which included both her and Gelman. (Full disclosure: Steinman has since asked me to speak at a digital event for Coven members.) In a joint interview for Fortune this month, she and Giel discussed how their startup is navigating its way through the pandemic, the protests against racism and police brutality, and the post-Wing, post-WeWork questions about the coworking business model.
This interview has been lightly edited and condensed for clarity.
Fortune: How did you decide to start collecting donations for people affected by the Minneapolis protests and police violence?
Steinman: We’ve always been really close to organizers, so we have connections with folks who knew which grocery stores had been burned down or closed. We were activated by a group called Women for Political Change, a group of young, mostly BIPOC women; they reached out to see if we could use our space to collect supplies for both protesters and for community members. We send out about 20 cars a day, stuffed to the gills. And we’ve been doing it every day.
Every morning at 8 a.m. we’re giving each other updates in a text group: What’s needed, what was depleted yesterday. There were a lot of folks without homes in South Minneapolis before all of this, and they’ve been moved around because of the curfews. So there might be an extreme need for tents or food that can be eaten without a microwave. We’ve had hair care companies and feminine hygiene companies reach out and offer products; they don’t know how to distribute them to where they need to go, so we do that work on the ground. It made sense to dedicate our space to this movement, and I think we’re in a unique position as a startup to be flexible in that way.
Obviously 2020 has been very different from what we were all expecting. How did the onset of the pandemic affect your business?
Steinman: Minnesota is in the middle of the country, so it felt like a storm coming from the coasts. We’re like, “This is getting very bad!” But we opened up community digital memberships within 24 hours of closing our business. We had a full calendar of events within a week of announcing that, and we’ve been iterating for the better half of three months.
How has this all affected The Coven financially?
Giel: Badly. [Laughs.] Our revenue took a significant hit. There are a lot of businesses that are closed, and that is not the position that we’re in, so we’re quite fortunate and grateful that we can look to the future. But it hasn’t been a great financial situation.
Steinman: When we opened the second location, there was a surge in excitement and awareness. And the first quarter is typically our largest quarter because annual memberships renew then, so to lose steam was a big challenge. But we’ve been able to bring in corporate partners and foundations to keep our lights on over the second quarter. We’re going to be catching up heading into the back half of the year; we know that rent is due. But we’ve done a lot of innovating.
How are you planning to reopen your physical spaces?
Steinman: We opened up to our handful of private office–holders on June 1, and then we opened up to 25% in our St. Paul location; both locations will be open at 50% on June 22. There’s a whole bunch of new regulations, and we’ve partnered with folks from all over the state to build a really robust reopening plan, so that people feel comfortable and our staff are safe. We’re slowly stepping into things as we learn more about what’s happening in our state, and in the rest of the country, and we’re certainly ready to understand what the implications of any rollbacks might be.
Between the employee walkout at The Wing, the implosion of WeWork, and the pandemic, are you rethinking coworking as a successful business model for a startup?
Giel: WeWork used to be helpful for us [to explain The Coven]: “Hey, we’re kind of like WeWork.” And now we’re like, “We’re nothing like WeWork!” You hate to think of looking at what other businesses have done, and trying to capitalize on their mistakes. That’s not really the intent. But it has been eye-opening for us to look at what is happening with some of the bigger spaces that preceded ours. We’re small enough that we can be nimble and move quickly. So as we grow, what is that going to look like? And as we navigate this pandemic together, how attractive is it going to be to come to a physical community space?
We are talking about new membership types and ways that we can make The Coven more accessible to everybody. We did launch a digital membership when the pandemic started, and we will be offering that as an ongoing option to the community. We’re also going to be announcing some new membership options that have equity at the core of them, in more accessible price options.
How has the pandemic changed your plans to expand to Nashville and some 20 locations?
Giel: We’d still love to get to Nashville. But the whole world has changed. And we’d be remiss to not use this as an opportunity to think through our options.
Steinman: The murder of George Floyd, as tragic as it was, has activated people in new ways that are incredible. People are doing anti-racist work that they’ve been putting off for their entire lives. This is a moment in history that I just feel so honored to be a part of, and so the expansion of our business right now? It’s like, sure, whatever. It’s my guess we’ll get there, but I feel like there’s just so much more that we’re contributing than physical space.
I hope that people feel like we’re amplifying their voices and amplifying their efforts. I think we’re close enough to the work and have been doing the work for quite a long time. There’s still room to grow and ways to go, but I feel really passionate about the work that we’re doing.
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