(Bloomberg) -- Kumospace Inc., whose software allows companies to set up virtual offices for remote and hybrid workers, has acquired rival Kosy Software Ltd. as the market for digital collaboration tools consolidates, people familiar with the deal said.

Kumospace is paying less than $10 million for Kosy, both of the people said. Yanis Mellata, London-based Kosy’s co-founder and CEO, will remain at the combined company to lead the transition, the people said. Kosy’s workforce of about 10 employees will be let go as part of the deal. New York-based Kumospace, founded in 2020, has raised $24 million in funding since its 2020 launch and counts Amazon.com Inc., Google and professional-services firm KPMG among its clients.  

The acquisition is the second in the space this month, following RingCentral Inc.’s purchase of assets from Hopin, which also makes software that enables virtual meetups but struggled after a rapid period of expansion. Another player in the space, Teamflow, sold its intellectual property to an undisclosed buyer earlier this year, founder and CEO Flo Crivello said in March.

During the pandemic, many venture-backed startups emerged, promising to improve connections between far-flung employees by creating digital facsimiles of offices or event spaces. The idea was to allow workers to interact outside of the rigid confines of Zoom calls. Research from the Massachusetts Institute of Technology’s Connection Science and Human Dynamics labs shows that the most effective teams engage in frequent, informal communication outside of scheduled meetings. 

The virtual-office architects mainly served smaller businesses, a market of less interest to Zoom Video Communications Inc. and Microsoft Corp., maker of Teams software, in their quest for big corporate clients with thousands of workers. More than 215,000 businesses use Zoom, up 9% from last year, according to its most recent quarterly earnings call. 

As the collaboration startup space began to consolidate last year, Hopin conducted multiple rounds of layoffs, while others like Bizzabo Inc. have also cut jobs. Zoom has also released new features, like Huddles, which allow for more impromptu interactions between co-workers and could impact the remaining startups, a group that includes Roam and Teemyco along with Kumospace. 

Still, Kumospace’s monthly recurring revenue, a measure of its active subscriptions, has more than doubled since the start of the year, one of the people said. Companies pay fees starting at $10 per employee per month for its software. 

©2023 Bloomberg L.P.