I'll just go on the record to say that I think WeWork is the biggest deck of cards that is begging for a collapse. I've only been to a handful of locations, but they never seem busy and I'm not sure how they're making rent.
Plus, not to mention, back in my day, when you did a startup and got funding from your rich uncle (not Uncle Rich), you grew your startup from your apartment, and when you outgrew that space, you got a bigger apartment. (ala Silicon Valley style)
I dunno, I can't put my finger on it, but I think this whole thing is a massive game of charades...
The ones I saw were very busy, and, filled by large corporates that wanted to be hip. I think for them value proposition is that they are able to hire some hipster people who don't want to work in the old buildings and also build some marketing stories around their "labs".
That said, I "worked" in a WeWork for about 6 months and it was just terrible. Tiny offices, lots of visual distractions, lots of noise, many parties. I wouldn't ever do it again.
I don't think it's a matter of wanting to "be hip", but a case of recruiting being a huge problem for most companies. Renting out the 'cool' co-working spaces of WeWork probably isn't their long term goal.
If BigCo has exhausted the talent in their city they have three options left: employ remote workers, pay people to relocate, or open satellite offices and pay a little more than then the local businesses to get people. WeWork is enabling the last option at scale. Renting managed office is a viable business model that's been happening for decades.
Whether there's enough of a market to make WeWork work is another question, but there might be. Anecdotally, a large insurer recently opened a new office in my city here in the UK because they've had 40 open positions in their London office for years. They've already filled half those positions. They wouldn't have done that without renting a large office on a business park.
I agree - but it makes sense to try to spread work out in other cities rather than have all the jobs in London with soaring CoL and struggling infrastructure.
A big company that's resisted remote working will find it hard to integrate remote people in to their teams. Remote is great, but unless everyone is in favor of it it can fail horribly - a manager who insists on having oversight of what people are doing at any given moment will kill any chance of remote workers being productive. Consequently if you have a big team at 'head office' who aren't used to or good at managing remote people then remote won't work.
Paying people to relocate from a small city to the most expensive place in the country is exceptionally difficult and expensive. Many developers here in the UK see London as a really bad place to live unless you're paid more than £100,000. Developer wages in London are often not £100,000.
> it was just terrible. Tiny offices, lots of visual distractions, lots of noise, many parties. I wouldn't ever do it again.
Same (London, Shoreditch). Additionally we had relatively frequent and loud noises from the ceiling ("eeeeeNNGNGNGNGNGNNG") which they couldn't fix. But not once did they suggest we move offices to any one of the 30+ empty ones downstairs.
In Spitalfields. It's big, and sparsely occupied. There are 6 (or more?) other WeWorks within a five minute walk and all are ultra-prime locations - not cheap. The attitude to spending is unbelievable.
It's a terrible place to work. We recently moved out of the shared, fixed desk room which was relatively quiet into a glass office. There is no sound insulation whatsoever, you can hear every recruiter on the floor speaking their patter down the phone (loudly, because they have earbuds in) on repeat all day every day.
I also think WeWork will collapse eventually, it's just so clearly unsustainable. Maybe the hope is that they become 'too big to fail' first?
I actually know why this is! If you're referring to the WeWork I think you are, it shares a building with Scape, a student accommodation I used to live in - the kids who live there are fairly loud, and the plumbing is quite weird and noisy
Yeah, that's what the engineers claimed but then it was only happening in our small office and it would alternate between "very frequent" and "gone for days" which makes their explanation somewhat unbelievable.
Really? I'm working in wework Lafayette right now and I love WeWork, so many free stuff (even beer!), beautiful building in a well placed location... I love it.
The frame of reference matters. In Paris at least Wework offices are relatively clean, well managed, and modern compared to most offices.
But compared to a decent traditional office, they are:
- noisy (always someone phoning while walking around because they couldn't get a booth, even when recruiting or doing otherwise sensitive discussions)
- more agitated (at a point there was people trying electric scooters in the corridor)
- some offices are just gloomy (some don't have any windows, with no natural light coming in from any direction)
I think we could see them as the McDonald of offices: a know quantity that passes some threshold. It's better than a random sandwich place next to a tourist trap, but not as good as a decent well managed (although slightly pricier) restaurant.
This. And they might not put it in the basket. IIRC there is talk that dual-ownership-stock co's are usually debated on whether they go in the basket for obvious (which, let's be honest, WeWork will do, cuz it's hip).
Also, want some more downside protection but want to bet on the market? Check out Fidelity's contrafund.
Its already happening except this time its standing desks for $100 vs $1000. Keep an eye on craigslist in SF, I've picked up a few for home and keep seeing more pop up. Each time its been a tech startup that has failed, so I guess we should start worrying when its established companies listing their office furniture on craigslist.
Craigslist seems to be dying as people use Facebook Marketplace, OfferUp and LetGo to buy used items. The end of the personals section combined with heavy advertising by the aforementioned new entrants is causing a slow user bleed from Craigslist.
And the terrible user experience of having a stranger say "I know we agreed on $200, but now that we've half way loaded it into my car I think $150 would be more fair."
Terrible experiences happen to me way more on the newer platforms I listed. People are literally crazy on those new platforms, I've had death threats (from a user which OfferUp never banned) and various other threats on those 3 platforms. Facebook, OfferUp and LetGo all ignored my complaints.
Craigslist over the past 2 years has had zero issues, I've interacted with fairly even keel 40+ year old people that are easy to work with. The "no lowballers, I know what I got" crowd has mostly departed Craigslist.
> I'll just go on the record to say that I think WeWork is the biggest deck of cards that is begging for a collapse. I've only been to a handful of locations, but they never seem busy and I'm not sure how they're making rent.
VCs are paying the rent silly. It's VCs all the way down.
The VC will cash out with the IPO. That’s the new strategy. Drive companies to valuations higher than the market cap of many S&P500 companies and then sell them to the “free market” (Uber, Lyft). Great deal for the involved VCs and banks. Is the end result a sustainable business...? who knows...? who cares...?
I agree WeWork is overvalued, but the whole thesis behind an index fund is you can’t reliably pick winners and losers. If you can, there’s no need for an index fund. There were plenty of naysayers calling FANG overvalued at their IPOs as well. If you didn’t hold those stocks for the last 10 years you missed out on most of the overall market’s gains.
We can leave Microsoft and Apple aside because their IPOs were so long ago, but there were certainly many periods in their history where a "tech savvy" investor would have wanted to drop them from an indexed portfolio because growth had stalled and they had no exciting new products on the horizon to justify their valuation.
On to FANG IPOs. If there weren't people saying they were overvalued at their IPO, their underwriters would have done a very bad job.
Facebook[0] - 'The problem is that the smart money on Wall Street simply doesn't think the company's prospects justify the $105 billion that the offering price implied. And no wonder. That values the company at 108 times 2011 earnings, requiring almost ridiculous financial growth to make sense.'
Amazon[1] - 'Online bookseller Amazon.com's push to sell some 3 million shares for as much as US$13 per share would value the company at $300 million - a pretty penny for a firm that lost about $6 million last year. And Amazon.com's prospectus suggests those losses could grow larger. Bill Bass, an analyst at Forrester Research, attributed the high valuation to "Internet inhalant" - the extra high that Net-related stock offerings can carry with investors. "Some people smoke Internet inhalant and their judgment gets bizarre," Bass said.'
Netflix[2] - 'Netflix is not profitable with an accumulated deficit of $141.8 million. The company had $4 million in operating losses on $30.5 million in revenue for the quarter ended March 31 on $20.4 million in operating losses on $17.1 million in revenue for the same time period the year before.'
Google[3] - '"Although Google enjoys faster growth and higher profitability, we see several risks to its valuation, which may mean the stock ultimately trades at a discount to its peers," says Susquehanna Financial Group analyst Marianne Wolk.'
I guess in your brokerage account go long SPY and short a bit of LYFT or similar as is your preference. Or skipping the S&P fund and buying BRKA is another conservative option if you don't like the silly stuff.
The consensus on Wall Street has WeWork nowhere near its $47B valuation. Like Uber/Lyft, its size is more a consequence of VC investment, rather than organic growth.
Plus the management isn't particularly scrupulous with how they allocate those funds. The CEO, for instance, buys property himself and then rents it to WeWork (for a profit obviously). VCs let him get away with it because their business is no longer to fund and help create sustainable companies, but rather to gather as much money into a "unicorn" as they can and then pawn it off to the public markets who ultimately pay the bill.
My WeWork has three kinds of clients. The first kind sit in the dedicated desk area, work 10-12 hours/day and rarely leave the space for community events. They're either serious consultants/freelancers or just starting their own startups.
The second kind sit in the shared desk area and basically dick around all day. They attend all the community events and use WeWork as mostly a networking/dating hub. Who they network with, I have no clue.
The third kind are companies with satellite offices in WeWork. GoDaddy works out of my space and has taken over an entire floor. Curiously, these are now the largest client type by far. Three floors in my space were earlier dedicated to independent workers and small startups.
But now, WeWork opened three more floors of space, and of the six floors, four are occupied entirely by large companies.
At the same time, just because large companies are renting space doesn't mean they are still profitable. In fact one can argue that WeWork may be underpriced enough that it attracts said companies to exploit it.
Reminds me of when Michael Scott tried to start his own paper company and was selling paper so low it was bankrupting his company. He didn’t understand it until an accountant consultant type pointed it out.
But hey, he got a $60k exit and landed back in an "executive" role at the company. Now that I think about it, that episode was prophetic of the startup scene
> But now, WeWork opened three more floors of space, and of the six floors, four are occupied entirely by large companies.
This was interesting to me. I've seen wework turn corporate often. Startups are great candidates: they want to offer good offices and not worry about big moves, contract negotiations, get good branding, etc.
Yahoo also thought it was doing well when most of its profit was coming from unprofitable startups funded by VCs. Guess what happened when VCs stopped investing in startups in 2000?
I will never forget hearing a software consulting shop had been around for 20 years until they picked too many customers who went under simultaneously.
My naive view is that it's similar to the reason some companies use AWS rather than running their own data center. That is, it's worth it to pay the premium to not have to manage their own space, and have the flexibility to scale up/down their usage a bit more quickly than locking into multi-year leases.
Real estate is a real pain in the ass for small startups; it eats up like several man-months of companies that have no people dedicated to stuff like this. I do think wework is bullshit, but thinking back to the process of moving a company your point makes sense. And in earlyish-stave companies the CEO / bigwigs are most involved with moving and corporations' decisions are no more economically rational than those of the people in charge.
WeWork is better than opening a satellite office in pretty much the same way that renting a hotel room is better than buying a house in a location that you're visiting.
Once you've proven you have traction and it's going to be sustained, it makes sense to transition to your own real estate (owned or leased), but in the early days, it's better to wildly "overpay" for temporary, flexible, easy space.
WeWork, at least in my area, has also picked office spaces right next to metro stations. This real estate is hard to find and several of the companies working out of WeWork advertise how they're located right next to the metro exit.
I'm just saying that this entire community feels very bearish on WeWork, but there is some method to their madness
Office space is sort of a commodity, though there's a lot of friction in lining it up. But the thing about datacenters is you need three with independent networks and power and cooling, and that's crazy expensive before you can actually fill three halls.
Given the office makeup others have described (small startups and freelancers), and the networking events, it might give them an opportunity to convince their neighbors to host with them. Probably not entirely worth it, but if you need office space anyway, that is a slight marketing advantage. And given that GoDaddy hosting is really just reselling AWS servers, they need all the help they can get.
There’s a bunch of internatonal companies using wework apparently. My guess would be the same as yours: nice location in the cities, modern looking offices, the brand value, and not having to find a good office manager.
I worked in a recently furnished office two years ago, there was a sizeable effort to make it an attractive work place but it still slightly paled compared to wework in terms of pure office space.
Amazon also uses WeWork in a few locations, including Seattle. I would imagine since they're renting out multiple floors, they're getting a better than market price.
I was a member at WeWork for over a year. The company doesn’t have a direction. WeWork seems more like a hip place to look cool than get stuff done.
A few experiences I’ve had:
1. WeWork holds lots of events like “Dog of the Month.” Meanwhile, there are empty desks everywhere and the printer doesn’t work.
2. I cancelled and no one ever followed up to ask why or try to keep me as a customer (see above).
3. The spaces are always too loud and chaotic. Every attempt is made to maximize rentable space that is never rented. American Airlines offers more bathrooms per passenger than WeWork has for its tenants.
4. I was able to cancel to $550 / month dedicated desk membership and get a year of hot desk membership for FREE thanks to a new promotion with American Express. AMEX snd WeWork should not have opened this generous deal to existing WeWork customers. This is very poor revenue management and shows the shortsighted approach the company has toward growth.
By taking an old stodgy business (commercial real estate) and bringing it in conformance with modern expectations of design, ease of transactions, lease length, and vibe.
The real estate owners couldn’t be bothered to do this because they make too much money by doing nothing to bother with doing something for an extra $47b (a rounding error on the value of global commercial real estate)
The huge fundraising rounds are an important part of this because the hype is important for making it seem like a cool place which is essential to the economics.
Add in some founder god complex which is not really necessary or sufficient for a successful startup but does seem to be often present.
So many of these unicorns seem so stupidly simple in hindsight.
I'm in St Petersburg right now and the taxi outside the train station quoted an initial rate of EUR 50 to drive a grand total of 6km (after haggling, "just" EUR 30).
I booked an Uber (operated under Yandex Taxi in Russia now) and the total price was just EUR 5
Take stodgy, often scammy, and downright consumer unfriendly industries, add transparency and accessibility to them, and viola - you have a unicorn.
> So many of these unicorns seem so stupidly simple in hindsight.
The "stupidly" part comes in when you realize that maybe the cabbie had a better grasp of the economics of his business when he accepted your bid of 30 EUR. The gig economy people driving you for a fraction of the 5 EUR you paid might come to the same conclusion sooner or later.
Add the taxes, add the commercial insurances (how many Uber has one?), add the much higher maintenance for a car that runs all day every day,...
Just because those drivers don't factor in things in legal or financial hindsight doesn't mean they won't need it, or that it won't go seriously wrong when that need gets called on.
I've traveled widely enough to know that at least at tourist centers, airports and train stations, the traditional cab driver business model is built on scamming unsuspecting tourists.
Most estimates put the cost of driving (in the US) at around $.50 to $.60 per mile. Assuming this is somewhat on par with Europe. Guy’s costs were likely around $1.50. After Uber’s cut he’s “making” like $3?
Take someone else’s money, spend it aggressively, pretend like you can fix things in the future, and viola - you have a unicorn.
Not sure I understand your math here. A car depreciates faster if it is driven (more repairs, needs to be replaced sooner). Just because I already own a car doesn't mean it's only the cost of fuel to drive it.
Tires, oil, brakes, belts, wheel bearings, transmission... With a mechanical system like a car there are lots of things which wear down with use.
Instead of trying to figure out the actual difference yourself, you can simply look at what people are willing to pay for a car which is the same year but has different amounts of mileage. The literal resale value of your car changes drastically depending on mileage, that is the actual unrealized cost most of these ride sharing services exploit.
==Take stodgy, often scammy, and downright consumer unfriendly industries, add transparency and accessibility to them, and viola - you have a unicorn.==
They're signing expensive long term leases and then renting them for the short term at a loss, which is like exactly the opposite of how it's supposed to work.
You are confusing unit economic vs profitability. They are very different things.
If I manufacture a widget for $1 and sell it for $.50 then my unit economics are negative and, unless I manage to either lower manufacturing costs or raise prices I am in trouble forever.
If I manufacture a widget for $1 and sell it for $1.50 then my unit economics are positive. My company might still be unprofitable due to other expenses though (R&D, Marketing, whatever). This is the situation that WeWork is in.
I am aware of the difference. If you look at their numbers, their literal unit economics are negative, if you employ normal EBITDA. They don't, they employ a so called "adjusted EBITDA", which last year flatout discounted 150 million in marketing as non-recurring trying to make the argument that you just made.
But this is hilarious number fudging, because obviously a lot of marketing budget is recurring and goes towarss retaining existing customers and should go into a unit cost metric.
They do the same thing that uber did, which is pretending that they can magically 'scale' and that they are a tech company, when in reality they are a real estate business siphoning money out of investors, pretending their losses are somehow magically going to turn into profit.
I don’t understand why laypeople are so confused by how real estate investing works.
I build an office building and spend $100M. I “hemorrhaged cash” yet I own an asset that’s going to throw off cash flow for years.
It’s the same thing with WeWork on a smaller scale. They spend $5M to build our office space to own an asset that’s going to throw off cash flow for years.
Albeit a much higher yield for a much shorter term.
WeWork doesn’t own property the same way you don’t own your house. The bank does. You still have an asset though, and so do they.
Their asset is what’s known as a leasehold interest. Riskier and shorter duration than owning real estate, but still an asset making this cash hemorrhaging talk complete bosh.
The presumption being of course that they’re going to be making a lot of money out of these investments, which is what us “laypeople” as you put it express doubts about when we see half-empty WeWork spaces? Which results in an over the top multiple valuation which has nothing to do with comparable competitors and which the CEO attributes to WeWork’s great vibes (no joke).
Short Answer: he is riding the Gig economy just like Uber etc.
Most viable businesses with a steady revenue stream can afford to rent office space and furnish it on their own. But the self employed folks -- the web designeers, SEM experts, and various other professionals without a steady employer need a place to work. For some, working from home is not an option due to regulation or family consideration etc. For most, working from a coffee shop is a very bad idea for various reason including ergonomics. WeWork fills this niche. Is this a $47B niche ? very unlikely .
I'm not a believer in WW's business model, but this is an overly-cynical take. We're a company that "started" in WeWork, have our own office now, and in fact moved a different office of ours from a private space in Long Island to a WeWork in Manhattan.
What WeWork offers to small businesses is quite valuable: an instantly-obtainable month-to-month lease, at relatively reasonable rates, with all standard office amenities (most notably Internet access) included. You can decide you need an office for your business on a Monday and have a better office on Tuesday than most of your local peers. Even better, you can quickly scale that office up to completely private offices or down to shared space.
To put it gently, the jury is still out on whether WeWork is charging an amount, given its number of subscribers at each level of service, to make the company profitable. It seems totally fair to predict that it'll turn out to be a house of cards.
It does not, on the other hand, seem fair to suggest that WeWork isn't offering something that people want.
It does not, on the other hand, seem fair to suggest that WeWork isn't offering something that people want.
If WeWork isn’t charging people enough to be profitable, there is no way of knowing whether WeWork is offering something people want - at a price they are willing to pay.
The"real business" of WeWork et al seems to be selling an entrepreneurial vibe to big companies. Lots of folks in my distributed company work at WeWorks around the country, and most of their neighbors work for big companies. One of my colleagues is almost fully surrounded by a Dish Network call center. WeWork will even custom build for big customers — in fact, their Enterprise landing page is a good an index to their view of the future as anything: https://www.wework.com/enterprise
I think the Short Answer is that the solo renters are the sizzle and the Fortune 500 is the steak.
The question is, why would a F500 company rent space from WeWork at a double-digit markup when they can do it themselves? This is not super hard or special stuff, and F500 companies need to do it enough that they can maintain the expertise.
If the answer is "wework allows us to be elastic with real estate as our needs shift", then WeWork will be in for a lot of hurt at the next recession. If the answer is "we are using a lot more remote or geographically-diverse staffers, and WeWork allows us to have small office space available all over the world", they might do okay. The single-company WeWorks described in the article lean towards the former, though.
The answer is - these are not core office buildings for those F500's. They want capitally efficient (e.g. minimal up front investment), fast to market and appealing to a desired workforce. GE wanting to set up a R&D center to hire 100x 25-40 year old developers in Austin? Great model. When we hit a recession, those are the first jobs to go and then they have preferable (e.g. not left sitting with the asset) ways of winding those centers down if needed.
Think of it like having 3-year Reserved Instances in AWS instead buying your own hardware and running your own data center. Which would you choose today?
In my limited experience -- there's a lot of corporate "innovation groups" or SWAT team kind of things that get put into a WeWork.
It's very rational -- if you are an "intrapreneur" and wanting to break out your team from the mothership, it's probably easier and faster to get your office space at a WeWork. Plus, you get a recruiting / lifestyle / hipness benefit from getting to be downtown with exposed brick, instead of out at the suburban office park with the sea of landscaped parking lots.
But my sense is that it's a high-beta customer base. When times are good and there's lots of corporate cash for high-urgency, high-concept stuff like innovation teams and new product skunkworks, a $25k/month WeWork bill is peanuts. When times get tight, that's going to dry up fast.
Similarly high beta on VC-backed startups. That cohort is pretty cyclical, though it won't disappear completely. I predict a similar % of Series Seed/A startups would still opt for a WeWork in a venture downturn as do today (but there will be many fewer of them).
Much lower beta on satellite offices and smaller professional services type groups -- they'll still show up to work, as it's a primary office for their primary business.
Wild card on the bootstrap / solo / freelancer stuff.
Also (IMO) sort of a wild card on the larger corporate buyouts of an entire floor or location. In crowded cities it really can be worthwhile to pay for the branded facilities management as the locations WeWork acquires are quite good.
However, and here's the big however. My understanding is that We's leases are LONG term and tend to have escalator clauses (they owe more rent to the landlord in the later years, faster than inflation). Which generally means their supply / cost structure is as good today as it's ever going to get. If the topline gets hit, which in a recession it surely will, the bottom line will take a double whammy as the escalators kick in.
So I'm not at a fortune 500 (fortune 1000 yeah) but we are expanding into a new city and waiting until our office population is enough to move into a full time space. I can not wait for that since we've completely outgrown their largest private office space and are spilling into random other offices here but it took a while to find the space we wanted and could grow into and do the build out. Flexport did that as well here in the city and moved into their own digs recently.
>Most viable businesses with a steady revenue stream can afford to rent office space and furnish it on their own
Yes, but do they want to?
My experience is that companies increasingly want to focus on their core competencies and nothing else, especially if the non core areas come with overhead in the form of full time employees. I could easily see non-HQ locations outsourced to a company like WeWork. For a satellite office of 50 people there is hundreds of thousands of dollars in annual overhead that could be drastically slashed by a local provider operating at much vaster scale. Less liability and variability for the employer and the employees likely end up with a better quality work environment.
It's a bit like the discussions you read around cloud provider costs vs. doing things in-house (or whatever). There are a lot of overheads associated with a big company doing peripheral tasks in-house.
For example, to your point, that 50 person satellite office probably needs a full-time office manager and then all the costs that percolate upstream associated with having a full-time office manager and another lease to manage/office to service.
It may be worth it to have your own location with your own branding etc. Or you may just want a location where a bunch of employees can work, have meetings with customers/partners, etc. with minimal hassle.
The biggest revenue opportunity for WeWork is big corporations opening smaller office location in cities where just want to staff a small field office or operations office. Example, Uber opening an office in let's say Columbus. Now instead of Uber going on a real estate hunt, they can simply rent out space in WeWork Columbus which gives them flexibility to scale or shrink depending on business. It is essentially abstracting away the real estate inefficiencies. There is a definitely a market for it. But not sure whether it is worth $47bn
This probably true, and there's a company similar to WW in Montreal who did a presentation indicating that as well.
The thing is: there's very little competitive advantage in that.
Having 'cool decor' is less valuable to larger companies, and it's not as though other entities can't duplicate that if they want.
Other, more established firms can inch their way into copying some of WW's mojo, and compete on price, which the CFO's of said companies will appreciate.
I wouldn’t say cool decor isn’t valuable to larger companies. If you’re a stodgy, older firm you’re going to get some chunk of Millennials that will decide that your beige cubicle farm isn’t anywhere they want to work. Or you might be running investors through the office and they don’t know jack about tech but if you don’t have a bunch of kids in hoodies clustered around the kombucha dispenser then they might just pass.
A good brand is a valuable form of competitive advantage. And real estate itself provides done scarcity value since each property is unique and there are limited attractive properties in high demand locations. I agree they’re in more danger from commoditization and competition than a company with strong network effects, but executed correctly they could have more natural advantage than say, a Chobani or Stitch Fix or Deciem.
I'm sorry but I don't see how what you're describing is different to any of the existing office rental companies out there and if WeWork were valued like them it'd be a completely different story.
I have the next billion-dollar business idea, an " Airbnb for coworking spaces". Convert your existing house to a co-working space. Looked at Wework, already pay too much for rent in the Bay area. I work from home, and would not mind the company. Got good coffee and great beer as well!
This suggestion is made every time there's a thread about WeWork and it's just not viable. There are startups in this space already and the reality is always borne out: it's simply not worthwhile to rent out space in your home to an individual. You can get a monthly membership to WeWork for <$400 in most locations, and there's lots of no-brand co-working spaces that charge less than half of that. If you can pay $200/month to have 24/7 access to a space with amenities and flexibility... why would you pay someone $10 to sit in their apartment for 7 hours until they come home and you awkwardly shuffle out so they can make their dinner? And who is going to rent their apartment out for $10/day with all the liability that comes along with it? All the pain of Airbnb, <10% of the earnings.
Every one of the startups in this space either disappears, or pivots their focus to larger spaces designed for meetings, events or shoots. For example there's https://breather.com in the US and https://www.vrumi.com in the UK. The cheapest space on vrumi is far more expensive than WeWork.
I think one of the components that drives the success of AirBNB, the ability to "live" for a couple weeks in, say, a former hermitage just outside Naples or a beachfront condo in the Seychelles, would also be viable for small teams or full time remote workers. Essentially it's just AirBnB but with some additional minimum guaranteed service levels for infrastructure (security, internet, privacy, pricing structured around a minimum 10 day work week block for fixed contract lengths, similar to short term commercial lease terms) for remote workers.
Another consideration is that private homes-as-workspaces can offer some incidental cost savings in the form of things you get with residential zoning like (usually) free parking and a car-based commute that does not follow urban congestion patterns. Say you need to work within 40 minutes of Paris or downtown LA in order to make the odd off-hours mixer or client meeting, but your daily workflow can be conducted entirely within a single dedicated space out in the burbs, priced comparably to the shared desks at a WW location and more comfortable or in a more walkable area than a typical industrial park.
To be fair the number of people who are able and willing to pay even $200/mo for co-working space is MUCH smaller than the number of people who are able and willing to pay $10/mo. Plenty of people would prefer to pay $10 to sit in someone's apartment for 7 hours, just like every day millions of people pay $5 to sit in a cafe for a couple hours.
This becomes more obvious when you leave the rich tech bubble of SF.
I’m not clear on the numbers you’re thinking about: is that $10 per month or $10 per day? The former is impossible (that’s... 1/300th of what Airbnb-ing would earn) and the latter is equivalent to the cost of a formal co-working space.
As the existing startups have proven, there’s no market for individuals renting houses to work from, the economics don’t work. A day pass at WeWork is cheaper than every listing on Vrumi.
I looked at Vrumi and the cost is ridiculous!
$20/day/person tops, I go to Hacker Dojo in the Bay area and it's a decent place with good wifi, nothing fancy and its about that much.
While there are a few companies that are actually trying to build this idea with renting out homes by the hour, at Out Of Office[0] we're working on a similar concept of a more general marketplace for coworking spaces. We've scouted hundreds of locations in San Francisco, both free and bookable, that you can search for in our app. You can find coffee shops, hotel lobbies, public spaces, or book private desks, and conference rooms throughout the city.
Yeah I had this idea too. I stayed with some people in a fancy apartment in Zurich for a week a while back. They all left to work and I worked from their home. It was the best office I'd ever had, and was empty during work hours all week. I reckon 60% or more of city apartments are similar - seems very inefficient.
As Uber and AirBnB have demonstrated, caring about laws is so last millennium. As long as you get big enough, fast enough, the cities will probably bend and change things to accommodate you.
To take it a step further, if the house owner works outside home during the day it could be mutually beneficial if you throw in taking a few breaks to walk the dog to make it an even trade. It's always better for pets to have people around all day.
mind blown. although i think you should focus on car garages and backyard sheds for that authentic start-up experience. for extra, clients can have their garage pre stocked with technical-looking equipment and stray wires hanging everywhere.
I thought at some point why not convert the garage, that way they're not bothering me. Would have cost me 10K tops to put an AC, nice flooring in the garage.
Hm, I worked in a company that had hired ~140 desks in WeWork (Aldgate London). If all the floors in the world have a few large-companies provisioned and filled like that - I could. be convinced the valuation is plausible.
When you are a large company in WeWork, you set the culture (e.g. noise) and you have personal relationships with the WeWork staff - which makes things run smoother.
From reading the comments it seems many people have had lack-luster experiences. Especially those who hired a single desk and have been forced to interact with the community. And imho the community is pretty unique:
I remember knocking off work at 7pm, and hearing there was free beers. I wandered over in a work-daze. As I approached the door, it opened and out poured hi-energy EDM, accompanied by a large group of happy, shout-chatting drunks. I slid around them and entered what was more "club at 1am" - rather than "knock-off drinks". I mean there was flashing lights, a DJ, and a decent sound system. What I was most amazed by was passing multiple people who seemed to be rolling hard. It was definitely impressive, but after coding for 10 hours straight it was not what I needed, so I grabbed a fist of and Heineken backed out.
The thing that always stuck with me, was the implicit agreement by all-attending, that they were all going to go _hard_ as soon as they knocked off work. I provide no judgement, just an account of something I'd never seen in inter-office culture. Note: I never personally saw that level of revelry again.
Ah, the magic of financial engineering. Mr. Neumann will cash out of his fictional decacorn in dribs and drabs and never have to work again. Everyone else will be left with a bit pile of shit (aka a commercial real estate venture that bet on ever upward growth and got ripped to shreds in the secular downturn).
It's not like they were working hard to make the world a better place, but investing in the hopes that they would be richer without too much work. It's hard to feel sorry for them. They are on the same level as Neumann but he happened to be cannier.
He made investors believe in a non-sensical vision that is not rooted in any sort of financial or commercial reality in the middle of an insane bull market.
You got it slightly wrong: He made investors believe that there will be bigger more stupid investors that will eventually buy out the shares for a higher price than those investors.
(Also, see Uber, Lyft and other ponzy scheme based companies)
> He has bragged about working 20-hour days and regularly called executive meetings that would begin after midnight. “I’ve had meetings that started at 2 a.m. where he joined us 45 minutes late, but that meeting was worth millions,” a former WeWork executive told me.
So i work out of a competitors place here in south east asia (indonesia to be specific), for the guys here from the region they probably know who im talking about. This coworking space was initially funded by a local VC but then low and behold softbank just invested, wework is also here in indonesia. I (last year) had to downsize my startup because some areas of business didnt do so well so i moved into this coworking, decent building , upper class part of town and i have 4 rooms next to each other probably 5x3 meters each. Each room i pay 300$usd a month, got it at a 60% discount cause it was just opening and locked it in for 3 years ! But at say ~$700 a room per month full price its still a dam good price, cheaper than anywhere else by far in the area. Wework is charging 3x that amount ... i have no idea what SB's strategy is here with wework and this locally invested competitor, specially with regards to cannibalizing each other and specially in a price sensitive market, maybe things will go the way of uber and grab where the bigger more international son of softbank will leave the region so the local son can dominate. But honestly, other then cheap rent, there is nothing special about these places, i dont see any tech, auto bookings, elastic rental or anything, i came here cause i had to downsize , needed interent , place for my guys to work, strategize and refocus. Its helped us save on costs over the last year and have brought back the startup from near collapse to doing very well again. Also at the price im getting it i have no idea how they make money, even at the full price its hard to understand as i know what a floor in the place im working at actually costs ... there are also many empty rooms ... i mean its like uber to me, im using it cause its cheap and its convenient, but should a cheaper one come out in the near future, ill simply ask my guys to pickup their laptops and move next door, there is really no added value for me to use one or the other just like all the ride hailing companies ... whos cheaper will get my business, if this is the way these SB companies are going to roll over the next few years and there really is no added value, they in for a lot of hurt. But after saying that, i thank them for cheap rent and helping me get my startup back on track :)
Valuation inflation / delusion only really matters if you’re the last one left holding the bag. So long as there’s someone else willing to buy the game continues for another round.
When the music stops though things get real ugly real quick.
For me WeWork is a prime example of how the rich (investors) don’t know what to do with their piles of cash. We need to force (eh, inspire) them to invest in renewables instead.
It seems like these companies are fully over valued so now they need to come up with shit to push down people’s throats for the IPOs so the investors can get out at a profit.
This is what happens when VCs keep funding these loses for a decade. We saw the same thing with Uber, pushing Uber eats as if it’s going to take over all food, meanwhile there has been like 3-5 startups already doing that at a very easy to value valuation.
Anyway, I’m not buying.
Edit: I’m referencing the following from the article
>>”He is known for making bombastic pronouncements, like this one at an all-company event last year: “There are 150 million orphans in the world. We want to solve this problem and give them a new family: the WeWork family.” In L.A., Neumann told his employees that the newly formed We Company would now have three prongs — WeWork, WeLive, and WeGrow — with a single, grandiose mission: “to elevate the world’s consciousness.””
For all the criticism that modern media gets regarding journalistic standards around coverage of big business, it's remarkable that they will lead with eye-popping valuation numbers in their headlines when they know that they are more or less a fiction concocted by VCs.
I worked in a WeWork in London for 6 month (it was one of the main reason I left.) I don't even considering initial interview with anybody using WeWork after that.
Cynical answer: he convinced VCs that his particular brand of shared office space was better than everyone else's, actual revenue be damned, and they believed him. That's it. Straight from the article: "Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"
Now, I don't cheat. And although I like to think we have some pretty smart people in this message board, it sure is a hell of a lot easier to just be first.
Their valuation is based on spirituality? Are they a business, or a church?
I mean, they can actually be more valuable than other such companies if they get the ambience right. Maybe that's what he meant. But if they're referring to the ambience as "spirituality", I cannot take them seriously. [Edit: And if by "spirituality" they mean something besides ambience, I still cannot take them seriously.]
If I had more faith in the market's rationality, I would short them as soon as they IPO...
>But if they're referring to the ambience as "spirituality", I cannot take them seriously.
I dunno, the Catholic church is doing just fine in terms of revenues and real estate assets, and that's just one example. Then again, religious organizations get preferable tax treatment...maybe WeWork will eventually pivot to religion down the road.
Unlike WeWork, the Catholic Church (and the mormons and scientologists) have realized that the best tax shelters come from actually owning the property that is used, not leasing it.
Some of the most successful cults did effectively operate as "startups" bootstrapped by a counterpart religious service community, i.e. the Oneida Community and the Amana Colonies
> If I had more faith in the market's rationality, I would short them as soon as they IPO...
Total tangent, but how much of the stock market do you think is fair? By fair I mean abiding by SEC regulations (and other obvious laws, such as regular fraud), versus unfair where people are using insider trading, trying to influence a short, or even have some ulterior motive perhaps related to politics?
Now I hope someone more knowledgeable than me chimes in with links to articles or papers, because I'd really love to learn more.
I said that the market might be irrational, not that it might be unfair.
"Irrational" is values that are not based on a reasonable interpretation of the company's financial state and reasonably forseeable future. This is what I think is meant by the saying "The market can stay irrational longer than you can stay solvent."
"Unfair" means corrupt, rigged, or otherwise dishonest. I wasn't suggesting that. But like you, I'd love to see the results if someone can measure it...
So IWG plc, which has a British stock-market listing and does business mostly as Regus, had 2018 revenue of £2.5 billion and a current market cap of about £3 billion.
It thus trades at about 1.2x annual revenue. WeWork's multiple is way higher.
WeWorks multiple is irrelevant when it is losing money every quarter. This current era is redolent of the dying embers of the dot com boom - over leveraged loss makers trying to go public to pay back vast sums of borrowing from investors
This gets tricky. Yes, some loss-making businesses never turn profitable. But others do (i.e. Amazon). And when it comes to real-estate companies, the rather goofy U.S. tax rules mean that even quite robust companies will engineer huge depreciation losses when they actually are doing fine.
WeWork might still be way overvalued in the private markets. But it could also be a lot healthier than its reported losses.
I'm curious what Regus' take is on WeWork (i.e. strategy).
In other words, did they start a hip new WeWork-killer? Attempt to compete on price? Have special retention marketing campaigns to stave off clients from going to WeWork.
Interesting, I did not know Spaces was under IWG! They are here in DC as well. Materially the office space is the same offering as WeWork, but there is a noticeably different vibe/sheen that is hard to pin down. Neither appeals to me as I find it hard to focus / get work done in coworking places like this, but WeWork just feels better executed / 'cooler' at first blush.
I've only been to WeWork in London, yes I agree the vibe is a little different. You could argue they're both faking it being hip but WeWork does a slightly more convincing job while Spaces feels bit more corporate.
That said, I found the WeWork in London extremely noisy and tight compared to my current space. It might be just a side effect of real estate prices in respective cities, though.
I've been to that Spaces Noma in DC many times, and I immediately said to my coworker that it was a "cheap imitation of WeWork". The same entrepreneurs in glass cages concept, the same barista upfront, but without any real originality. I don't like the WeWork vibe but at least there's some original thought going into it. Spaces is just an imitation, but you know what, does it matter? From a business perspective, immitation is the sincerest form of flattery, even if it feels like a cheap imitation.
The fact your friend is using a no-fee platform to invest in the second-most profitable company in the world paying out a reasonable dividend is problematic? I mean, I guess they could invest in SPY but Apple's been a solid 5-year outperform. Tesla's worth half what it was 6 months ago, so seems like a balance of risky and less-risky assets.
Now Beyond Meat, well, that's a different story haha.
"“valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"
Literally valuation based on 'spirituality'.
Not only do I call 'bubble' but also 'BS'.
Very wary of companies leveraging 'morality' in whatever form (esp. all the way up to 'Spirituality'), unless it's somehow deeply authentic (i.e. a company that makes 'green' eqipment can claim 'greeness' that's fine), and are something to be cynical about. I find it kind of repulsive.
My feeling is that WeWork must be the 'high tech startup' opportunity for all those non-tech 'Goop' reader types.
... like the NXVM of startup land.
Tony Robbins of working real estate + SoftBank.
“There are 150 million orphans in the world. We want to solve this problem and give them a new family: the WeWork family.” In L.A., Neumann told his employees that the newly formed We Company would now have three prongs — WeWork, WeLive, and WeGrow — with a single, grandiose mission: “to elevate the world’s consciousness.”
Just beautiful ...
WeWork’s size and scale could put it in a position to help deal with some of the world’s largest problems, like the refugee crisis, saying, “I need to have the biggest valuation I can, because when countries are shooting at each other, I want them to come to me.”
How does anyone take this guy seriously?
In the comments here there seems to be a lack of calling out on the so many of the gob-smacking authoritarian/hypocrisy red-flags going on here.
The guy's line is preaching morality, spirituality and inclusuion ... while doing the opposite i.e. dropping the least productive 20% staff every year? 'All dudes' in charge? (Nothign necessarily wrong there (maybe red flags), but it's definitely hypocritical)
All of the Kabbalah stuff and social preaching at offsites?
'It's like a capitalist Kibbutz' ... this is double-speak.
And that his background doesn't legitimately speak to any of this, i.e. total lack of legitimacy?
The trick to this kind personality is 1) words have no bearing on reality 2) total lack of self-awareness or consideration such that he can come across as 'honest' even when spouting garbage.
Who else could possibly be talking about 'saving the refugees of the world' like this with a straight face?
This guy is a legend. He is exposing how our world is running on bullshit fumes, and how people throw money without thinking out of greed, and becoming richer than a small nation for it. We need more of these modern day Diogenes.
Plus, not to mention, back in my day, when you did a startup and got funding from your rich uncle (not Uncle Rich), you grew your startup from your apartment, and when you outgrew that space, you got a bigger apartment. (ala Silicon Valley style)
I dunno, I can't put my finger on it, but I think this whole thing is a massive game of charades...