
WeWork IPO Shows It's the Most Magical Unicorn - jpm_sd
https://www.bloomberg.com/opinion/articles/2019-08-14/wework-ipo-shows-it-s-the-most-magical-unicorn
======
tomhoward
I have a bit of knowledge of the co-working industry.

I’m good friends with the founder of the first and long-dominant tech/creative
co-working space in my Australian city, and I served on its advisory board in
the past couple years, through what turned out to be a distressed sale of the
business to its landlord, after it became insolvent and unsalvageable.

There are several fundamental flaws with the concept that make it very hard
for this kind of business to work:

1) Difficult/unpredictable/uncontrollable customer retention

Most of your customers are individual freelancers and early-stage companies up
to about 20 people. If they become successful, they outgrow the space and
leave (possibly after a period of tenancy on negotiated discounted rates
because “hey it would really hurt you guys if we left”). If they are
unsuccessful, they go out of business and leave, possibly after a couple of
months of non-payment (“oh man we’re just waiting for a big payment/financing,
we’ll be able to pay next month for sure”), which is hard/impossible to
recover once they’ve left. And even where people remain eligible customers,
the transient nature of the customer-supplier relationship means it's easy to
jump ship if a cooler space opens around the corner.

So you’re running this revolving-door business, where retention is only
partially within your control, and having to invest heavily on new customer
acquisition (often involving free trial periods and other incentives) to keep
up with churn.

Your most reliable customers in terms of tenancy and payment are remote
workers/teams for bigger interstate/international companies, but too many of
them and the culture can become too corporate-feeling and less appealing for
everyone - them included.

2) High setup costs and fixed running costs

Rent, fit-out, furniture, facilities, utilities, cleaning/maintenance, staff,
etc. Most of these costs are largely independent of occupancy levels/revenues.

3) Difficulty finding/keeping good staff

The “community management” job in these places is highly specialised and
demanding. All day you’re dealing with human problems that are exacerbated by
people’s stresses about their business or job, as well as all the minutiae of
things like the toilets/kitchens being clean/stocked, meeting room booking
windows being adhered to, ensuring that the people in the space are all people
who are meant to be there.

Emergency calls from people who e.g. left their wallet in the space that day
and “just need someone to let me in to grab it” (at 9.30pm) become routine
occurrences once you reach a certain scale.

Beyond these practicalities, the people in these roles set the mood for the
whole space, and can make all the difference between it being a welcoming and
happy place or a dull/miserable one.

Finding people who can not only do this kind of work all day every day, but do
it with an enthusiastic and friendly demeanour, is very difficult, and
burnout/turnover is common.

In general, the kinds of people who can do this job really well can get a
less-stressful/better paid job elsewhere (quite possibly for one of your
resident companies).

4) Competition/substitution

The market in many cities has become saturated (partly thanks to WeWork
itself). This pushes market rates down, acquisition/retention costs up,
expectations up (“the other place has FOUR types of kombucha on tap”), and
dilutes the pool of potential residents and staff.

And after all, what you’re offering is not essential for freelancers/small
companies anyway. They can easily work from home, cafes, borrowed/subleased
space with other companies.

It seems the only way to make these businesses financially viable is by
partnering with something like a startup accelerator/investment company or an
R&D body backed by industry and/or academia.

But this requires deep links with local community/industry, and is a huge
amount of work to establish and manage.

For a player like WeWork, this kind of work is hard to do as it can’t be done
with a cookie-cutter approach, and local collaborators for these kinds of
partnerships often prefer to work with locally-owned businesses rather than
big outsiders.

So, we’ll wait and see. Maybe WeWork has something up their sleeve that will
allow them to build a model that works.

I’ll be interested to watch it play out.

~~~
jngreenlee
I really like your analysis here and it made me think.

Ultimately, for control of many of these issues, a localist approach is
superior..understand the local culture, etc.

Maybe a coworkery in La Jolla would have surfboard racks and a tacit
understanding that surfing comes first...so allowance for wet gears (and
showers) might be needed. Maybe a location in Boulder has community climbing
gear and/or a bouldering wall.

So, does scale lend _any_ benefit? Certainly the "network" of locations might
help...but what % of tenants are really and truely jet-setters off to many
major cities, versus those that stay close to home and just need a regular
space out of the house. I don't think scale is that vital in this view.

Next, deals...I suppose scale can lend itself to leasing deals with major
brokers that have multi-city inventory. But that benefit is only on the supply
side, and unless the _same_ landlord is involved, they won't come down in
price just because.

At the end of the day, more, 'localist' coworking spaces probably wins and is
a more dynamic market (and thus resilient) than some attempt at "winner-take-
all" scale. Also, to reinforce that...I suspect many times a good coworking
location is probably an individuals labor of love...they like their town, had
access to the commercial space, and they wanted it first-and-foremost for
themselves. Any subscribers are just helping to pay the bills and making new
friends.

~~~
tomhoward
> So, does scale lend _any_ benefit? Certainly the "network" of locations
> might help...but what % of tenants are really and truely jet-setters off to
> many major cities, versus those that stay close to home and just need a
> regular space out of the house. I don't think scale is that vital in this
> view.

Spot on here. They are building for a world in which everyone is location-and-
asset-independent. Don't need a car because we have Uber/Lyft. Don't need a
home as we have Airbnb. Don't need an office as we have WeWork. Etc.

But the market of people who live that way is still small, and I think it will
always be somewhat small, or at least limited. (It becomes much harder to live
that way once you have a family, for example.)

And can they really end up opening spaces in all the places where location-
independent, digital nomads want to go - e.g., all those beach resort towns in
Thailand and exotic villages in Central/South America?

But even if they do, independent digital nomads are not the people who will
sustain the business anyway, as independent freelancers are more costly to
acquire and service, and harder to retain. Their bread-and-butter is mid-sized
teams (5-20) and satellite staff for interstate/international companies.

They're often described as the Starbucks of office space [1].

But Starbucks doesn't succeed in every region it enters - certainly not ours
[2], as we have our own many-decades-old coffee/cafe culture in which people
much prefer independent cafes over large chains.

I'm sure this mentality will apply to co-working spaces just as much as cafes,
in many places.

[1] [https://www.inc.com/sonya-mann/wework-company-
year-2017.html](https://www.inc.com/sonya-mann/wework-company-year-2017.html)

[2] [https://www.cnbc.com/2018/07/20/starbucks-australia-
coffee-f...](https://www.cnbc.com/2018/07/20/starbucks-australia-coffee-
failure.html)

~~~
erikpukinskis
> Don't need a home as we have Airbnb. Don't need an office as we have WeWork.
> Etc.

> But the market of people who live that way is [A] still small, and [B] will
> always be somewhat small

I agree with A, but not B. To me this is a classic disruptive tech scenario.
Right now living in hotels and working in coffee shops is strictly worse than
having a home and an office for almost everyone.

A few people who have very special needs are well served by coworking.

However, all of the different metered rental propositions (metered office
rental, metered car rental, etc) offerings are getting better and better. They
are all pretty bad but you can imagine what it would take for them to be
great.

Will those experiences eventually catch up to long term home/office leases?
Maybe. If enough services like that get good you open up interesting
possibilities like a company that only exists for a week but can do everything
a fixed company can do.

I find it difficult to predict what can and can’t happen here, so I think your
“people will never want this” assessment is too hasty. If there are enough
early adopters who will hold on and provide feedback and a small amount of
revenue, that could produce something quite compelling over the next decade.

~~~
deckard1
> Right now living in hotels and working in coffee shops is strictly worse
> than having a home and an office for almost everyone

Maybe it's just the WeWork I've been it, but it was every bit as loud and
distracting as a Starbucks. The glass fishbowl offices constantly remind you
other people are walking around you. You see them, they see you. In addition,
the one I was in had the bright idea of installing hardwood floors everywhere.
Men and women in dress shoes and high heels would "clop clop clop" all day
long.

You also never want to mix sales people with engineers. Or any job title that
requires a good percent of the day socializing. Sales people are on the phone
nonstop, usually running a script quite loudly. That's not even something you
could get away with at most Starbucks. But WeWork on the other hand...

~~~
samgtx
It surprises me that they don't offer quiet cubicles or areas of office space
for quiet workers. I see noise of coworkers as a major complaint among office
workers and the source of hatred for open concept offices. Do these WeWork
offices not have separated work spaces?

------
dalbasal
Control/ownership/structure aside, the interesting line here is:

" _The financial disclosures make it clear that WeWork — which, it should be
said, is a commerce office leasing company and not truly a tech company_ "

Lots of tech companies (eg uber) take VC funded losses to grow at tech startup
rates. This can create unsustainable business models and mask sustainability
issues. But...

..But, in tech, the potential _payoff_ driving all this investment flow is
getting to a monopoly (in the Thiel sense). Out of this world business models
like Google's or FB's that generate massive revenue with near-zero marginal
costs. Software economics, basically. The winners win incredibly big. This
makes the massive-multiple investment case rational.

Tesla, WeWork and such have much more normal, non-software-like economics.
WeWork will never lease office space for _that_ much above market rates. No
matter how good Tesla's cars and/or manufacturing tech gets, they are never
going to sell cars at a 40% margin^. That's why Elon had to sell all the Tesla
share and take loans. It takes a lot of resources to build factories and cars.
Office space can be leased, so WeWork hasn't needed as much financing, but it
comes out of operating margins instead.

You basically cannot achieve software startup money-machine goals with atoms
and marginal costs.

^Self-driving aside.

------
lifeisstillgood
The City of London is having a skyscraper boom at the moment - two major 100+
floor buildings are going up and you can hardly turn a corner without some
crane or building work going on.

I personally (and without any empirical evidence) think that there is no way
London needs this much more office space, partly because "Brexit China
Tariffs", but mostly because remote working and "just not in the office five
days a week" is becoming a thing.

Turning that sterile office space onto more live/work/mix-it-up space, perhaps
floors 1-20 as office and 20-40 as apartments or something, will _almaot
certainly_ be a feature of the next twenty years.

And all that office space and living space and mixed something or other we
don't quite get, all that will need to be sold and packaged and marketed.

And so, long story long, whilst WeWork may look like a joke, may be a "lose
money on each sale but make it up in volume", something like WeWork _may just
be_ the Hoover or the Pullman coach of mixed live work office buildings.
Because mixed live work office buildings will be the Pullman coaches of
tomorrow's cities - cities have a new brighter car free future, where
Barcelona's mega-blocks will meets the density of skyscrapers. But it needs
... looking after.

Putting a millions tons of glass and steel pointing straight up is an awesome
technical achievement

Making that tower somewhere that families can live, love, shop and work is a
different skill set entirely.

It won't look like building service companies do today. It might _just_ look
like WeWork

(Thank you, normal cynical and cutting remarks will resume shortly)

~~~
loceng
I wonder what happened to the concept of the garage startup that Silicon
Valley's foundation is famous for? Too much money from profits and not enough
people or ideas to invest in?

Paying for an office space is an extremely inefficient use of resources,
especially when plenty of cafe space - or just, you know, your living room,
kitchen - or garage - are useful even for teams of 20+ because will be rare to
need everyone in a single space at once, and then you can just rent something
larger for that event.

I kind of have a challenge with myself to work towards launching the fastest
growing projects/platforms using as few resources as possible. whether I'll
reach that goal is moot, though - it's more or less a mantra for me to pay
attention to whether I am rushing or not.

~~~
umanwizard
Maybe it could work for founders, but as an employee I would absolutely not
sign on to a company whose space is a garage. First of all, it signals
precariousness and non-seriousness. Second, I can get a job at any number of
companies in more comfortable settings, so why shouldn’t I?

Maybe part of the difference is related to supply and demand: potential
employees have other opportunities, so why should they make sacrifices for
companies they don’t own more than 0.5% of?

~~~
discodave
> I would absolutely not sign on to a company whose space is a garage. First
> of all, it signals precariousness and non-seriousness

So you would have avoided Apple and Amazon then?

~~~
adrianN
They would also have avoided a million companies you never heard of.

~~~
loceng
Right, so following the leading metric for your decision basing it on off of
if they mostly run out of a "garage" is a terrible idea; adding the two Apple
founders into the equation, assuming you have the opportunity to get to know
them and their ideas and plans well enough, would be an important part to the
equation of deciding where to work.

~~~
adrianN
Only if you believe that you can distinguish lucky founders from normal
founders with sufficient precision to beat the odds. Personally I wouldn't
trust myself to do that.

~~~
loceng
Of course, you can only do what you're most comfortable with - which should
depend on your understanding of as many pieces to the puzzle possible, that's
how we understand risk/reward, and how we hopefully make calculated decisions.

------
jbarciauskas
Zoom is also up 50% since it went public in April, and Crowdstrike is up 70%.

I don't really get the sense in comparing a bunch of companies with disparate
financials and very different industries. The We Company is a real estate
company trying to convince people it's a tech company. This list mixes B2C and
B2B companies, SaaS platforms with monthly recurring revenue with companies
with advertising-based business models. Almost none of these organizations are
reasonably comparable.

~~~
bradleyjg
I would expect something described as a real estate company to be long, well,
real estate. As I understand it We is short real estate.

~~~
jbarciauskas
I forgot about the shell company bit on their long-term leases. In any case,
they are in the business of managing and reselling real estate, whatever the
time horizon.

------
qsymmachus
WeWork's business model makes more sense when you realize it's probably just a
scheme for transferring VC money directly into Adam Neumann's pocket. He owns
a number of the buildings that WeWork is leasing:
[https://www.bizjournals.com/sanjose/news/2019/01/16/wework-c...](https://www.bizjournals.com/sanjose/news/2019/01/16/wework-
ceo-neumann-property-owned-ipo.html)

~~~
tomhoward
No longer true; he transferred them to a fund owned by the company:

[https://www.businessinsider.com.au/wework-ark-fund-to-buy-
co...](https://www.businessinsider.com.au/wework-ark-fund-to-buy-commerical-
properties-2019-5?r=US&IR=T)

~~~
throwawaytoday5
I don't mean to be facetious but how does that make it better? Doesn't he
still control the company that owns the fund?

Is it suppose to be better because it "looks" better because with my minimal
understanding there isn't a difference.

~~~
fastball
I mean, it is different / better.

Now, if WeWork goes belly up, Neumann doesn't get to keep the buildings.

~~~
elmomle
But he gets to keep the money that they paid him for the buildings.

------
femto113
Magical indeed. From the chart in the article it looks like for the most
recent half-year they were paid $1.35B in rent and spent $1.23B to operate
their properties, which works out to just $120MM in operating income for the
year, let's say $250MM for the year. Per the S1 they already have around $4B
of debt which looks like it costs them about $80MM per year in interest. That
leaves about $170MM in plausible "earnings" if you assume they didn't have any
other costs (they do, massive ones, but for sake of argument). The suggested
IPO valuations are about 400x that amount, or about 20x higher than the
average P/E of the S&P 500.

~~~
femto113
Digging into those other costs is informative as well, the numbers for 2018:

    
    
        Pre-opening location expenses $350MM
        Growth and new market development expenses $475MM
        Sales and marketing expenses  $370MM
    

One could make some sort of argument that the first two categories are long-
term investments, but the last one really stands out to me: they spent $37 on
sales and marketing for every $25 they "earned".

~~~
zaroth
Their sales and marketing was $370m/$1350m or 27% of revenue. Is that in line
with industry norms?

I think it makes little sense to express Sales & Marketing expense as a
percentage of Net Income...

You could express it in terms of New Revenue Growth, to get a feel for
customer acquisition cost, and then look at churn to get a feel for lifetime
value and payback periods... if you wanted to analyze them like a "SaaS" type
business.

~~~
femto113
What industry are we talking about? Most commercial real estate used for
offices spends almost nothing on marketing (they put a sign in the window
perhaps).

I don't think SaaS is at all relevant. Typical SaaS gross margins are upwards
of 60%. WeWork's gross margins are under 10%.

Edit: found a source[1] that states "5% of broker’s cut is standard" for
commercial real estate marketing expenses, with a broker getting about half of
the commission which is around 2.5%. Even if you went with 10% of a 10%
commission rate that would only be 1% of the total.

[1] [https://www.calicomarketing.com/commercial-real-estate-
budge...](https://www.calicomarketing.com/commercial-real-estate-budget-
marketing/budgeting-marketing-listings/)

------
OkGoDoIt
One thing I never see mentioned in any analysis of WeWork is Regus, which does
more or less the same thing but with less fanfare. They’ve been running
coworking spaces and short term office rentals around the world for a long
time. Do the two companies have similar business models? Can we look to
Regus’s long history to better analyze WeWork’s prospects? It’s not like
WeWork invested co-working spaces, so I don’t understand why everyone acts
like they did something novel.

On a personal note, I’ve been a happy user of Regus for nearly a decade and I
can’t imagine switching to WeWork. The WeWork offices I’ve been to are large
open offices or glass-walled. They have better kitchenettes but not
astronomically better. And the whole vibe feels very unprofessional, one step
up from a coffee shop. And they cost a lot more. I don’t get it.

~~~
ageitgey
I've worked at a lot of different WeWork locations in different cities and
countries. They are essentially Starbucks for working - you get the exact same
product in every location and it is "good enough". The overall product is
definitely designed for a younger generation, but it is very easy and fast to
use.

I've also used Regis occasionally when a WeWork wasn't nearby. It was like
stepping back 30 years into the past. Instead of getting my corporate-
allocated portion of predictable factory-generated open office space, I got
what was equivalent to a random left-over desk at your weird uncle's small
town real estate agent office 25 years ago.

The whole Regis experience felt like something from the mid-90s. It was a
whole different thing than WeWork. The crowd skewed 30 years older and heavily
into non-tech industries, the architecture was very "90s small office", etc. I
honestly felt like I would turn a corner and see someone using a Packard Bell
486 with a giant CRT. That's how much it reminded me of working in offices in
the 90s.

I'm not saying one is good and the other is bad depending on what you need.
WeWork often comes off as a parody of itself and can be a ridiculous place to
work. But WeWork is also something that most people in their 20s think is a
"fun place" where you just "hang out with your friends" where as the Regis
offices would probably feel like an old school work prison to them.

I think WeWork is probably a ridiculous business in the long run and I'm not
convinced they are even a "coworking" business at all, but I'm happy to spend
their VC money to get free office space as long as they want to give it out.
Likewise, I can also totally understand why Regis would never excite any
investor.

~~~
OkGoDoIt
I feel like what you and the other replies are saying is WeWork is super
trendy and hip whereas Regus feels old-fashioned and stuffy. This feels
surprisingly superficial to me.

1\. The old fashioned office feel at Regus is not necessarily a bad thing. I’m
able to focus much better in a Regus office. And I feel like I’m actually
getting what I’m paying for (if I want beer, I’ll go to a supermarket). I’ve
never had client meetings in either place, but from what I’ve seen Regus is
much more the kind of place I’d want to bring clients to if I wanted to give a
good impression. This kind of feels like a parallel to the open office versus
cubicle debate. Open offices are undoubtedly trendier and more community
driven and just feel cool, but if you want to actually be productive and get
work done then open offices are kind of a step backwards.

2\. Regardless of what’s better in our differing opinions, the business models
are more or less the same, so it feels like Regus could be a useful case study
when thinking about WeWork. I still find it confusing how most articles about
WeWork imply it’s the first company to do what it’s doing at scale and
therefore it’s in uncharted tech startup growth mode territory.

------
kolbe
What I don't get is how small some of these numbers are. Weren't some of the
figures being tossed around valuing it at $40bn? And their revenues are in the
low single digit billions. It's one thing to get sucked in by a company like
Uber who does $50b+ in rides, and think how valuable they could be if they
figured out how to earn a meaningful chunk of that pie, but WeWork earns
virtually no money, and exists in one of the oldest and most competitive
businesses known to man. What is the upside that investors are envisioning?

~~~
skewart
The optimistic case for WeWork is that they have a shot to become an extremely
powerful player in the office real estate market. The idea is that they could
get to a place where most big companies looking for office space would prefer
to do it from WeWork because it's better than leasing directly from a building
owner. And most building owners would prefer to lease their space to WeWork
because it's better than trying to lease directly - after all, at this point
everyone looking for office space is going to WeWork so it's tough to find
companies who want to lease directly. Once they're in this position they'll be
able to bully building owners into leasing to them at very favorable rates -
who else are the owners going to lease to?

The idea is that WeWork can do in real estate what cloud infrastructure-as-a-
service providers like AWS and Azure are doing in computing. Most companies
find it easier to build on AWS instead of running a data center directly. And
data center hardware providers find they kind of have to accept the big cloud
providers' terms because they don't have a lot of other people to sell to
these days.

In order to believe this optimistic case for WeWork you have to believe that
they are providing a useful abstraction on top of leasing office space the
traditional way, and you have to believe that they won't face any deadly
competition. Personally, I'm skeptical of both of those, but I think the best
case for WeWork providing a really useful abstraction hinges on two things: 1)
a secular shift in the way people work leading to highly flexible office
arrangements (e.g. instantly spin up an office in Berlin, run it for two
months, then shut it down) becoming much more attractive; 2) WeWork being able
to structure lease terms in ways that are better for corporate accounting
somehow (i.e. it's not a better product at the end of the day, but it looks
better on the books). The best case for them winning out over competition
comes down to them getting such a big lead in the amount of space they offer
and brand recognition that nobody can challenge them - hence the rationale for
burning a ton of money quickly to open as many locations as possible as soon
as possible.

I'm skeptical and I'd argue WeWork is more likely to end up like MoviePass
than AWS. (MoviePass had pretty much the same idea and playbook - burn money
to get to scale and market power quickly then dictate terms to the suppliers
who have been eating into your margins - and it didn't exactly turn out well.)
But anything is possible.

tl;dr Long-term investors hope that if WeWork can achieve a dominant position
in the global office market then they can increase their margins by both
lowering their cost to acquire space and increasing the rents they charge. If
they pull that off then they can rake in hundreds of billions of dollars and
be worth trillions.

~~~
mikeg8
Thanks for this thoughtful comment, it’s the most insightful one to me so far.

------
paulsutter
“In the short run, the market is a voting machine but in the long run, it is a
weighing machine" -Benjamin Graham

------
brooklyntribe
Isn't the new WeWork in the Brooklyn Navy Yard empty? They have been trying to
fill it for months. But double-check me on that.

1/2 billion to build that baby.

~~~
judge2020
Unless there's another one, the Dock 72 location is still "Opening Soon"
[https://www.wework.com/buildings/dock-72-at-the-brooklyn-
nav...](https://www.wework.com/buildings/dock-72-at-the-brooklyn-navy-yard--
new-york-city--NY)

------
codesushi42
A bubble company, pure and true. What's new? This one is riding the wave of
both the commercial real estate and tech bubbles. Brilliant.

------
smithmayowa
I never knew pinterest was that big, never used it in my life not even once.
How many other startups and market tangents have I been ignorant to I am
beginning to wonder.

------
ed_elliott_asc
Pretty certain that paying for wework is a vanity project.

You get biscuits and beer and a nice location but you don’t need any of it

------
JamesAdir
As much as I love reading all the commenets here that try to use rational and
great thoughts about WeWork, they forget one thing - this company for a very
long time is a classic pump and dump. Even the founder sold stocks just a
while ago. There is no business reason, unique technology or anything else
that will even try get close to the numbers of this company. I just hope that
when it collapses it will be contained and not affect the entire technology
sector.

------
frostyj
Market will teach these companies a lesson

~~~
wavefunction
Companies don't possess a capacity to learn, being just a legal fiction and
not actual people.

~~~
Barrin92
institutions are just as capable of learning than anything else as long as
they consist of bodies that are capable of reform and memory (my home country
Germany can tell a lesson about it), and anyhow the idea of an 'actual person'
as somehow continuous entity is a fiction too.

Individuals pass through just as many disruptive phases as any other entity. A
person at the age of 5 and at the age of 50 is only 'the same' in a legal
sense.

~~~
marmaduke
Iso9001 being a prominent example of RL on an organizational level.

------
randomsearch
When the recession hits (more controversially the bubble pops), I’m not sure
what will happen to WeWork.

I would guess it will collapse, as tenants leave and it can’t pay for its
rental costs.

But on the flip side, in a recession landlords become much more open to
renegotiating terms, and more people freelance or start their own business
when they lose their jobs. So it’s possible WeWork could somehow claw their
way out of it.

~~~
cherrypepsi
There's an interview to Neumann by BI where he talks about that exact same
thing. Makes one wonder if they're betting it all on a recession for things to
"work" (heh)

The interview, soft paywall: [https://www.businessinsider.com/wework-ceo-adam-
neumann-busi...](https://www.businessinsider.com/wework-ceo-adam-neumann-
business-model-softbank-ipo-risks-2019-5?r=wework-10yr)

I don't like this pattern, more than VC funded startups they are more like QE
funded startups, regurgitating your own devalued money as a favour. Uber comes
to mind, too.

------
not_a_cop75
Magical = Most incredible potential for failure

------
RyanAF7
I'm sorry, who the frack is this CEO?

How are these anti-savvy CEOs getting this much money in the first place? What
investor looked at this kind of model and went...oh hell ya, Imma dump money
into that.

Massive real estate speculation you say? Shrinking capital gains you say? No
downside risk of massive customer fallout or systemic risk of market downturns
you say?

Oh...you're saying all those things are totally possible and very likely! Well
in that case just take 75% of all my money for your little scheme.

------
TazeTSchnitzel
I feel like something must be seriously wrong with capitalism if it can keep
creating these startups and funnelling endless hundreds of milions into them
so they can accumulate debt, lose money, and achieve absolutely nothing of
value.

~~~
umanwizard
Even if that’s true, why should it bother you that money is being extracted
from rich VCs and distributed to other rich people in the worst case, and
working- and middle-class employees and customers in the best case?

~~~
randomsearch
Aren’t the rich VCs cashing in on the IPOs and letting the markets take the
losses? Classic bubble behaviour - pay plenty so long as someone else will pay
more.

~~~
TazeTSchnitzel
Sort of like a ponzi scheme requiring a constant inflow of cash, where those
who get out earlier are fine and the rest lose?

------
danso
Tangent: the article includes a chart titled "Unicorns Gored" with the
caption, "Many of the highly valued young technology companies have not done
well as public companies". It features 9 relatively recent tech IPOs,
including Lyft, Dropbox, Spotify, and Snapchat. All of the companies have a
negative delta in terms of initial stock price, from -47% to -2%, _except_ for
Pinterest, which is +77%. I actually had forgotten Pinterest IPOed, and I
guess that's a reflection of how much I get my tech news from HN. Pinterest
seems very underdiscussed on HN [0] relative to its market cap – $17.5B vs
Lyft's $15.8B and Dropbox's $7.3B. I guess that's a function of how relatively
few HNers may be Pinterest users?

[0]
[https://hn.algolia.com/?query=pinterest&sort=byPopularity&pr...](https://hn.algolia.com/?query=pinterest&sort=byPopularity&prefix=false&page=0&dateRange=pastYear&type=story)

~~~
gnulinux
Huh didn't even know Pinterest is still a thing. Is it like Instagram?

~~~
munk-a
Every time I've interacted with it I've found it extremely obnoxious, it is
very strongly oriented to capture users within it's network and actively tries
to avoid letting users do anything while logged out or to get a raw image.

------
BIKESHOPagency
I realize I'm probably a bit of a unicorn, but I've coworked in the same co-
working office for over 8 years. The businesses in the office have changed and
there has been some turn over in those years but 50% of us have stayed! Those
of us who have stayed the past 8 years have cycled between self employed, and
employed full-time, often years at a time for one company.

We live in a small town in Colorado that has never provided work opportunities
in our field, but we've always been successful working remotely.

Small town co-working has provided a huge value for us: no commute, we're out
of the house, camaraderie, friendship and support. Maybe this is an example of
a profitable co-working.

I know that in these past 8 years the owner has done very little recruiting
and the desks are always full.

