
How Did WeWork’s Adam Neumann Build a $47B Company? - ajuhasz
http://nymag.com/intelligencer/2019/06/wework-adam-neumann.html
======
hdpq
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...

~~~
baxtr
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.

~~~
onion2k
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.

~~~
winningcontinue
I don't understand why BigCo would ever go with the last option after talent
exhaustion. The former two make way more sense.

~~~
onion2k
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.

------
puranjay
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.

~~~
sharadov
It's interesting that godaddy would opt for a wework rather than leasing
office space and setting it up. Probably less cost and hassle?

~~~
kemitche
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.

~~~
xkcd-sucks
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.

~~~
sokoloff
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.

~~~
puranjay
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

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danielfoster
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.

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anbop
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.

~~~
puranjay
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.

~~~
rchaud
> 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.

~~~
thedrbrian
Even worse Uber might have paid the cabbie another €5 to take the job.

~~~
wetpaws
$10 is still less than $30

~~~
nolok
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.

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manishsharan
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 .

~~~
tptacek
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.

~~~
jfb
It's much easier to offer people something they want if you are undercutting
your competition by subsidizing your business with dumb investor money.

~~~
tptacek
I guess that is a shorter way of saying the exact same thing I just said, yes.

------
dmode
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

~~~
sonnyblarney
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.

~~~
coredog64
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.

~~~
sonnyblarney
It's not that hard to fake up a bit of 'cool decor'.

Landlords will do it quickly and cheaply if it's part of a contract.

------
sharadov
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!

~~~
weworkfromhome
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](https://breather.com) in the US and
[https://www.vrumi.com](https://www.vrumi.com) in the UK. The cheapest space
on vrumi is far more expensive than WeWork.

~~~
a13n
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.

~~~
weworkfromhome
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.

~~~
sharadov
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.

------
KuhlMensch
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.

------
rpmcmurphy
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).

~~~
Bakary
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.

~~~
rightbyte
The laught is on us when pension founds buy at the IPO.

------
exogeny
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.

Simple.

~~~
warp_factor
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)

~~~
b_tterc_p
Maybe! That’s what happened. Is it his initial plan? Unclear. Results don’t
proof intentions or even competence.

------
dbbk
> 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.

This is not OK.

------
dlock
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 :)

~~~
omni
Friendly suggestion: adding some line breaks / paragraphs to a post this long
will make people much more likely to read it.

------
code4tee
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.

~~~
espeed
_Valuation inflation / delusion only really matters if you’re the last one
left holding the bag_

Not if you're positioned as too-big-to-fail [1] and can force a government
bailout.

[1] [https://www.cbinsights.com/research/report/wework-
strategy-t...](https://www.cbinsights.com/research/report/wework-strategy-
teardown/)

------
perfunctory
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.

------
listenandlearn
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.””

------
espeed
The CBINSIGHTS research report (WeWork strategy teardown) is an interesting
read...

"WeWork’s $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt
Commercial Real Estate"

[https://www.cbinsights.com/research/report/wework-
strategy-t...](https://www.cbinsights.com/research/report/wework-strategy-
teardown/)

------
ddffre
It's a bubble and everyone there is afraid of saying.

------
rchaud
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.

------
loriverkutya
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.

------
the_arun
There is a podcast for the interview Guy Raz did for “How I built this” with
Miguel McKelvey [https://podcasts.apple.com/us/podcast/how-i-built-this-
with-...](https://podcasts.apple.com/us/podcast/how-i-built-this-with-guy-
raz/id1150510297?i=1000386707846) . Thought it was a pretty good startup story

------
jshowa3
Sounds like a cult to me.

Next business idea. WeX. Just put We in front of every building name and get
richer just from branding.

~~~
alfiedotwtf
WeUber - Like UberPool, but everyone takes turns driving

------
mdorazio
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.”"

~~~
AnimalMuppet
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...

~~~
creaghpatr
>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.

~~~
alasdair_
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.

~~~
abakker
He owns the properties that we work leases!

------
naveen99
I wonder what the price of a cds is on wework.

------
sonnyblarney
"“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 the Donald Trump of Vegans.

~~~
Bakary
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.

------
dsr_
"Hey, would you buy 1 50-billionth of my company for a dollar? Sign this,
please. Thanks."

I can probably manage to avoid a down round for a while, but only if I don't
run out of cash or accidentally IPO.

(Every month: "Hey, would you buy 1 (1.2x previous valuation)th of my company
for a buck? Sign here. Thanks!")

"Revenue is flat but market cap is increasing 20% month over month!"

