edit: to clarify, hacker news has been extremely skeptical of WeWork for some time, due to this, I was extremely wary of their offer and leaned towards (and eventually chose) other options.
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.
I seriously doubt that. I think they're overvalued too, but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide.
There's also a TON of rent-a-desk places.
The big questions are:
- What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
- What's WeWork's secret sauce or first mover advantage?
I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
WeWork is also very similar to Uber in the sense that you also need a very effective "on the ground" team managing operations of each individual location, doing tours for prospective renters, managing upkeep + maintenance for the space, etc.
Advantage to customers? Likely minimal.
Advantage to the company itself: economies of scale and, likely more importantly, lack of competition allowing them to increase prices.
The very clear trend across all sectors is that companies trend towards giant monopolistic behemoths unless some very strong regulatory force prevents it. People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
Sadly WeWork do not appear to offer this option (or didn't last time I looked).
Yes, that's right, the free AMEX WeWork plan is significantly better than any WeWork plan you can buy. That's start-up logic for you. I stopped paying WeWork after 1-2 years as a paying customer because their free plan was better.
I live in London and I can choose from any of 36 WeWork London locations for tomorrow along with anywhere else in the world. It's nice living off of VC money.
... Assuming any true competition is still in business in a year.
Are there any limits to how much you can make use of this offer or the kinds of spaces available?
_Surely_ they won't let you just camp an entire private office in SF all year round when it's supposed to cost upwards of $1000 per month?
Many of the benefits only apply to US-issued cards.
Is someone can write more about it it would be nice.
Thanks for this insightful comment. I never fully considered it, but yes - all healthy, competitive markets exist as a result of a government that fosters them.
Its the reverse. All healthy, competitive markets exist as the result of a lack of government intervention.
Lack of a competitive market is the result of government intervention.
There is so much commercial real estate that it's hard to imagine them in any kind of a monopoly situation.
I’m not sure exactly how all of those contracts look with landlords, but someone is going to need money to spend to maintain them. If not, the person with brand new build outs is going to look more attractive.
Now, maybe I’m wrong and run down office spaces don’t matter. Uber drivers all used to wear suits and their cars were pristine. Even UberBlack cars have holes in the seats and transmissions in poor condition. Uber is vastly largely today than it used to be. So that could be the trick, WeWork at scale but more as a necessity than anything else. If that is the case, then it is more a question of how much extra space other sorts of businesses, like coffee shops, want to keep free for customers.
Consistency of branding can't be overstated too. People turn to trust when times are hard.
And no competition in the real estate market? Please.
So the economics of scale (supposed that is a relevant factor) could provide WeWork with a higher profit margin, but to become dominant, they have to take a cut to this margin.
Smaller company would need a smaller team but even a single salary on the books just to comply is a large expense for a small business. Multiply this by other areas now such as licensing, insurance, etc. Just ensuring your every day work is not breaking the law becomes financially prohibitive.
Say you're a pretty large company and suddenly decide you want to open a dozen 'offices' in a dozen different countries. You just have to deal with one provider, one set of infrastructure etc. Plus if you decide you then want to consolidate to half-a dozen offices, it's easier to scale some up and some down.
However companies like Regus have existed for ages - so not quite sure what WeWork brings, aside from being able spaff away profits to get you in the door.
I think it's down to the customer. There's a post below about somebody being reassured "it's a We Work" office they'll be in.
When I've looked for a job, it's never entered by head to ask who manages the office (my assumption is that it's my employer and if I'm not happy, I'll take it up with my employer).
I can see if you've often worked in offices not run by your employer, you might have learnt to ask - but would think that's a small pool of people working frequently in shared spaces, having worked their frequently enough to have a preference.
Back to the OP - it's not a "hypothesis", this stuff's been going on for decades.
e.g. ~2000 I was working in Paris and visited our local guy in his local office on the prestigious "Champs Elysee" no less.
I went down the "Champs Elysee", then through a small door behind two shops, then walked back a couple of hundred meters, then through a warren of rooms, then in a room off a room, there was a desk... and that was our office. Hundreds of people all working at this prestigious address - we must have been silver-class as we had our own physical desk.
If you went right back to the entrance door, there was a receptionist you could specifically pay to 'represent you for the hour' and a set of very swish/generic meeting rooms you could pretend were yours to visitors.
Probably, but that knife does cut both ways. I know a number of people (including myself) who wouldn't be willing to use a WeWork facility again.
Among the people I know who dislike WeWork, there are two main things that they complain about: the surveillance, and the actual environment.
An advantage I see as a customer is that I can go to any WeWork across the country and get a desk/coffee/etc for the day. I can get that from a few other coworking places, but I don't think any have the number of locations that WeWork does.
Sure, there's probably some need for temporary surge office space like a insurance company setting up after a disaster. But that seems a pretty small niche to build a billion dollar business on.
And on-the-ground ops just require intuitive software to enforce standard operating procedures. The last two coworking spaces I've worked at both used different SaaS solutions for coworking-space management, with customer portals and all. I'm almost certain WeWork's edge has been commoditized.
Existing coworking spaces already make lots of money off of people who don't fully utilize their membership (which isn't necessarily a bad thing). WeWork is no different.
I don’t know how much that impacts their profitability or value as a company, but it feels like a very cloud computing model of work space where you get what you need where you need it, so that you can have local employees in cities across the country to serve customers there.
In comparison Regus Virtual Offices has more than 2500 locations.
And that not so much anymore. All they had was a cannabilized version of Meetup.com for doing reservations.
Same answer in case of gyms. Your advertising overhead does not scale linearly as you grow. Once you build a brand. Customer acquisition costs go down. For moving workforces - entrepreneurs, sales, executives - it becomes more affordable to use one brand rather than plenty of smaller brands.
From what I understand, WeWork is structured as many small companies, so they can negotiate favorable terms with long-term leases on office space and the smaller company can fail without leaving WeWork on the hook for the rest of the lease.
There has always been, and will always be, demand for the ability to buy one dollar for 80 cents. This is not some newfangled business model. Amazingly, it keeps cropping up again and again.
But supposing they do, I see little reason to think they'll be a major player. I don't see anything stopping other rental companies from matching any innovations they've made. The same goes for major property owners. Some will stick with big chunks of space. But if there's a 30% premium for being flexible, providing desks, etc, the some of them will happily cut out the middleman.
Edit: or to borrow a popular saying - with WeWork, it's not the furnished rental office stuff that is the product, it's the IPO.
Right now, no-one is competing against We because they are selling a dollar at 60 cents to their customers. The second they stop doing that, there will be a dozen clones. We is worthless.
WHAT? there's quite healthy competition, which actually make money as opposed to We.
Granted, you don't get free beer and smarmy slogans. But competition is definitly on the market.
Also, the strategy of segregating assets onto Adam's personal balance sheet looks like a bad idea now that he's no longer ceo.
Was kind of a death rattle for me and sure enough after they IPOd they really did nothing.
Still makes me angry when I think of it cause it was such a kick-ass product.
Seems they're trading at 2x their IPO, and they were at 3x a few months ago... Did something happen in 2018 that made them huge for a bit? or was it just the rest of the world discovering cloud?
When a recruiter makes that argument to me, I consider it a huge red flag all by itself, and am much less interested in working there.
It's an essential thing if you want to be a successful entrepreneur -- as long as you don't confuse skepticism with cynicism. Skepticism and optimism make a powerful combination.
Theranos and WeWork are two great examples of companies hated by HN because there's evidence supporting negative opinions.
Edit: here's the thread - not 100% positive but close: https://news.ycombinator.com/item?id=6349349
HN is overly skeptical of startups that take something possible and simplify the UX. Although I can't think of a recent example.
basically someone belittling Dropbox before it went on to be worth billions.
There are always going to be isolated nay-sayers for whatever reasons. When you get a near-consensus on HN that something's a PoS that's something that's worth bearing in mind.
_Excess_ is bad for your health (such as drinking 1 liter of vegan olive oil).
> WeWork, Bankers Have Discussed Laying Off One-Third of Workforce (theinformation.com)
If you, the reader, have an offer from WeWork, I suggest you ask for a bigger paycheck (like real money, not funny money) for all this uncertainty.
They will likely try to force the IPO through anyway at some sub $5B valuation, but even then it seems like they may not generate much interest after that cuckooville S1.
Did a 2-month old HN comment foretell WeWork imploding which informed your decision to decline their offer, or reading HN in general helped you determine that their offer would be close to worthless, compared to your options at that time?
Edit: I'm on the 5th floor, feel free to come party
Independently of what you read here, you saw right through this as total bullshit, right?
Funny enough, my current company seems to have pretty good odds at making me a good chunk of change from my options, but I didn't even know I got options until after I accepted the offer.
Many companies flaunt it and give a weak offer accordingly. That's a pretty big red flag for me.
Even though the less they have raised, the more valuable your equity is likely to be. It's fascinating to watch.
Is that even legal?
EDIT: I guess I should add I really did not care for the work and stopped after 2-3 years to start my own company. I do a lot of the same work today, but as the Founder, I obviously control the company and my workload.
But if the OP is really distraught about making money in tech, they will find their economics background of use.
My economics professor addressed the reason for the difference in class very simply. He noted there were over 350 applicants for the English prof position. Only 3 people applied for the economics position.
So if anything, $37k was too high for English and $85k was not nearly enough for econ.
The moment your same exact job can be replaced by a worker willing to do it for less is the moment salaries start to fall.
For the majority of professional jobs out there, there's a vast oversupply of labor, and thus the unemployment rate for professionals is much higher than the overall unemployment rate would suggest.
Software engineering is one of the few areas where there some semblance of balance between supply and demand. But, this too will eventually go away. There's nothing that's stopping the supply of Software engineers from growing. Indeed, the Stack overflow surveys suggest there's a huge wave of junior SEs joining the industry. I predict in 15 years, SEs will be in such high oversupply that they will no longer have an advantage in the market place.
Of course you likely won't have great pay from the start, but keep doing work for a few years and keep improving your skills and you should be fine.
My friends have geology and psychology degrees working in technology companies making $130 - $180k/year as non-developers.
Don't let your degree stop you from doing what you want, the resources are all there.
How did you ever make that connection? Have economists ever been paid well?
After they were done with me I started asking questions. I asked what they would have me doing?
"Oh the back-end system & api is done by a different team, you would just be doing the HTML/CSS for the front-end team"
I was furious when I left...
I'm not entirely sure what a data science engineer does, but somewhere between "making it easier for the DS team to find what they need to find" and "figuring out where we should buy/lease next".
I think of it as similar to how UPS rigs their routes to avoid left turns.
Optimizing for absence of failed stores would be an interesting utility function for them to have, but since they own substantially all of the stores (and therefore don't have franchisee relationships to consider, where volatility for a partner might impact you disproportionately to economic loss), that would be a suboptimal utility function. They should calibrate their risk appetite to maximize profits; occasional failed stores are just a search cost.
A market commenter who believes that Google is not one of the most sophisticated engineering organizations in the world is wrong. If you believe Walgreens is not one of the most sophisticated commercial real estate operations that exist, I would encourage you to talk to people who understand real estate as well as you understand Google and recalibrate based on what they tell you.
MacDonalds is similar. If they have a franchise that is doing badly, they will pay to move the franchise to a new location. A suburban McD closing is rare, usually only the oldest ones on lots that are too small for contemporary usage patterns.
You can have 0 failed stores if you open 0 stores. A successful operation will inevitably have failed stores. Having a long list of failed stores doesn't mean anything in of itself. You have to look at the rate of failed stores vs successful stores among other metrics.
Starbucks in 2019 is the McDonald's of coffee shops, so it's not the same, but if you track their Starbucks Reserve locations you'll find the same predictions being used.
It was some sort of "connectivity and identification team" working to identify people/customers/tenants/whatever. Something like, you'd walk in, and WeWork would know it was you, and like, turn your office lights on or some shit. It was going to start off with keycards and I remember someone talking about bluetooth or wifi recognizing your phone, eventually doing face recognition.
I couldn't figure out the point. A HUGE team. The questions I was being asked were wild system design questions and android app stuff (what? I'm frontend lol). All so that people's desks would be at a certain height or whatever when they came in the room.
Sounds like a reasonable use of tens of millions of dollars of VC money.
I just saved you $20M per year in sensors, IoT platform subscription, and data scientist salaries for an investment of $5k. Pretty insane how much money is wasted on dumb BS just because there's so much money to waste and it's a trendy way to waste money
Or more likely they wanted an innocuous reason to track all their office users at all times for other reasons
WeWork's long game and eventual income is Real Estate, but their short game, their bread and butter, their brand, and their marketing is and always has been services and transactions. They compete much closer to a Starbucks than a Real Estate company but it's like neither side quite got it. (esp considering the CEO was a scam artist abusing the Real Estate side of the business while misdirecting everyone towards services)
WeWork is (to most) a company whose focus was on people and atmosphere, and on service. I would argue that they are MUCH closer to a hospitality chain like Marriott than a Real Estate firm or a tech co.
data science is a tech agnostic role. Wework might want to play with various data models for predictive modeling.
“Thanks so much for taking the time and interest in applying to WeWork Global Technology. Your application has been received and we will review it as soon as possible.
Once we've had a chance to review we'll be in touch on possible next steps, thanks again for the time!
WeWork Global Technology”
My bet is that they will now try to remarket We as a shareholder-controlled company, will maybe even eliminate the multi-class stock structure in order to get included into the passive funds. I am still not sure they will ever become profitable through. The only way to disrupt the incumbents in an established market like this one would be to spot a new opportunity in the market and capitalize on it faster than the slow 30-year-old companies like Regus. Except the only market opportunity We has successfully exploited by now are the desperate investors ready to shove billions in your hands if you pretend to be a cool techy thing they don't fully understand.
Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.
It needs $8.1b market cap to get into S&P500.
I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing.
Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
>...Unadjusted company market capitalizations of US$8.2
billion or more for the S&P 500..... are required.
It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
People already knew what kind of business WeWork was. Sure, they were getting press, but when actual institutional investors looked at it, they must not have liked what they saw.
That has been going on for the last few rounds, so I suspect that they couldn't have gone public then, either. Nobody was buying what they were selling, except Softbank. And once the S-1 dropped, the press and social media saw all the red flags together in one document.
Those red flags would have been just the same if they'd gone public earlier.
Can you give some examples where this has worked in the past?
The alternatives are either that Softbank believed in WeWork's fundamentals, which honestly feels unlikely, or to believe that they went in early, then discovered that nobody else would invest, so they kept putting more of their own money in to avoid closing the business and taking a write-down.
So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round.
If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
That’s not at all clear.
Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.