This dude had a plan, had big energy, earned trust, spent like a king, and came up short some miles and inches. He was building We to be a holdings company since the late-2010's-era, a la Zuck with late-2010's-era Facebook or a la Mayer with mid-2010-era Yahoo.
This is what a WeWork tech stack would have been:
* Case - property development management software
* Fieldlens ($12.6MM raised) - construction site management software
For space management:
* Euclid ($43.6MM raised) - space tracking software
* Welkio - lobby digital sign-in software
* Waltz - digital lock software
* SpaceIQ - office management software
* Teem ($100MM buyout) - room booking software
* Manage by Q - office vendor solution management software
* Spacious ($9MM raised) - restaurant downtime
For business management:
* Conductor - digital ads spam software
* Unomy - sales marketing spam software
For training management:
* Meetup ($200MM buyout) - event and group management software
* Flatiron School - coding school
* MissionU - fake college
* Naked Hub ($400MM buyout) - Chinese wework clone
* Spacemob - Singapore wework clone
* The Wing ($32MM investment) - Women wework clone
* Wavegarden ($12MM investment)
All of this prob has been a $2B spend. But Steve Jobs he ain't with the integration so it's all loosely organized and disjointed. But Adam's at least Steve Job's esque enough to convince Ashton Kutcher to call all this pile of parts a tech behemoth.
Divesting all this will be a mistake.
Find a better CEO, get it all done.
Firstly, a successful office rental company is valued at no where near the multiple that WeWork claimed to be. So if this strategy is successful, what you're left with is likely a company that is significantly less valuable than the amount that's been invested.
Secondly, it's not entirely clear that all these things put together actually would be a significant competitive advantage in the office rental space, where the bread and butter issues are what dominates the running of the business.
Thirdly, let's assume this is a good strategy. Buying up these companies and integrating them into a single purpose business is a difficult task that most companies struggle with, it's much more common for these strategies to result in massive acquisitions followed by write-downs. Even a good CEO would struggle with it, but WeWork has already bought these companies, so a new CEO doesn't just need to slowly fold each company into the core business, the new CEO has to handle the fact they already own these business and need to integrate all of them, all at once, as fast as possible, before they go bankrupt in a way that looks good for the IPO.
The tell is amongst these post mortems being drummed up by the media they remark how Adam Neumann is unreasonable when he demands the tech team to "think bigger". I've heard that before when working for CEOs like Adam. He managed upwards, sold that to Softbank Vision Fund, and fails in managing downwards.
So on one hand it's an indictment on Masayoshi Son's tunnel vision when spending his fund's cash.
On the other hand, that's in the past. It's already happened.
So to your first assertion: WeWork isn't an office rental company, it's a real estate financial engineering holdings company with the intention of investing its funding into software research and development to further make their real estate financial engineering efficient. In simpler words, WeWork is in the occupancy game.
Like McDonald's using burgers to pay its mortgages, WeWork uses monthly rent and a splash of crossfit gym membership to pay its lease.
Therefore to your second point, it is indeed clear how these things would be a significant competitive advantage. If you think of a building as a living, breathing being, WeWork is the means in which it monitors all that goes in and out of that building. WeWork knows when someone shows up, wanders about, sips coffee, takes a poop, and leaves. WeWork knows when you are occupying a space.
There were some stuff tossed in to help you create and grow a business so that they can hedge against you running out of money and leaving.
Next step they want to help you be occupational, so they bought up stuff to make it so that you can go from idiot to trained. They also wanted to help you occupy your home.
Then he gave away the other silly stuff like raising children to his wife and brother in law.
Now for your third point, is this a good strategy? Yes. Masayoshi agreed. Will it work? Won't know till you try.
Except two things may have gotten in the way:
a. WeWork over-extended and needs more cash, Masayoshi Son was painted in the corner to not being to give more cash, they found themselves in a situation where they had to IPO in order to get more cash.
This is inevitable for the sake of chasing ambitious hypergrowth.
b. Adam Neumann is inherently greedy and shady, bad at operating a business, and bad at technology integration.
Will anyone else available now be able to manage the 12-18 mo process of integrating all that they've bought? Maybe. But it doesn't sound like they tried or figured it out.
When Microsoft swallows up businesses they work fast to rebrand, clean up the insides, then toss it to their sales force to recover costs. When Google swallows up businesses they leave it alone but then shut it down later. When Facebook swallows up businesses they leave it alone and their businesses grow.
So one might say Adam Neumann just isn't in the same leagues.
And Masayoshi Son is now seen as bad at picking which handful of people out of 8 billion on this world is going to be the next big thing.
Oh well, the world spins on.
Marissa Mayer spent $2.3B - $2.8B on 53 acquisitions in 3 years to make Yahoo into a MaVeNS (Mobile Video Native Social) company. It didn't work because the core revenue engine just didn't flystart.
Mark Zuckerberg spent ~$30B on ~70 acquisitions in 8 years to keep Facebook a social platform through photos, chatting, and VR and he's been successful at it because the core revenue engine keeps it all going.
WeWork's $40B+ IPO val and the $4B+ re-val parellels Yahoo's Icarus story.
How does Marissa using Yahoo's $30MM in a sweetheart deal to pay a 16 yo kid in Oxford for his news summary mobile app any more "tech" than a $12MM investment in a Spanish engineering company making artificial waves.
Lol all of this is an indictment of how the last 10 years has been a crazy run.
That poor driver is gonna be forced back on the job market I bet.
My mental image of the old CEO is Ryan from The Office.
Wow, that is incredibly spot-on
> Kozlowski, prior to trial, asserted his innocence by stating, "I am absolutely not guilty of the charges. There was no criminal intent here. Nothing was hidden. There were no shredded documents. All the information the prosecutors got was directly off the books and records of the company."
All these cases show is the very nuanced thing they did wrong, and how to do the same thing within the frameworks available.
The decision making authority and the written latitude available for it. They paid excessive ambigious things.
Very different from selling shares you own at market values and leasing property you own back to the company, and IP trading. This is the fun you see at WeWork.
Wow so there were people on the We payroll that were being paid by We Co. to work on private deal's that only benefitted Adam and not We Co? The level of of greed and hubris involved in the We story is really incredible.
Poke a little more at your own employer and you'll likely find just as much shenanigans.
In just one cross-country trip, the Gulfstream IV emits nearly double the CO2 that the average American emits in an entire year.
Not sure if that was the actual use.
Similar reason as to why Wal-Mart has a fleet of private jets.
So those same managers are more inclined to go actually visit the stores they are in charge of. Imagine having to visit 5 or 6 walmarts across different small cities, doing it commercially would take a week or more.
As the destination airport for both Wal-Mart execs and vendors seeking an audience, FYV was a huge headache for all involved.
Curiously, XNA had its own problems when in 2011 runway degredation was found, so a temporary one was built while the main runway was torn down and re-slabbed. What a PITA.
¹—at the time of its opening it was nicknamed the "eXtra Nice Airport" as a cute promotional blurb and as a handy mnemonic for its unique IATA code.
²—legend has it that in its initial planning phase the surveyor for the siting of FYV died prior to making a final recommendation; "luckily, " they found on his maps a big red X and assumed that would have been his recommended location. So, rather than contract another surveyor and incur more expense & delay, they just went with that and built it there. However, when the airport opened, the frequently fickle weather there with subsequent disruptions to service led those in the know to acknowledge that the "big red X" must have meant, "this site is completely ruled out." Oops.
Building an airport based on some scribble a dead person left behind... boggles the mind.
From the article
> The plane was a favorite of Mr. Neumann’s, who would use it frequently to zip between his homes in the Bay Area and New York.
Also, Walmart is a business that actually makes money. Doesn't seem like the same situation.
I worked for a Fortune 500 that ran two commuter jets that few to each of their major sites each day.
Why did they have them? Because the volume made it cheaper than airline tickets. If I remember they billed the respective cost center $150 each way.
All the stops were in the NE US.
Still, it was luxurious compared to commercial travel. No security checks, board, close the door and take off.
And to think that this mess nearly got listed :(
for the same reason Neumann's name appeared ~170 times in the IPO filing and the corporate structure looks like Losts Dharma iniative
it's the only way to get a company that subleases real estate to look like something that is worth 40 billion dollars
Phew. At least they haven't lost him completely. /s
> Also out are some of the 10-plus staffers who worked directly with Mr. Neumann in a group that was referred to internally as the “oval office” and included some friends who worked on personal deals for him.
Charitably, some high aspirations from Mr. Neumann and excellent synergy to have his personal deals team on-site at his We office.
The main use of the plane was for personal reasons, not business ones.
> Attached to his office was a small spa an ice bath, according to people familiar with the matter.
I wonder if this is a normal amenity offered to CEOs and if it is more prevalent in the Bay Area or New York City?
> The office is in the process of being cleaned up,
... which I take to mean they are removing the spa?
> and as a director, Mr. Neumann’s access to the company’s facilities will be more restricted, the people said.
And here's where I hear a loud buzzer signaling that someone is not appreciated within their organization - no one wants to see them on-site after they leave.
With Uber, at least there was a real business, with some real differentiation and not the tremendous Capex overhead of real estate to weigh down the business. Imagine if Uber had to employ all of the drivers full-time and also own the cars outright, that would be a dramatically different business.
But everyone is happy when things are moving up and to the right, but in this case, the losses outweighted revenue. It's one thing for a startup to be burning x% of revenue to grow market share, but to literally every year burn more capital than revenue at such a massive scale is completely bonkers.
The only logical conclusion is that Masayoshi Son was calculated in this. In that he had some belief that WeWork would work, but additionally if he was able to markup his shares through his own investments, he could then raise a second vision fund based on the supposed returns of the first one.
Obviously that plan is now shot with Uber trading below the value of his private investments, and with WeWork it is an even larger hole that he has dug for himself, because not only is it's value dramatically less than when he invested, but there is a real possibility that the company may not be able to get on to solid financial footing.
Softbank would literally be the only investor willing to put in more capital at this point, and they almost have to in order to save the business, but at that point, don't be surprised if the entire cap table is completely redone.
Why would they call it the oval office instead of the cabinet?