I've always wondered why WeWork didn't operate more on a "franchise" model. Lots of property management companies have empty space that will be empty for a year or two, and the WeWork system is useful to install against, along with its brand, so these management companies should be able to "install" a WeWork for a year or whatever while their space is vacant, to help offset the lost revenue from leases.
Shifting the revenue to a franchise model seems like it solves the majority of their lease issues, and still lets them be useful, even in smaller markets. Their value, IMO, is in the "seamless" experience. Knowing I can paratroop into a city and will have a space to work that's of a consistent quality is great, someone sell me that!
Regus has been selling that for ages and ages. They have more locations in more cities in more countries, too. If they're not as well-known, I'm guessing it's because they're just a boring old real estate company and not a SoftBank-fueled moon rocket.
Does Regus sell that? I just did a search for a coworking space on Regus website and it matches my earlier experience: they want me to get a quote and talk 1:1 with an advisor. Wework I can just pay for a 1 day pass at a location purely online. So its so much easier to use when traveling or if you need adhoc coworking.
That is the good part about We-Work. Regus is very old school. The one I went into earlier in the year seemed to have been fitted out with plastic wood grain panels from the 70s. That's said, Regus is still running and WeWork is in Chapter 11. Plastic wood grain is fine for the price and the lack of bullshit add-ons like an extra stool.
I can only speak for Regus locations in Europe, but all of the ones I’ve visited have been new and modern, if a little office-drone boring. But frankly after being at a WeWork beforehand, I prefer the Regus blandness to the fake enthusiasm and brightly colored furniture.
How are they in general to deal with? I was in touch with them last week and there were red flags abound. They don't respond to emails, but would rather spam my phone. The price kept increasing from the first point of contact, and they finally wanted me to pay a bill where fees again were unspecified. When I asked for a detailed, itemized bill, they ghosted me.
Their mother company iwg PLC has less than stellar reviews on trustpilot.
Am I missing out by looking elsewhere? They were by far the cheapest and most flexible, but I don't have time to deal with administrative bullshit and protecting myself against predatory sales.
They squeeze you on some various fees - you can rent an office, never use it, and be charged a 300 or 400 cleaning fee etc. you get charged a separate fee for access to coffee etc. pricing isnt online you work w a salesperson. Square footage is hard to find. I’m sure if you were very careful you could pick up on all this but not greatest
I haven’t had any issues, but I just did everything in person. It isn’t as streamlined as WeWork, though.
I have heard negative experiences from people renting an entire office, but I only rent a desk.
Editing to add a few more details: their app and tech stuff is a little clunky and not as good as WeWork's. You have to pay via an invoice system (at least in my EU country) which is again a little clunky. Otherwise I haven't had any issues with billing, etc. – but I reiterate that I only talked to the guy on the phone to set up a meeting, and then did everything else in person.
Competition from WeWork seems to have gotten Regus to up their game. Like you said, it's still bland and corporate, but the quality of the spaces is pretty good.
They also seem to have a relationship with a nicer service called Spaces, but I’m not sure what the connection is exactly. Spaces seemed like a direct WeWork competitor to me.
I work with a company that has a spaces subscription and their location in Prague has so many weird rules and ways to squeese money out of both the workers and the company that I find the office to be downright unpleasant.
You're not allowed to eat food or bring your own drinks into the common areas because they want you to pay for their overpriced coffee and sandwitches. The coworking space closes at 5 and you have to leave. It opens at 8:30 and you can't enter before then. They will randomly close half the common area because someone rented it for a party. In the private office there are no power outlets at the desk. There is exactly one hookup place in the middle of the floor and we have extention cables everywhere. Despite paying (way above market) for a private office only a limited number of preaproved people are allowed to use it, anyone extra has to have a spaces subscription too. Despite allegedly renting the private office we are not allowed to use our own furnature, or electronics, or place anything on the walls (we can, but this would be paid extra).
Overall, it looks nice and has a nice view but once you see the rulebook it becomes an extremely unwelcoming experience.
My protip for anyone who has arbitrary food or drink restrictions is to come with dietary restrictions - as soon as you ask for a low sodium vegan gluten free sandwich the company will give you a hall pass to bring your own food in.
I've shared this tip with so many people after actually going vegan and noticing that airplane food is less intolerable.
I asked around and apparently the same is true for all "special" meals, I thought it was interesting. Finding some related data to analyze has been on the back of my mind for a bit now.
And yes, often people are just okay with you bringing your own. I guess it works everywhere except prison, based on SBF.
Yeah my only experience with Spaces is that I stumbled into one while traveling, assuming it was a Regus location. They let me use it anyway, although I think it’s technically a separate membership.
I do have a dedicated desk in a standard Regus location and for the most part, it’s fine. Unlimited access 24:7, clean kitchen, etc. Unlike WeWork, the coffee machine isn’t free and there isn’t an on-site barista, but I don’t care about that anyway. No weird rules about food or anything else.
Spaces is/was a Dutch WeWork clone, but they are now owned by the same parent as Regus and they've been integrating the two. My office is in a Spaces in Amsterdam and I like it, but I think the Spaces facilities outside The Netherlands are a bit of hit or miss. I think they've been quickly assembled to show a growth curve but are not all up to the same standard.
Yes, you are correct. Maybe I should have said there is more certainty about the future of Regus. I am not even sure of that.
I do agree, a lot of the media is saying this is a tactical move to re-negotiate a lot of expensive leases and they plan to get out of chapter 11 when they do.
Guess which other companies filed for chapter 11 bankruptcy? Sears, BedBath&Beyond, and Circuit City. I don’t see them coming back at all.
Not saying that there is no possible comeback from chapter 11, there is. But seeing a chapter 11 filing and assuming the company will get out of it just fine is a bit preposterous.
Most of the time, the whole point of “reorganization” under chapter 11 is to keep generating whatever cash flow they can in the process, to make sure the creditors recoup as much of their investment before the (most likely inevitable) shutdown and the operations are wound down as gently as possible.
And yet, chances don’t seem that good. The highest possible estimate for survival rate from chapter 11 bankruptcy that i managed to find was quoting about 25%[0].
It’s not “plain wrong”. Sure, most chapter 11 companies don’t make it - but by filing chapter 11 instead of chapter 7, it means they’re still operating and trying to make it. Chapter 7 is “turn out the lights and liquidate”.
I guess it's a little hard to find from their home page because the top search widget thingy is for longer-term reservations, but if you scroll down and choose the "coworking" tab, there's a tile for coworking day passes with a link you can click for the reservation page.
Yes, there are hot desk memberships on their coworking page [1], including single day purchases. They're underneath the giant "get a quote" call to action, however, which is indicative of their priorities.
I went to one of these this summer and had to create a full corporate account online before the people at the front desk could sell me a day pass, and I was bombarded with emails for months afterwards about signing up the rest of my "company"
They are in chapter 11, which is aimed at reorganizing a company. They hope to still be a business going forward.
For customers, it should still be relatively the same service. I expect some amenities to change, but you should still be able to rent a desk (for at least the near term).
As mbreeze stated, this location is probably going to continue operating as some form of coworking space even if it gets spun off of wework, which it may or it may not. There were a lot of people there, I imagine that location is probably cash flow positive. It would make sense for someone to operate it, as there was clearly demand at least at that location.
That doesn't match my experience in Ireland. I select co-working spaces or meeting rooms, add options and checkout. I've never spoken to a Regus advisor.
Regus in Chicago used to offer a phone number for tenants then lock that number to your lease and never let you port it away. That soured me to them. I’ll never use them again. I’m glad nimble startup companies like CoHatch have figured out how to open locations in Malls in the Midwest.
Boring old real estate company with nearly the identical WeWork business model that also filed a strategic bankruptcy to shed its leases a couple years earlier.
Regus has way too much bureaucracy and are also expensive (though WeWork is also expensive but it never made sense to me).
The reality might be that there are enough co-working spaces and you can paratroop into anyone and check before hand that it meets your expectation. There is nothing to franchise.
I think they really wanted "parachute", which has been used in a non-threatening metaphorical way for a long time. You can be "parachuted into a meeting" or "parachuted into a project" for example.
To say the least. I recently signed up for an office at a Regus location with the explicit purpose to incorporate a company there. All went well until a few weeks later when I went there to pick up post for the company and was told I was not allowed to do so until I had submitted a particular document. Only problem is that this document can only be sent to the registered company address by post. The woman in the reception literally had the document they needed in an envelope behind her desk but could not give it to me until I had submitted that same document. Zero understanding or willingness to escalate the issue to make an exception, just hiding behind "process".
In the end I managed to get in touch with someone else in the organization who realized how ridiculous the situation was and convinced them to make an exception so I could hand in the document but I'm not impressed at all by the company, to say the least.
This is the most hilarious part to me. This is a VC’s forum, right? So, ostensibly they offer connections to the right organizational entities. But then a startup darling forms that offers a boring thing that already exists and it gets labeled as innovative. So, what were the WeWork VCs thinking? Did they expect failure or were they just wrong?
Regus doesn’t let you just book space on demand from what I could tell (admittedly years ago).
Tried to book an office for my sister’s exam in a city with Regus but no WeWork and had to get a hotel room instead as we couldn’t figure out how to actually book any space. There was just a fill out a form and we will call you option.
Adam Neumann is literally the landlord on most of their best-located places. That's why. WeWork gave his real estate company loans to buy buildings to then rent back to WeWork.
Seritage is funny since the REIT is public, but Warren Buffett's Berkshire owns much (most? all?) of the secured debt. BH will get paid first at a good rate at relatively low risk, while public investors really take a (highly leveraged) chance (and have been getting hosed after initially being drawn in by a high yield).
I understand they're currently liquidating it, TBD if the common stock investors see anything left after BH gets paid back (and then preferred stock holders, currently trading pretty close to par)
Most retailers, banks, and companies realized that owning realestate is not part of their core competency. Canadian tire rolled their realestate into a REIT and then rents the locations back.
There's no double dealing or anything nefarious about it. Heck there is a huge company called Brookfield that has made a living out of buying commercial realestate from companies and renting it back to them while spining the realestate out into a REIT.
That's just smart business for the company who gets money upfront and a stable knowing rental price.
I agree it's common and not underhanded. But it's not always smart business.
Most commercial tenants are still resonsibile for maintenance, which is the primary ongoing expertise.
It can be a useful way to free up capital, but only useful if it's used to expand the business and deliver a greater return.
Too often it's used to artificially increase the share price or pay out dividend. In these cases the company commits to never ending rent payments for no actual benefit.
There are whole bunch of businesses who have bucked this MBA trend, kept their freeholds and have ended up with a more resilient business better able to weather a change of economic circumstances.
It's not as if he was doing it under the wraps or something. He did it in full public glare so creditors (and equity investors) knew exactly what they were getting into.
If that's the case and he isn't under legal risk then he hit a damn gray hat gold mine. A fool and his money. Idk if it was worth his reputation and company being completely destroyed but many people have risked their (literal) freedom for much much less.
I had to look myself, from wikipedia: "As CEO, Neumann, on multiple occasions purchased buildings and then leased the space back to WeWork.[60] Observers noted this as a potential conflict of interest and one that would not be allowed if WeWork were a public company.[61] During his tenure as CEO of WeWork, Neumann also purchased US$90 million worth of residences, including a 60-acre (24 ha) estate in Westchester County, New York, a 6,000-square-foot (560 m2) condominium near Gramercy Park, two homes in The Hamptons, and a US$21 million mansion in Corte Madera, California.[16]
Neumann launched Flow, a residential real estate startup funded by the venture capital firm Andreessen Horowitz, in August 2022." (https://en.wikipedia.org/wiki/Adam_Neumann)"
Its astonishing that Adam Newumann was able to raise hundreds of millions for Flow after all he did at WeWork. At this point you wonder, if VCs are also complacent in these scams. Are they together in scamming the LPs?
Not LPs, but later stage VCs and private equity. It’s a game of musical chairs, you just need to be early in. And A16Z are experts in this, with all their investments in crypto. Def not great for their rep and I’d never raise from them because of this btw.
Although to be fair, they seemed to be interested in scamming true crypto believers in that space, more than their partners, they'd get a bunch of shitcoins in the ICO and then offload them asap.
a16z viewed Neumann very positively, to the point that they asked potential CEOs what they thought of Neumann, and the "correct" answer was to be empathetic that he took a huge swing of the bat.
> A candidate who displayed empathy for the entrepreneur would answer the question about Neumann with something like the following, Horowitz said: "He did an unbelievable thing in that he built something that almost nobody has done, which is he built a consumer brand in commercial real estate." The person might add, "He told that story so beautifully that he was able to raise a gigantic amount of money and fund this incredible growing operation."
I mean, Ben Horowitz is correct here. In a VC interview context, crapping on Adam Neumann is boring and zero information value which is a negative signal. Being able to fairly evaluate people you have strong emotions for, positive or negative is a key VC trait.
I somehow think that Horowitz wouldn't want to hear my honest evaluation of Adam Neumann: He found a set of idiots with money (chiefly Andreesen Horowitz and Softbank) and saw them making dumb trades, so he found a way to put himself on the other side of those trades. To do this, he constructed an "audacious" but ultimately fundamentally dumb business that he could wrap in VC shibboleths, whose principal goal was to collect VC money and funnel it into his pocket. In a way, he is a brilliant exploiter of people like Horowitz.
I don't think that anyone can do this, at all. I think there's a totally different skillset that it takes to actually run a business than to get money from VCs, and by stripping away the need for the running-a-business skillset, Adam Neumann really perfected his VC grift game. That doesn't mean that he wasn't exceptionally skilled at it.
This was a big part of the controversy that scuttled their 2019 IPO plan and ousted Neumann from WeWork leadership, along with the toxic workplace accusations and other...volatile things associated with Neumann.
It’s not self dealing if you really love the building I guess. To be fair it was a matter of time before somebody loaded them up with debt and wiped equity. Might as well do it yourself.
If a company tanks right after being listed on the public markets -- that is, right after insiders got an opportunity to dump their shares on less informed investors -- most likely a serious financial crime has taken place. A real business doesn't go from a 47bn market cap to zero in ~2 years. It's not sufficient to make generic disclosures to investors that there are substantial risks and that you have an unproven business model and such. If it looks, talks, and walks like a pump & dump scheme it probably is.
I think part of the misunderstanding of WeWork even within Silicon Valley/tech is what a diminishing part of their business the "coworking spaces" actually were. WeWork gets a lot of hate both inside and outside Silicon Valley, but I worked a lot with their team before the failed IPO and my strong sense is most of the blame for the process that lead to today rests entirely with senior management and not even the core business.
I'd be curious to know how this trajectory played out past the IPO blunder, but at the time they were already focused on the "enterprise" model of being the best place for a large firm to go to source/spin-up offices around the world (where in some sense you could understand the coworking spaces as dogfooding their own systems of vendor/space management for quickly spinning up and operating office space around the world). I.e. rather than either having to maintain profitability at a global network of coworking spaces or whatever franchise model you become the outsourced office team for the world's largest/high growth firms, who want to focus on their core competence not sourcing furniture vendors in China.
Rather than partaking in the joy of mocking WeWork's obvious hubris leading to their downfall, I think the interesting question, especially in this time of high interest rates, is what this bankruptcy signals for the future of "tech-accelerated" firms that want to primarily focus on the real world not software (ie without marginal cost of 0) -- who want to achieve the exponential scale of software yet who have to operate with the margin/cost structure constraint of a traditional firm. Tesla/SpaceX are of course the big success here, but I doubt we'll see anything equivalent until interest rates are back to 0...
The problem is more fundamental. As with Uber, WeWork is an evolution of a simple and well understood business model… but layered with some high-tech fantasy about being able to change the fundamentals of the universe.
WeWork could have succeeded with the franchise model you describe or the focus on being a flexible leasing option for enterprise… but we wouldn’t have heard of them, that wouldn’t be the WeWork we ever knew. WeWork only became big because of the mythology, otherwise it would just be a nicer Regus… which existed before WeWork and will exist long after.
WeWork’s core business was mythology, like Uber, and every other “technology” business from the 2010s. You can peel back all the bullshit and say that their “core business” was good but it was all the bullshit that made WeWork, WeWork.
> Tesla/SpaceX are of course the big success here, but I doubt we'll see anything equivalent until interest rates are back to 0...
I guess it's all about where and when you draw the boundaries, Mush has just managed to lose $20bn on "X" so the Tesla/SpaceX empire may not be counted as a big success for ever.
What's interesting is McDonald's HQ owns the real estate of many McDonald's locations and takes rent from the franchisee. This way they can guarantee a steady stream of income regardless of their food sales.
I'm not sure how this would've worked out for WeWork.
People complain about "ZIRP", but it did reduce the benefits of co-mingling finance with retail and decoupled consumer credit from being quite so critical to sales.
That was true until the Global Financial Crisis in 2008. Now, they use their finance arm to help customers finance very large purchases. This is common in heavy industry.
Isn't that precisely how it started? Then, they realized they had so much they could open that financing to more than just large industrial clients. Did they just scale it back to their original intent?
It seems like for that to work, you'd need to be mostly reliant on day-pass-type customers rather than longer-term ones -- if I were looking for a permanent arrangement to house a small team, say, I'm not sure I'd want to sign with someplace I knew was only going to last until they found a permanent tenant. But I think the day-pass people, in practice, are a pretty small percentage of total revenue.
The reason for this is that the rent they would pay will fluctuate with the market. If a city grows and an area becomes more expensive, the landlord captures the uplift by raising the rent and WeWork would operate on a thin margin. On the other hand, if they buy the property, then (if its with leverage) the mortage should be relatively stable as surrounding rents rise making it cheaper. After the mortgage is paid off there is no rent to pay at all and 100% of the location value is captured as profit. Also, the value of the property goes on the balance sheet, giving you back most of the cash paid on the mortgage (or the upfront cash price), so little loss.
It still seems likely that they were offering more than they were charging. If the cost to convert is $200,000 and the cost to operate is $200,000 a year - but they can only realistically bring in $200,000 - then no one is going to buy that model.
It worked when investors didn't care about losses because the losses were hidden as technology investments that they thought would get smaller with scale.
I was expecting it to turn into some kind of AirBnB model where people rent out a room as an office. A good desk, a good chair and a good connection in a house sounds rentable to me, many people could have rented a room in their house during the working hours to those who don’t have a spare room to turn into an office.
That model would make sense if you have interesting ideas/culture/tech but are capital constrained. WeWork's problem was the exact opposite - they had an excess of capital and nothing to spend it on except for buying buildings and taking out long-term leases.
Before the pandemic, commerical real estate was seen as a very low risk store of wealth.
At the time of the construction of WeWork's business model, actually being on the deeds would have been seen as reducing the risk profile (by not being beholden to variability/increases of renting). At the time, private capital would have seen being on the deed as a low risk benefit to the business plan.
Obviously how we think about commercial real estate, particularly 'downtown' office space has changed heavily, and it seems like wework for whatever reason was unable to pivot. It's arguably very difficult to move the direction of that much capital on w you've made the opposite argument and are already holding the bag.
> Shifting the revenue to a franchise model seems like it solves the majority of their lease issues, and still lets them be useful, even in smaller markets.
The beauty of this idea is that they could make some money while all of this settles out, and then it would pave the way for another PE to come along and start rolling up all of the most profitable locations until they re-consume all the properties again.
https://www.morning.fr/
in France does that, using buildings that are scheduled to be destroyed or "repurposed" in 12-24 months. They convert them in offices and rent office space until the landlord carry on with their initial projects.
They might be doing that in some countries. Last week I heard from a friend working at a WeWork in Bogotá, that they don’t think it will affect them, because the location is run by Softbank using the WeWork brand. Don’t know if that is true.
1. Like many companies who go through Chapter 11, WeWork will come out stronger after they cut a lot of their debt, offload leases on non-performing locations, and shrink to only be in those locations that can be sustainably profitable.
2. WeWork users are likely to also be happy, as with the greatly reduced debt WeWork can invest in their product (though I think most folks that used it always thought their product was good). Of course, this assumes the locations you use don't get cut.
3. Some landlords are going to take a bath as their leases are terminated during what is essentially a depression in commercial real estate. Given how big WeWork is in many cities, it remains to be seen whether this will have any cascading effects.
> The Company maintains the strong support of its key financial stakeholders and has entered into a Restructuring Support Agreement (“RSA”) with holders representing approximately 92% of its secured notes to drastically reduce the Company’s existing funded debt and expedite the restructuring process.
Perhaps. That's just one class of creditors though. Maybe they'll reject a bunch of leases and come out of bankruptcy, but they wouldn't be the first company to go into Ch 11 with high hopes and never come out.
That's a bet I'd easily take 7 days a week and twice on Sundays.
There is nothing fundamentally wrong with WeWork's core product. Users are generally big fans of their services, they have huge brand recognition and are basically synonymous with co-working spaces, and while the need for corporate office space is drastically reduced post-pandemic, the flexibility that WeWork provides is exactly what many companies want.
The problems with WeWork are nearly entirely with their capital structure. They expanded way too fast, they signed many leases that would never have been profitable (often in bizarro 0-rate environment world sweetheart deals with Adam Neumann), and their ridonculous valuation made them take on way too much debt to fund further expansion. Chapter 11 gets rid of all that. WeWork will be a much smaller company in the rather mundane business of office and property management, but it serves none of their stakeholder's interests to liquidate.
> There is nothing fundamentally wrong with WeWork's core product.
You have to justify this for a company that has just entered bankruptcy.
I suppose it depends on how you define “core”. But even if you take the most conservative definition and call their core product “office space” even that market has been thrown into massive turmoil.
There is plenty wrong with WeWork’s core product and much of what made it popular also made it unprofitable.
That phrase mostly means that the company is profitable, but it's RoI is smaller than the interest rate on its debit.
For having really nothing wrong with the company, it needs to be able to scale profitably too, by having a RoI that is larger than the interest on its assets.
The first part is clearly true for WeWork. On that strict sense, the company is quite alive, and its creditors would lose by closing it down. On the second sense, well, I don't think anybody can really say.
Profitable before considering the alternative of a guaranteed return at a higher rate is unprofitable, people were just confused (or imprecise about an irrelevant distinction) when the interest rate was near 0.
Are they viable though? The market they served is holed below the waterline by people getting the idea that they can WFH and the spread of high speed fibre. The years of the pandemic were years where (if it had been well run) a model like WeWorks could have established itself as the alternative to standard offices, but that's ship saled. Who want's to work in an openplan now?
Seems unlikely they'd go for that under any circumstances. I know they claim billions in assets, but I'm guessing it's all stuff whose resale value has tanked since 2020 and WeWork's actual liquidation value is $0 give or take.
What would the creditors get from the liquidation of a company that leases its spaces? The value of second hand office furniture? Doubt they’ll vote for this.
The asset is the positive operating properties/leases.
The idea from WeWork management would be to shed the bad properties and keep the good ones and operate them as post-BK WeWork.
Creditors could say, great idea, but we want to sell that remaining business for cash rather than leave it in your hands because we don't trust you to continue to run this.
Definitely agree liquidation is non-starter here. They don't sign long term deals with their own customers so WeWork's only real asset is the brand. What the creditors will do is take over ownership from the equity-hodlers, then try to milk the brand for any remaining value. It's conceivable many of the building owners might actually do ok directly operating WeWork branded spaces and keeping the margin that used to go to WeWork for themselves.
That last one has me really worried. A big dump of real estate on an already strained market with a lot of folks using it as investment. How many big buildings have we seen go up in the last year and remain basically empty.
Commercial real estate needs to pull its head out of its ass soon and start heavily discounting spaces or shit’s going to get real real.
> Commercial real estate needs to pull its head out of its ass soon and start heavily discounting spaces or shit’s going to get real real.
Agreed - so many viable businesses have been forced to close due to rent hikes but the underlying problem is that there a lot of investors who were promised guaranteed high returns for commercial property. They should be forced to accept the downside of that gamble but as a group they have so much political clout. Pretty much all of the “return to office” hype machine is driven by those very well-connected people and cities are receptive because most downtowns were heavily over-focused on subsidizing suburban car commuters, which can’t easily be converted into more attractive spaces for actual residents.
> Commercial real estate needs to pull its head out of its ass soon and start heavily discounting spaces or shit’s going to get real real.
Looking at SF, I think it is not only a discount thing. The way it was rented before: "open space" office with bare wall, rows of desks and insanely high price per sqft or a mall is probably not gonna work anymore. They need to repurpose it: convert to apartments, smaller open space offices, regular offices, etc. Trying to do any kind of construction in SF is ridiculously complicated. When money was flowing it created many layers of bureaucracy and complexity, but it was affordable. Since then money flow dried up but complexity and bureaucracy is still there.
I worked in a startup in commercial real estate during WeWorks glory days. It was interesting to talk privatetly to veterans in the industry.
They pretty much sounded like "this doesnt make any sense. I don't understand how it is possible. It shouldnt be possible. But they are doing it so they must be doing something right and we need to follow in order to not be left behind"
So i guess they saw that something didnt make sense but then they got fooled by the old "everyone else celebrates them and everyone else cant be wrong"
It's a relief to see it go bankrupt. WeWork could exist against all odds thanks to funny money, not to visionary execution, or real value... compared to other shared-office solutions. Besides, if you've ever visited some of these shared spaces, you'd know that they are in decline, and by all sanity - should be in decline post-COVID when people went home and felt comfortable doing so.
Its a relief for all those owners of small shared spaces, who created the market, and were worried to see the market taken from them. It's a relief for everyone who thinks this can only work on a franchise basis. And for everyone else who felt this was going too fast in this dystopian future laid out in Neil Stephenson's Diamond Age where you have enclaves, etc.
Now I'm looking forward to seeing someone try the illustrated primer business...
I worked with an older fart many years ago who taught me some of my best investment strategy.
He said that one time his 4 year old niece asked for an IPod for Christmas. He said that he didn’t know what that was; but if a 4 year old did, then it was probably gonna be big.
So basically if common folks in your network interact with a particular product; then there is a good chance that it’s a billion dollar product. The inverse is the same, in that if few people have heard of a product, then it’s probably not a unicorn.
Applying that logic to both WeWork and Theranos back when Uber was at peak, I asked around within my network if people knew of the anyone who had experience with either company.
People said nope; never heard of it or used it. I thought that was very strange considering how often both companies were dominating HN at the time with mindshare about their insane success.
If it walks like a duck, and talks like a duck; it’s probably a duck.
Not sure that test works well with WeWork. Where I was in London most people had heard of WeWork as they had lots of events with free beer. Obviously it didn't seem to make them much money.
I kept seeing them pop up in strange places as I traveled the country for work; but I hadn’t ever met any business who used them, and I kept seeing them headline HN about being the next great unicorn.
I thought it was strange that I didn’t know at least a single person in my business network with any experience of WeWork; most said “Who?”
Then I later asked some of my non tech common folk friends if they knew anyone with any type of experience with WeWork. Same response lol..
Wasn’t long after that headlines started to come up in the news about turmoil.
Rule 1: If everyone loves it including toddlers; it’s a good buy
Rule 2: If your gut tells you something isn’t right; prod around and get some feedback on your instinct. If things aren’t adding up, just stay away. It’s not worth the risk or effort if things are fishy. Things might not unravel immediately, but usually where there is smoke, there is fire.
If it walks like a duck, and talks like a duck, and even looks like a duck… It’s probably a duck honk honk :)
You need to ask people in different circles though.
A cross section of people in your age bracket, people in your neighborhood, people in your family, people you work with, and people you buy things from should give you better info than just one of those groups.
I sat out the whole NFT bubble but I would lie if I didnt at least once think "maybe I should learn how to code smart contracts because everyone is doing it" before dismissing it when realising NFT:s doesnt make any sense at all (and I have to yet see a blockchain use case that solves a problem better and cheaper than existing solutions)
Smart contracts and NFT's are like cars and the blings clients put on their wheels. A car is a good thing, the blings not so much. So yeah, you should still learn to code smart contracts, NFT's are just one particular use of that. Oh, and they definitely still do smart contracts by millions nowadays in ETH blockchain.
> There might be a sense in which bubbles are getting more ridiculous over time (e.g., NFT) but it would be hard to prove it in any objective sense.
IMHO, the key driver to NFT were a bunch of early crypto whales who wanted/needed to cash out. Just dumping their coins on the open market would tank the valuation, but create a demand frenzy by contracting some high-profile influencers and now you can dump as many coins as you want and people will still buy them.
Now, a lot of people are holding very very deep bags.
Though to be precise the acronym FOMO was already in use long before the cryptotoken bubble. FOMO originally referred to the fear of missing out from social events shared on social media (essentially only Facebook at the time), and was only later used for fear of missing out on making a quick buck by being an early buyer of the latest cryptocrap.
In any case though, 'FOMO' is an equally good term for both phenomena.
I think Freakonomics basically debunked the whole tulips thing. The real Tulip mania was much smaller but stories of it got exadgerated as they passed around the world. Actual business records of the claims in contemporary newspapers don't exist.
There seems to be currency with debunking tulipmania but reading this [1] it seems people play more with the semantics, i.e., what kind of market behavior do you admit into the "manic class" as opposed to the "rational calculation class".
Expecting others to enter a bubble and trading accordingly can be a perfectly rational calculation following observations of behaviors in a given market context.
Would be cool to have some sort of well defined "bubble-mania-meter" but it is unfortunately quite subjective.
The role of scarcity is something interesting to consider as input. Scarcity (perceived or actual) is more natural with tulips or anything that is a tangible, real object.
NFT's tortured way of creating "digital scarcity" sets them, imho, apart from other bubbles. Given how much of modern life revolves around digital they are probably the forerunner of much worse to come.
strange but true, scarcity comes in different sizes. Is the infinity of NFT's the same as that of paintings? How many types of infinite junk are there? Or is this infinite itself?
Sorry to bring you the bad news, but your lifetime is (likely) finite and each brush stroke takes away a bit of that precious finite time.
In contrast, while digitally reproduced crap is also fundamentally finite, it can be replicated gazillion upon gazillion times more without any effort or sacrifice.
This is the so-called zero-marginal cost of (re)production [1]. Some people think its a blessing, some people think its a curse.
With AI algorithms it gets even worse. You don't only have infinite copies of the original, you also have infinite variations of the original.
This is what I was thinking, saying "WeWork Goes Bankrupt" is not news at all, they've been going that direction for quite some time as the liquid resources were being systematically siphoned off.
The actual news is more accurately captured in the title of the "dupe" thread where it says "WeWork Files for Bankruptcy".
Can you elaborate on which part exactly doesn't make any sense? The idea that one could rent wholesale then sublet retail (with a few value add goodies, printing, coffee, etc sprinkled in) is not "obviously" dumb to me.
It's dumb because their landlords locked them into a multi-year lease, while they're playing mini-landlord on the same property, to 'digital nomads' who aren't locked into anything.
So they end up wasting money and effort on constantly acquiring new customers to offset existing customer churn.
Those who lived through past market busts will remember enron, worldcom, tyco etc. (2000s), lehman, bear sterns, aig etc (2008s). This time around we have Theranos, FTX, WeWork,... Different names, same story. Market excesses, almost always coincident with some degree of fraud. I'm glad we're saying goodbye to this weird story of excess, and I won't ever have to read about WeWork again.
Agreed, but the difference for me in some of those companies is that Theranos, FTX, and WeWork were never real companies in the sense that they performed valuable service to the world and turned a profit. In contrast, Enron, Worldcom, Tyco, and AIG were all real, functioning businesses that turned bad via executive accounting shenanigans. And the 2008 crisis was a collective failure of unthinking financialization and deregulation, again mostly among otherwise functional companies.
So I'm especially glad to see the current crash, as for me it represents businesses founded on "fuck around" finally finding out what business fundamentals are.
I'll be interested to see what happens with other massive capital consumers from this era, with the poster child being Uber. It's plausible to me that even on its own terms Uber will never generate profit above the $20 billion of capital it took. Let alone getting into the black once we count its more obvious externalities.
FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business.
Their product was letting people take leveraged gambles on crypto, so arguably not a social good.
Exactly. It was an illegal casino dressed up as "investment", while also ignoring the regulations on investment. Part of their explicit plan was to use the house rake to give enough money to politicians that they'd retroactively legitimize themselves. It was an enormous social negative.
I'm not sure it's so simple. There's a strong case to be made that Alameda was losing money as FTX's liquidity provider and without the alameda money FTX would have much, much lower revenue. I think it's hard to look at just one side of the business because they were so intertwined.
There are plenty of never-profitable businesses that have gone bankrupt in the past. See e.g. pets.com from the dot com bust. And this downturn has seen "functioning" businesses like SVB and First Republic go under too. So I'm not sure this time is different, at least to the extent you're suggesting.
I do agree that this era of low interest rates has led to some companies getting absolutely massive without ever turning a profit. But hey, that playbook worked for Amazon. Most tech companies have substantially lower capital requirements than WeWork, and can weather this sort of downturn as long as they have a reasonable cash position. Sure, Uber might not make back the amount of funding it's burned through, but that's different than it having a business where the unit economics will never work out.
You write in a tone of contradiction, but I'm having trouble understanding how your points relate to mine. I don't believe I said that never-profitable businesses were unique to this era, or that the only business failures lately have been ridiculous ones.
I also think Amazon is distinct in that they chose to not have profits because they saw better uses for the money. Bezos could have declared big profits long before he did, and there was a noisy contingent of investors who were agitating for it. Bezos instead chose long-term investment in ways that upended our notion of commerce, and whose effects are still playing out.
I think that's very different than WeWork and Uber, where a lot of investor money was burned on subsidizing the core business. At least in Uber's case there was a theory, which was basically, "Use the rise of mobile to capture the global taxi market (while externalizing the capital costs to the desperate) and then use pricing power to extract Google-size monopoly rents." Maybe not a great theory, but at least something articulable. Whereas WeWork never made any sense as a business beyond a hazy "Uber for offices" handwave.
Amazon is perhaps one of the best executed businesses. Their retail logistics physical footprint is insanely huge and chews billions in capital. They chose to reinvest their profits to stronghold their logistics position.
One difference between all other and WeWork is that while others were involved in some kind of fraud. WeWork wasn't fraud just pure hubris of founders and investors. Fraud is somewhat common and motive/modus understandable, here it is very difficult to empathise the thought process of all involved.
WeWork's business model had concerning parallels to the risks that led to the 2008 financial crisis. Banks then made risky bets chasing short-term profits while accumulating long-term vulnerabilities. Similarly, WeWork took on expensive, long-term lease obligations relying on an unstable revenue stream from membership fees. This mismatch amplified risk. Like pre-crisis banks, WeWork did not commit outright fraud but showed poor judgment. Its financial mismanagement echoed 2008's problems.
I dunno if they are all the same story. Things like Theranos and FTX were outright fraud from the jump. Enron was a complex mess of both accounting chicanery and yes, some fraud, but they DID actually have assets at the end worth owning.
ISTR the banks just got caught out having made egregious poor bets.
AIG though is a bunch of fucking criminals.
That said, with this I agree 100%:
>I'm glad we're saying goodbye to this weird story of excess, and I won't ever have to read about WeWork again.
As an end user, I really hope WeWork the product sticks around. It's been super helpful while traveling, and when I was more invested in spending time on side projects I seriously considered getting a WeWork membership to have access to a curated environment specifically designed for getting work done on personal time.
Try spaces/regus if wework fails - more locations, some offices are nice and hip but others are just normal office buildings. I like travelling to small towns, and seemingly everywhere has a couple regus offices.
I had a baffling customer service experience with Spaces where I signed up, it took 2 months to get an access card that worked, then they claimed I’d signed up to something totally different. They would be one of the last companies on earth I’d ever sign up with again.
I don't understand though, finding a place to work in pretty much every city is simple and doesn't require WeWork, pretty much every city in the world, even when I was visiting smaller polish towns had at least 3/4 coworking places.
What's the WeWork moat? Because there's an insane operational costs that have to be passed down to the customer.
It's brand expectation. Finding X in any given city is easy, why do people go to brand Y everywhere? People like knowing what to expect, even more so in an unfamiliar place.
There may be some places that are easier than others, but in my experience it's the consistency of knowing you'll have access to good wifi, outlets, bathrooms, and a desk which provide a moat. Otherwise it's a gamble whether the coffee-shop you stop at will have those.
Local co-working office spaces are options of course, but with WeWork's brand you already know what to expect rather than gambling on something new.
I have used both Regus and WeWork while traveling and compared to signing up for a local coworking space, both were a million times easier. Don’t underestimate how convenient it is to stroll into a foreign city’s WW/Regus, swipe your card, and be working two minutes later. Signing up for a local space always takes longer.
Yes it's true that normal co-workings take a bit more, but I have never spent more than 3/4 minutes and that's not nearly enough of an annoyance to pay off for the much higher prices.
Most people just want a table, a chair and internet.
It’s as much of a moat as chain hotels have compared to local hotels. Reliability and predictability are worth paying a bit more for many people.
Personally, it was absolutely worth knowing that I’d have a clean, organized space, coffee, not need to fiddle with the Wi-Fi, not need to sign contracts in foreign languages, etc.
Most coworking places are clean, organized, have snacks, do not have Wi-fi issues. Most of them also have contracts in english or don't even ask you for a contract at all.
I keep not seeing the moat. The customer you describe "picky and willing to pay double normal rates when travelling to foreign countries" is quite of a niche use case.
Most people simply find the coworking that is closest to their hotel/train station.
> Most coworking places are clean, organized, have snacks, do not have Wi-fi issues
You would think so, but this is incorrect. Every single WeWork you go to, across the globe, offers the same fantastic experience from "feel good vibes" to functional meeting rooms, wifi, and ad-hoc services.
But even if there are local gems, it becomes another chore to browse listings, read reviews, spend time deciding between Coworking Space A and B and C. With WeWork and Regus/Spaces, you save a lot of time and can just get there, and get busy.
> The customer you describe "picky and willing to pay double normal rates when travelling to foreign countries" is quite of a niche use case.
Not OP but just like luxury hotels are niche, WeWork is not your local coffeeshop and does cater to a different crowd. Whether that's profitable for them or not, looks like not for now.
Yeah, I don't think you have much experience with this, and I do. Again, it's extremely convenient to know that your coworking space will be ready and waiting for you, without the need to sign contracts, input wi-fi passwords, get a tour of the building, on and on. You just walk in, scan your card, and you're go to go. The wi-fi connects automatically at every location.
It's also extremely unlikely that local coworking spaces in random countries around the world can be relied on to have robust contracts in English.
People with stuff to do don't want to waste time figuring out the nuances of a dozen different coworking spots. This is the entire use case for half of the hotel industry and why chains like Holiday Inn or Marriott exist.
Your cost argument also doesn't make much sense either, as if anything, using a service like Regus or WeWork is cheaper because you get both the travel benefits and the local space for the same price. You don't need to sign up for a separate coworking space and pay a separate fee for every place you visit. I get access to thousands of Regus locations around the world with my single flat fee.
In terms of actual monthly prices, I pay about 1/3 more than I would at a comparable local coworking space. Not double.
So yes, for a slightly larger fee (something like $150 more per month), that extra stuff is worth it.
I worked in WeWorks office for a year (Barcelona) and was awed by the amazing quality and design of their offices. Focusing on my work was easy, interchange with my colleagues natural, and the post-workday beer kept me staying late. Most of their buildings have gone, and now it is back to the dreary and loud staple office space. It makes me sad.
Is anybody else having a similar experience? Is there anything outside the US with a similar level of quality?
Reminds me of the early Netflix era, where every show was there, the cost was neglible and you could share it with 4 people. Now the catalogue sucks, cost has gone up and sharing is no longer possible.
Or the pandemic-era food delivery, or the illegal private taxi services like Uber.
It was cheap money subsidizing what they hoped would turn into a monopoly.
We were definetly spoilt with WeWork because the entire show was subsidised with SoftBank cash.
So many nice buildings in world class cities must have cost a fortune to establish, but the short term rental market cannot bare that much of a premium so it left us with a great product for only a slightly higher fee.
I agree the whole setup is nice, though the customer service leaves something to be desired.
In London there are plenty of both smaller more independent individual and small chains like Second Home [1] of co-working spaces as well as larger players like The Office Group [2].
I've not found the environment at most WeWorks to be anything special compared to most of these others, often not as good. WeWork's one big advantage is how uibiquitous they are in major cities, which is incredibly handy when travelling.
Some are speculating that it is a way for them to re-negotiate leases, given what is currently happening with office space rents it could come out stronger.
edit: Also, given that startup investments are way down right now, tech is in a recession and there are recessionary tail winds this is a great way to get out of leases to downsize to a smaller footprint. Either way I don't have their stock or any ties to them and all of this could be wrong, but it is an interesting theory.
Until a company is dissolved, somebody is speculating that everything's part of a plan or that it's all going to turn around. Speculation is armchair effort that helps passive bagholders stay hopeful and that helps savvy traders work out of their positions.
I suppose it's a fun curiosity to hear the detail of somone's speculation, but it shouldn't be taken for much and it shouldn't be a surprise that there is some. There always is.
Some also speculated that Ryan Cohen and Carl Ichan were going to save BBBY in a sweetheart deal that would make bagholders who got in at $30/share whole despite the pennies-per-share valuation.
Bagholders never lose hope. Even if "We" comes out ahead, the equity holders will be wiped out.
> Some are speculating that it is a way for them to re-negotiate leases.
People aren't "speculating". WeWork has said outright that is exactly what they're doing, and that is the entire purpose of Chapter 11 bankruptcy, to allow a company to shed some debt, and in return equity holders lose everything and some debt holders take stakes in the reorganized company.
Or consider a different type of investment if they don't want the risk. The low interest rates drove a lot of people into the stock market that would have otherwise chosen more conservative investments. It also drove high valuations for some companies that make no sense. Sadly the market is like a casino with how many stocks are valued and what drives a stock up or down. One one hand if you bet the right way you can make a lot of money, but if you bet wrong you can also lose a lot.
well, luckily, wework is not public, and so only sophisticated buyers are able to buy. Therefore, there's no need for "buyer beware", as if there's some scam going on.
Yeah, this whole murky area smacks to me of blatant fraud - get massive investment in a company you create, use the valuation to get personal loans against your stake in the company, then use those loans to buy real-estate which you lease back to the company.
Oh, and you keep personal ownership of 'We' as a trademark, so they have to lease that too.
And then, when it all starts to crumble, walk away with a multi-hundred-million dollar exit package.
I can't imagine how this guy still walks free and isn't being sued into the ground by investors.
I would put it differently: an IPO is what most tech startups aim for or are pressured into.
I'm a founder and have talked with few people (albeit I'm not looking for money) and you could clearly see disappointment in money-bringing people hearing you want to stay private.
I feel like I dodged a bullet being declined by Flow. I didn't know it was run by Neumann when I was interviewing, but I think he's a complete idiot and I don't think I would enjoy working for him.
Looks like he has a couple billion dollars in the bank, so if you have any suggestions on how one might dummy themselves down to "idiot billionaire" level, I am all ears.
I mean, at the risk of making this political, I think we can find at least one ostensible billionaire that most people are not arguing for the intelligence of. I'll let you figure out who I might be implying.
I think intelligence is helpful, but not a necessary component to become really rich. I think there can be combinations of luck, opportunity, and charisma. It doesn't hurt that silicon valley investors appear to be the most gullible people on the planet.
I don't know the guy, but I did hear reports of him constantly drinking and smoking weed at the office, and him claiming that they're making a "human based operating system", a claim that does not make sense.
The only billionaire I am 100% sure is a genius is Jim Simons. For the rest, the most common trait seems to be that they are good at spotting trends early
If you read about interactions with him, he's preternaturally confident and charming. I think he's also deranged. Per Wikipedia, "The Wall Street Journal reported in 2019 that Neumann had aspirations to live forever, become the world's first trillionaire, expand WeWork to the planet Mars, become Israel's prime minister, and become 'president of the world'."
There are plenty of nutty rich people like this. If you would like to follow the path to lunatic billionaire, I'd suggest you start by being very tall so as to impress and dominate people. Definitely come from a broken home, the wilder the better. A sufficiently dysfunctional early environment will fuck you up for life, but it also gives some the ability to thrive in chaos. Make sure to be a charming sociopath, so that you can manipulate people, quite a lot of people, without being crushed by the moral weight of the harm you do. You'll also need some desperate character flaw that makes you insatiable: sane people will get enough money and stop, but you'll have to have some sort of unfillable void that compels you to keep going beyond all need.
Lastly, make sure to be very lucky. You must be born into the right moment, such that there are people foolish enough to give you a lot of money. Luckier still to fall into the right context, so that you have plenty of enablers around you who will effectively institutionalize you. Even luckier that your crimes against society are of the sort that either aren't currently illegal or are sufficiently inconvenient to prosecute.
Holmes got federal prison time. Neumann did not. Arguably, Holmes did worse. Holmes was about to start selling snake oil, or rather snake oil blood test, which is essentially a medical fraud, although this is not the type of fraud that brought her to she to the prison cell.
Neumann took stupid VC money for a ride. Unethical? Yes. But they giving it to him very willingly. His actions arguably could do more damage, because maybe WeWork bankruptcy can finish off SF commercial real estate market – I don't know how much of their 13 billion lease obligations are in the city. But it's hardly his fault that the system is so brittle.
Buy property where you have no flexibility to scale your space (and thus, debt payments), then offer it to others with maximum flexibility to scale down on a month-to-month basis.
Guess what happens when demand falters? Though, to be fair, they were losing money before the pandemic...just much closer to break even.
The losing money pre-Covid was very typical in a low inflation, low interest rate environment where growth is prioritized over profit for newer companies that recently went through the startup IPO cycle. With high interest rates profitability is more important so it's a vicious cycle right now.
Chapter 11 petitions have been accurately and usefully described in other comments, I justed wanted to add, chapter 11 doesn't "cap" or "downfall" anything, just as record profits don't cap or downfall anything. It's an orderly measure to try to preserve as much value as possible for stakeholders.
The court decides but the rules are quite literally written in the Chapter 11 of the United States Bankruptcy Code. The shareholders usually gets the shortest end of the stick.
How is it that time and time again, business die and the executives walk away with a parachute while the regular employees walk away with not even the rest of their pay, but hacker news and Reddit consistently states the regular employees come first?
The anecdotes are not aligning with the observations. So what’s the deal here?
We're talking about Chapter 11 here, which means the plane has already crashed and the court is deciding who gets what on what is left of the plane, which could still be somewhat valuable. People with golden parachutes already jumped off before the crash.
if there's any money at all, employees get their pay. Shareholders can be forced to go in their pockets and pay employees wages due.
I don't know of this happening to a large corp, but if a local restaurant goes bankrupt, or a local construction company, and the owner is not also bankrupt, they can be forced to pay employees. Usually they are also bankrupt. Not sure if those debts survive through personal bankruptcy.
You may be referring to employees losing retirement or other benefits like that, but the worst of those loopholes have been closed (the pension can't be in the company's own stock, that type of thing)
> Shareholders can be forced to go in their pockets
no they cannot. Shareholders can only lose at most the capital they put in originally - they cannot be liable for additional debt.
> the owner is not also bankrupt, they can be forced to pay employees.
That would be because the owner mixed their own personal wealth with their business (e.g., as a single entity), instead of a limited liability company. Therefore, any assets the owner has is subject to be sold to pay the debt of the business. It's why only small businesses, owned by a single owner (who would have nothing else) is done this way (cheaper administratively i presume).
It’s usually state labor laws. Some states don’t have it, most do. Wages are treated as a special case, often with these type of forced payout clauses and even criminal penalties.
Do preferred shareholders still get their liquidation preference in a bankruptcy? I don’t think they should, they are usually the ones responsible for the bankruptcy. Common shareholders are going to be the employees in this case with ESOPs or RSUs, getting the shortest end of the stick.
Preferred shareholders can be VCs who are usually not directly responsible for the bankruptcy. Also, WeWork is a public company so common shareholder can really be anybody, not necessarily all employees.
In theory the existing shareholders should be the first to lose their stake - though those with inside access can benefit by re-investing at a low price once the restructuring is complete.
Those owed debts can lose much of what they are owed. In the case of WeWork, landlords will likely lose a lot of owed rent, and lease agreements will be cancelled or renegotiated at much lower rates.
Employees are meant to be at the top of the list to be paid what they’re owed, but that’s still contingent on funds being available to pay them.
Interestingly the Japanese incarnation of WeWork has high occupancy, a separate ownership structure (WeWork Inc. is a shareholder) and they are putting messages out that they will be totally fine.
I've only seen it on archive.today (& Co.) so I suspect it's an in-house solution. As for why, perhaps it's just because people are already familiar with the Cloudflare one, and they don't want to startle people with a new one? Not sure, but it's my best guess here.
Edit: oh, I think I've figured out the why! From the JS comments, I think it's used to get around captchas on archived sites (well, at least LinkedIn) sometimes:
var widgetId = grecaptcha.render('g-recaptcha', {
'sitekey': '6LeQbtsSAAAAAHevV56qhVr_0JhQI7N-zTPoOoWJ', // my
//'sitekey': '6Lc7CQMTAAAAAIL84V_tPRYEWZtljsJQJZ5jSijw', // linkedin's
'callback': function(response) {
// [...snip]
Yeah, I think it's just a cheap way to get around anti-scraping captchas.
The alternative would be to use an anti-captcha service that outsources captcha solving to people in low-wage countries, but that's probably a bit expensive given archive.today's scale.
Things are starting to remind me of the 2001-2003 bust, where a ton of companies whose entire business model was "lose money but get a lot of users" had to either shutdown or retool, and "making an actual profit" became more important than growth.
Here in Mexico WeWork is extremely popular. Both in Mexico City and Monterrey all locations are most of the days packed with both corporate subscriptions and desk clients like myself. They own/rent entire skyscrapers with floors subrented by local companies
At least for the Monterrey locations, the economics do not make sense to me.
I'm a member of one of the newest locations which, when packed "full," still tops out at 200 people, and in 3 months, I have never seen more than 100 people in a single day.
I expect about 400k MXN per month in revenue; let's double it to be safe, to 800k per month. Yet, most of the people are on the all-access plan, so that's 2k per customer per month only.
The rent for these two new floors is at least 1 million MXN per month. I also see 4 janitors, 4 front-desk staff, and 2 guards to operate the elevators, all full-time. This is not counting utilities and extra services such as coffee, mouthwash, etc.
It’s not digital nomads that pack up WeWorks, it’s actual Mexican office workers. Foreigners actually are pretty rare to the point that in some locations security doesn’t even know that you can access with your own membership and ask you “Which company are you with?”
I suspect it’s popular because there isn’t really anything better out. WeWork figured out operations and culture of running a productive office space and it’s probably worth it for business to just rent this infra. If WeWork shuts down, someone will definitely come in and acquire all these
Bit strange really that you can go and break contracts(leases) and then continue operating afterwards. Surely the outstanding leases should be paid in full... And only after that you be allowed to continue...
Paid in full with what money? There isn't any left. If anything, it is probably in the interest of the real estate owners to free up the building so that it can be leased out to someone else who can actually pay the rent.
At the same time there is often some value (though not necessarily actual money) left in the brand name and some other intangible things like business processes. Outright killing the company until the debts get paid (which they won't) is just needlessly destructive and leaves money on the table that could have been at least partially recouped. The whole point of chapter 11 bankruptcy is to try and recapture some of that value to try and pay off the debts a little bit more than would be possible otherwise.
Wouldn't maximum payment come from selling everything they have? At least for the debt holders who own unpaid contracts. Sell the furniture and the brand. Distribute the money. Everyone gets their fair share.
The liquidation value is usually way less than the "going concern" value.
Mind you, there's also the "flatpack" version where the company technically disappears but all its assets are bought by a different company that just happens to be run by the same people.
Ultimately there's nothing hugely bad about the lessors getting stiffed in the bankruptcy - at least they still have the asset! Suppliers often end up worse off if they've shipped actual goods but not had their invoice paid. This is why landlords do credit checks and ask for deposits.
Before I took my current job in 2019, I interviewed at WeWork and apparently I did really well (per the recruiter) as they really liked me technically, except that one person (the guy who went through my resume with me) vetoed me.
Apparently, when he asked me why I left a certain job, I was honest and said, it wasn't the right fit for me enjoyable wise, while I could do the job well, it wasn't what I wanted to do. So he asked, did you follow up with your manager about your issues. I replied honestly, and said that I had a very good relationship with him, and that because of that I didn't know how to tell him I didn't like my job/role so was easier for me to find a role outside the company. I noted that this is something I have to work on. Apparently, the interviewer interpreted what I said as leaving without giving notice (and hence the veto). If he would have asked, he would have found out that after I accepted an outside offer, I gave my manager as much time as he needed from me (was about a month) to transition everything.
I was upset at the time, but pretty soon afterwards I (and the rest of the world) learned what bullet I dodged.
WeWork went up against a market already under heavy Securitization for 30 years.
They didn't stand a chance, as most sane commercial companies no longer maintain locations in high-tax neighborhoods post 2008. Only legal and financial services tend to cling to the traditional tower blocks.
Should convert the assets into retirement village care facilities, as this is a projected growth market in the next 10 years. =)
WeWork is mainly renting to smaller startups. Does it follow, that startups are going through a downturn? There seems to be a VC funding downturn, now how big is that one?
They currently claim 660 locations in 119 cities (avg 5.5/city) NYC seems to be the biggest with 49 or so. They will try to renegotiate all potentially profitable locations and cancel everything else, so maybe 50-75% get canceled? In average that's 2-4 canceled leases per city. That's commercial real estate so no effect on housing.
Wonder how many bullets India dodged by having smaller stakes held by foreign entities. In Tata AIG, AIG has 26%, so we werent worried when AIG was in trouble in 2008.
It will have the same effect as a raindrop does to a flood. One of many contributing events that continue to create downward pressure on prices and rent.
Almost certainly priced in already given that the pending filing was in the news a week or so ago.
I haven’t been following the market lately but CRE has been getting absolutely crushed all year, remember the “return to office” hubub? And WeWork is a big player in terms of the news cycle but tiny in comparison to the market as a whole.
You are incorrect, this is not their second bankruptcy. They renegotiated some debt and leases previously but they have never actually filed for bankruptcy before today.
I really wonder how WFH will physically reshape cities. Will we see less dense downtowns, with more people working in the less populated parts of a city? I'm not even talking about suburbs. In my city, downtown has a handful of skyscrapers where the major employers are (banks, government, state-regulated monopolies), but with fewer people going there these days, the faster growing parts of the city are places which used to be almost uninhabited (former industrial areas being turned into brick-laden brewery districts with cheaply constructed "luxury" apartments).
Will we see fewer skyscrapers, as fewer people clamber for downtown apartments to live close to their jobs? Downtowns are generally desirable in themselves, but that's often because of the retail and restaurants that popped up to serve the people working there. If nobody works there anymore, does it generate a vicious cycle in which retail and restaurants can no longer sustain themselves, being forced to close, and thus downtowns lose their inherent desirability?
Do the cheaper and sparser places get pushed further and further out, until we end up with more sprawled-out megacities replete with suburbs and shorter buildings like Los Angeles?
it would actually be pretty great for cities to have more multimodal patterns of density, rather than the current unimodal downtown + progressively increasing sprawl (I'm looking at you, nyc)
Patrick Boyle was quite entertaining on youtube on The Inevitable Decline of WeWork. 4 weeks ago but not sure much has changed https://youtu.be/n3Q_4vjPMSE
Commercial real estate has been in crisis since covid started.
Higher interest rates are the final nail in the coffin. Commercial estate is generally bought through variable rate mortgages, not fixed ones.
This means that at the same time lenders are under a deadly combination.
On one hand, higher rates means that owners need to raise rent fees (which they could for more than a decade consistently) to pay down their much expensier mortgages.
On a second hand, there's no market for their property, and if there is, it's at way reduced prices than it was before.
Third, the property value crashes, thus putting even more pressure on these mortgages to be refinanced with banks unwilling to come to terms and negotiate.
It's a Chapter 11 bankruptcy so likely they're not all shutting down. Some locations will probably renegotiate the lease term with the landlords and the profitable ones will stay open. With the office vacancy rate rising, I'm sure some landlords want to keep them.
Coworking spaces has been commoditized. Every major metro area has a dozen local companies offering coworking spaces. So unless you need the same membership to work in very different locations, you'd just join any of the local companies near home.
Exactly, and more is on the way. There are a lot of empty / underused offices right now and the easiest way to try to monetize all that real estate is co-working, flex desks, sub leases, and other forms of short term usage. If it's empty, it's not generating any money. Finding space is easy right now. I think prices are still a bit inflated given the amount of vacancies. They have to come down a lot for that to start changing. But you can get some really nice bar gains if you invest a bit of time.
Over the next few years, a lot of leases are coming up for renewal and I'm guessing a lot of companies are looking to reduce the amount of square meters they have and what they pay for that.
Apartment buildings have very different surface to volume ratios. There are only so many square feet you want per window, assuming conventional layouts. Of course there's always the "disused industrial floor loft" approach to living, but that requires exceptionally rich tenants and/or exceptionally low rent expectations. Chances are most office buildings have higher operational costs than the rent that could be collected that way.
We'll see a lot of decay, building operators trying to make ends meet with ever cheaper office tenants, before informal factory floor type conversions happen. Wouldn't be surprised if, very much unlike those old factory floors, buildings are well beyond effective service life by then. (because architecture has become depressingly good at being on schedule in terms of design service life)
Yeah I remember Regus office space commercials well before WeWork offering single offices/flex spaces. They even had shared reception you could subscribe to.
I dislike remote work and really dislike working from my apartment and coffee shops. I really really like WeWork.
If WeWork went away completely and I couldn’t find a local coworking space that I really liked it’d probably be the impetus I need to find a job at an on-site only company.
I met a client in a co-working space in Midland TX of all places, and it was great. We could grab coffee in the open area, we had a private room with a big screen, whiteboards, it was quiet, convenient, everything you could ask for.
I don't understand how he was able to find funding for his current crypto ventures. Is he some kind of wizard or the investors are just playing a game of greater fool?
When I was younger, I used to think investment success was about 80% the fundamentals of the business and 20% your social connections and ability to get in front of people with decision making power. I now think it’s closer to the reverse - especially if you’ve raised money before.
I can’t find the link now, but there was a good piece in Money Stuff about how previously being a CEO is a major requirement for future CEO jobs, even if you lost millions and did your job horribly.
For a second there I misread the sub headline as "$19M in debt" and thought - that's not too bad. I guess the conning goes on, if knowing what I know about WeWork I could momentarily consider them folding with a mere $19M debt.
It's also amazing how mundane our apparent technological progress ultimately ends up being. We have so much computational power, access to information, now AI crap, and we figure out how to basically price ourselves out of necessities (like office space or a marginally bigger apartment) to the point where paying by the hour for a place to sit seems compelling.
When I search it says this is a chapter 11 bankruptcy, and it says that means its a restructuring. What does this really mean? So can we see we work come back again ? Or is we work as we know it never going to come back?
“The company said creditors holding 92 percent of its secured debt had agreed on a restructuring plan that would include reducing its portfolio of office leases.”
They will almost certainly be cutting a bunch of locations.
it's funny how threads about sbf, holmes and this guy, even musk, all have in common that readers here easily agree on them being stupid or idiots which is completely nonsensical. they are all with certainty among the hn crowd intellectually deeply in the top 10% or so. you don't found a multi billion dollar corporation if you're stupid or rather not exceptionally smart. just one example of unhealthy lack of self reflection and delusion on here which i find rather tiring.
I'm not sure the argument is for "stupid" per se, but more a question of "delusion or crime?"
If you make a set of claims and forward-looking statements that it's unlikely to be possible to deliver, get a lot of money on that basis, and then fail to deliver, was that just incredible over-optimism ("stupidity") or intentional fraud? In the case of SBF and Holmes it was unambiguously proven-in-court fraud. WeWork seems to have escaped that, although a lot of the deals make Adam's counterparties look especially stupid. Such as Softbank, who've lost a huge amount of money.
The obvious response to your middlebrow "if you're so smart, why didn't you make as much money as them?" dismissal is "if they're so smart, why are two of them in jail?" (ironically Neumann probably listened more to his lawyers than SBF because he wasn't such a high IQ nerd...). You can be intellectual and make decisions which are fucking stupid (in this case that applies more to the bagholders), just like you can be intellectual without the charisma, lack of scruples, connections or even ambition to pull off a multi-billion dollar real estate scam.
Adam Neumann promised to get rich, he got rich. He also mentioned, that his grandkids gonna be on the board and carry his legacy, it is probably true, as he has built generational wealth for them in real estate. He took everyone else for ride. Matt Levine wrote multiple times on Adam Neumann and WeWork. One of my favorite quotes "He lit $10 billion of SoftBank’s money on fire and then went back to them and demanded a 10% commission" [1]. And they kept paying them.
I find it remarkable that he manages to escape the spotlight that SBF or Elizabeth Holmes received. I guess the guy knows how to play the hustler game better than all of them.
I don't think it's so fine. I doubt the WeWork guy has (materially) lied to the investors, unlike the FTX guy. I remember him saying that he's building a "physical social network", and everyone seemed in on the game of pretending that this is the hottest thing since the Manhattan project. I.e. WeWork was more like trading shitcoins that don't even promise anything, whereas FTX just robbed people of shitcoins.
Either way, he is failing upward. With Andreessen Horowitz's blessings this time he's back to rent-seeking schemes, this time it'll be the small people who will experience his flare:
https://en.wikipedia.org/wiki/Flow_(real_estate_company)
I expect he'll do it all in the open view, but again the mass land buying-spree he's been on, it can't help but invite disdain for the guy and worry for those who will be in his eye-sight.
People forget that the only difference between genius and fraud is success. Succeed, and you will go down not as a liar but making "premature promises"[0]. I believe that generally people like Holmes and SBF actually think they will pull these things off. Just spend an hour or two listening to entrepreneur podcasts and you will identify the source of this kind of culture. We reward truth-bending constantly and listen to founder's stories with awe, but as soon as any of these things fail we are quick to judge the failure.
I think it actually has a lot more to do with the social disgust reaction to a big failure, than any well reasoned distinction between fraud and hustle.
This whole thing makes me question our economic system.
Yes, we want to reward people who create value. If someone invents a fusion power plant or a cure for cancer, they should get a fat payoff.
But this thing, the guy has gotten paid a lot of money for creating no value.
Of course, investment is a game about uncertainties. People paid him out based on projections that turned out not to happen. You buy a thing, it turns out not to work, you are out money. That seems fair enough too.
But somehow it still seems wrong that a guy can sell a thing that turns out to not do anything useful, and get a similar payoff to someone who eg becomes all-time top musician.
The only thing I can think of that might seem relevant here is that there were relatively few people involved in judging whether WeWork was gonna work. The amounts of wealth concentration make this possible.
Contrast that with Taylor Swift, who still needs to spend her time touring to make her money. She's dependent on the decisions of a large number of consumers.
I don’t think there’s a founder who has at one point been running a company over $1BN in value who would have trouble finding venture capital for their next thing.
I sincerely believe if SBF or Holmes were raising money for a new startup today, they’d have at least a few notable names lined up to throw money their way.
There’s a famous NFL quote from the general manager of the Arizona Cardinals that goes, “I've said this before - If Hannibal Lecter ran a 4.3 (40-yard dash) we'd probably diagnose it as an eating disorder.”
Will he continue to spray his new potential investigators with fire extinguishers to solidify potential rounds of funding?
> In late 2015, WeWork was completing an investment round led by Beijing-based Hony Capital Ltd. that pushed its valuation to $16 billion. Mr. Neumann invited its CEO, John Zhao, to a party at 110 Wall Street, where WeWork was about to open its first WeLive dormlike apartment building. Toward the end of the night, Mr. Neumann led others to the roof of the 27-story building. There, guests passed around tequila shots. Mr. Neumann picked up a fire extinguisher and set it off, spraying Mr. Zhao and others with white foam.
> The deal went through. Mr. Zhao joined WeWork’s board in July 2016.
To be completely honest, Neumann reminds me of Ian Schrager. He would run a fantastic club. Somehow, we’re in a world where clubs contain the C suite and are grafted on multi-billion dollar companies.
It's different, because this time he is only getting funding by putting up his hundreds of millions of dollars worth of real estate (bought using his WeWork money) as collateral.
Do you have a source for that? Not a challenge, I'm genuinely really interested in learning more as that's the first I've heard that. I always wondered what would have caused a16z to put so much money into Flow, but them having actual collateral against their investment would make more sense. But as far as I know a16z's investment was a pure equity stake so I don't know how collateral would work in that situation.
It's a prerequisite to be a fool to invest in, or start, a business of the startup subtype. This isn't a bad thing™ on its own if there a path to something that can also be a mildly or wildly profitable business. One issue is not every founder can become a CEO, and that's okay. And not every startup->business CEO wears the CFO hat enough of the time to keep their numbers on a sustainable trajectory. That's one of the differentiators between startup CEOs and corporate CEOs.
For every wildly-ambitious founder or founder team, they need to bend an ear toward the sage advice of a conservative corporate CFO to ensure the venture stays alive and has a chance to thrive. Surrounding oneself with "toxic economic positivity" is a recipe for failure.
I guess WeWork Won'tWork then /jk
But I wish something like this existed in my town. Coffee shops are okay but sometimes you just need a proper working env.
Temporary office spaces have been a thing in a lot of places for a long time.
I have no idea about your town in particular, but there's a company called Regus who have a presence in the US, UK, France, Australia, Singapore, Japan ... actually according to their website they're in 120 countries.
They are not cool. They are not new. They have not spun themselves a reputation of being an awesome, new, disruptive, special, fun, aspirational, Silicon Valley tech-adjacent service like WeWork did. But if you want an office or a meeting room for a day or a week or a month, they can do it.
Having used their services in the past, the rise of WeWork was massively surprising to me. It was touted as disruptive, as new, as amazing! It's gonna be huge! But there are already these boring companies doing this exact thing, boringly, making money but hardly earth-shattering. I guess it's testimony to Neumann's charisma as much as anything else.
A lot of places do also have more casual co-working spaces. Worth looking to see if there's one near you. You mention coffee shops - in Southampton UK, where I lived pre-pandemic, one of the coffee shops took the initiative to open a co-working space on an upper floor. Which would have been a great business move if the pandemic hadn't hit and f*cked everything.
(edit - I am rate limited so cannot reply below, but I wanted to add that I have used Regus in Australia as a private individual with a credit card. Obviously I don't know how it works in every country, but here it seems to be very easy)
WeWork pushed incumbents like Regus to simplify the onboarding process.
In the olden days, getting a Regus desk required an office tour appointment, followed by paperwork. Now they have an app, and nobody needs to send or receive a PDF.
I would argue that any company that has successfully at any point marketed itself as "tech" company going through these procedures qualifies as tech news.
archive.today has issues with certain DNS eg. 1.1.1.1 aka Cloudflare.[0] It isn't geofenced, and simply using another DNS is the easy fix to your troubles here.
The solution isn’t to switch away from Cloudflare DNS. Particularly when the most notable alternative is Google or my ISP DNS who sells my internet history to the highest bidder.
I really wish the community would post links with a service that works on Cloudflare DNS.
archive.is also blocks quad9 now. pretty much every privacy-oriented DNS service doesn't provide EDNS, which means that whether or not archive.is blocks them depends on whether or not the operator has gotten in a mood yet.
why anyone would use cloudflare for anything unless there were no other viable choice is beyond me. Honnestly, why?
DNS has many, vastly better alternatives.
edit: explanation I thought was common knowledge. Set "do not track" on your browser and watch cloudflare break the internet for you without your consent. Far, far too much centralized power. Just don't.
If you have DoH (DNS over HTTPS) turned on in Firefox, I think it defaults to Cloudflare as a DNS provider. I can't remember if DoH is on by default with Firefox though.
Yes. I know the latest HN trend is to hate on Cloudflare, but I’ve had zero negative experiences even as a heavy user (dns and CDN and workers) even during the major downtime events.
The negativity toward Cloudflare has always confused me. I don’t get it.
I like the archive.ph links. What alternative do you use? It would be easy to have users post both in a thread. Perhaps one of the European users could post the alternative.
In this case the Wayback Machine and archive.ph handle the content similarly, but archive.ph is more resistant to content removal efforts and makes it easier to archive rapidly changing pages on demand.
Interesting. Are there blocked by ISP or archive doesn't support Europe? I wonder if either way it's something to do with European laws? Germany in particular seems to have a cottage industry of copyright harassment
How are they going to elevate the world’s consciousness now?
In the Adam Neumann can do no wrong era this was their “corporate mission”. Honestly I can understand people using WeWork’s service, but at this point anyone who is a shareholder or creditor is either completely reckless or is strapped in, expecting a bumpy ride.
There’s no way you go in eyes open to a company that:
- used to spout BS like that
- has had to ditch the “visionary” founder and cut back on hubris
- has had to ditch its IPO and go public in a SPAC deal
…etc etc …and not expect things to be rough. I sort of get SoftBank’s position at this point. They are chained to the mast and they just need to see it through, knowing it’s going to be painful as anything.
