from Hacker News

How Did WeWork’s Adam Neumann Build a $47B Company?

by ajuhasz on 6/10/19, 7:14 PM with 206 comments

• by hdpq on 6/10/19, 8:35 PM

  I'll just go on the record to say that I think WeWork is the biggest deck of cards that is begging for a collapse. I've only been to a handful of locations, but they never seem busy and I'm not sure how they're making rent.

  Plus, not to mention, back in my day, when you did a startup and got funding from your rich uncle (not Uncle Rich), you grew your startup from your apartment, and when you outgrew that space, you got a bigger apartment. (ala Silicon Valley style)

  I dunno, I can't put my finger on it, but I think this whole thing is a massive game of charades...

• by spaceman_2020 on 6/10/19, 8:41 PM

  My WeWork has three kinds of clients. The first kind sit in the dedicated desk area, work 10-12 hours/day and rarely leave the space for community events. They're either serious consultants/freelancers or just starting their own startups.

  The second kind sit in the shared desk area and basically dick around all day. They attend all the community events and use WeWork as mostly a networking/dating hub. Who they network with, I have no clue.

  The third kind are companies with satellite offices in WeWork. GoDaddy works out of my space and has taken over an entire floor. Curiously, these are now the largest client type by far. Three floors in my space were earlier dedicated to independent workers and small startups.

  But now, WeWork opened three more floors of space, and of the six floors, four are occupied entirely by large companies.

• by danielfoster on 6/11/19, 3:02 AM

  I was a member at WeWork for over a year. The company doesn’t have a direction. WeWork seems more like a hip place to look cool than get stuff done.

  A few experiences I’ve had:

  1. WeWork holds lots of events like “Dog of the Month.” Meanwhile, there are empty desks everywhere and the printer doesn’t work.

  2. I cancelled and no one ever followed up to ask why or try to keep me as a customer (see above).

  3. The spaces are always too loud and chaotic. Every attempt is made to maximize rentable space that is never rented. American Airlines offers more bathrooms per passenger than WeWork has for its tenants.

  4. I was able to cancel to $550 / month dedicated desk membership and get a year of hot desk membership for FREE thanks to a new promotion with American Express. AMEX snd WeWork should not have opened this generous deal to existing WeWork customers. This is very poor revenue management and shows the shortsighted approach the company has toward growth.

• by anbop on 6/10/19, 8:13 PM

  By taking an old stodgy business (commercial real estate) and bringing it in conformance with modern expectations of design, ease of transactions, lease length, and vibe.

  The real estate owners couldn’t be bothered to do this because they make too much money by doing nothing to bother with doing something for an extra $47b (a rounding error on the value of global commercial real estate)

  The huge fundraising rounds are an important part of this because the hype is important for making it seem like a cool place which is essential to the economics.

  Add in some founder god complex which is not really necessary or sufficient for a successful startup but does seem to be often present.

• by manishsharan on 6/10/19, 8:25 PM

  Short Answer: he is riding the Gig economy just like Uber etc.

  Most viable businesses with a steady revenue stream can afford to rent office space and furnish it on their own. But the self employed folks -- the web designeers, SEM experts, and various other professionals without a steady employer need a place to work. For some, working from home is not an option due to regulation or family consideration etc. For most, working from a coffee shop is a very bad idea for various reason including ergonomics. WeWork fills this niche. Is this a $47B niche ? very unlikely .

• by dmode on 6/10/19, 8:42 PM

  The biggest revenue opportunity for WeWork is big corporations opening smaller office location in cities where just want to staff a small field office or operations office. Example, Uber opening an office in let's say Columbus. Now instead of Uber going on a real estate hunt, they can simply rent out space in WeWork Columbus which gives them flexibility to scale or shrink depending on business. It is essentially abstracting away the real estate inefficiencies. There is a definitely a market for it. But not sure whether it is worth $47bn

• by sharadov on 6/10/19, 8:34 PM

  I have the next billion-dollar business idea, an " Airbnb for coworking spaces". Convert your existing house to a co-working space. Looked at Wework, already pay too much for rent in the Bay area. I work from home, and would not mind the company. Got good coffee and great beer as well!

• by KuhlMensch on 6/11/19, 8:27 AM

  Hm, I worked in a company that had hired ~140 desks in WeWork (Aldgate London). If all the floors in the world have a few large-companies provisioned and filled like that - I could. be convinced the valuation is plausible.

  When you are a large company in WeWork, you set the culture (e.g. noise) and you have personal relationships with the WeWork staff - which makes things run smoother.

  From reading the comments it seems many people have had lack-luster experiences. Especially those who hired a single desk and have been forced to interact with the community. And imho the community is pretty unique:

  I remember knocking off work at 7pm, and hearing there was free beers. I wandered over in a work-daze. As I approached the door, it opened and out poured hi-energy EDM, accompanied by a large group of happy, shout-chatting drunks. I slid around them and entered what was more "club at 1am" - rather than "knock-off drinks". I mean there was flashing lights, a DJ, and a decent sound system. What I was most amazed by was passing multiple people who seemed to be rolling hard. It was definitely impressive, but after coding for 10 hours straight it was not what I needed, so I grabbed a fist of and Heineken backed out.

  The thing that always stuck with me, was the implicit agreement by all-attending, that they were all going to go _hard_ as soon as they knocked off work. I provide no judgement, just an account of something I'd never seen in inter-office culture. Note: I never personally saw that level of revelry again.

• by rpmcmurphy on 6/11/19, 4:44 AM

  Ah, the magic of financial engineering. Mr. Neumann will cash out of his fictional decacorn in dribs and drabs and never have to work again. Everyone else will be left with a bit pile of shit (aka a commercial real estate venture that bet on ever upward growth and got ripped to shreds in the secular downturn).

• by exogeny on 6/10/19, 7:57 PM

  He made investors believe in a non-sensical vision that is not rooted in any sort of financial or commercial reality in the middle of an insane bull market.

  Simple.

• by dbbk on 6/11/19, 1:41 PM

  > He has bragged about working 20-hour days and regularly called executive meetings that would begin after midnight. “I’ve had meetings that started at 2 a.m. where he joined us 45 minutes late, but that meeting was worth millions,” a former WeWork executive told me.

  This is not OK.

• by dlock on 6/10/19, 9:30 PM

  So i work out of a competitors place here in south east asia (indonesia to be specific), for the guys here from the region they probably know who im talking about. This coworking space was initially funded by a local VC but then low and behold softbank just invested, wework is also here in indonesia. I (last year) had to downsize my startup because some areas of business didnt do so well so i moved into this coworking, decent building , upper class part of town and i have 4 rooms next to each other probably 5x3 meters each. Each room i pay 300$usd a month, got it at a 60% discount cause it was just opening and locked it in for 3 years ! But at say ~$700 a room per month full price its still a dam good price, cheaper than anywhere else by far in the area. Wework is charging 3x that amount ... i have no idea what SB's strategy is here with wework and this locally invested competitor, specially with regards to cannibalizing each other and specially in a price sensitive market, maybe things will go the way of uber and grab where the bigger more international son of softbank will leave the region so the local son can dominate. But honestly, other then cheap rent, there is nothing special about these places, i dont see any tech, auto bookings, elastic rental or anything, i came here cause i had to downsize , needed interent , place for my guys to work, strategize and refocus. Its helped us save on costs over the last year and have brought back the startup from near collapse to doing very well again. Also at the price im getting it i have no idea how they make money, even at the full price its hard to understand as i know what a floor in the place im working at actually costs ... there are also many empty rooms ... i mean its like uber to me, im using it cause its cheap and its convenient, but should a cheaper one come out in the near future, ill simply ask my guys to pickup their laptops and move next door, there is really no added value for me to use one or the other just like all the ride hailing companies ... whos cheaper will get my business, if this is the way these SB companies are going to roll over the next few years and there really is no added value, they in for a lot of hurt. But after saying that, i thank them for cheap rent and helping me get my startup back on track :)

• by code4tee on 6/10/19, 8:24 PM

  Valuation inflation / delusion only really matters if you’re the last one left holding the bag. So long as there’s someone else willing to buy the game continues for another round.

  When the music stops though things get real ugly real quick.

• by perfunctory on 6/11/19, 9:21 AM

  For me WeWork is a prime example of how the rich (investors) don’t know what to do with their piles of cash. We need to force (eh, inspire) them to invest in renewables instead.

• by listenandlearn on 6/10/19, 10:04 PM

  It seems like these companies are fully over valued so now they need to come up with shit to push down people’s throats for the IPOs so the investors can get out at a profit.

  This is what happens when VCs keep funding these loses for a decade. We saw the same thing with Uber, pushing Uber eats as if it’s going to take over all food, meanwhile there has been like 3-5 startups already doing that at a very easy to value valuation.

  Anyway, I’m not buying.

  Edit: I’m referencing the following from the article

  >>”He is known for making bombastic pronouncements, like this one at an all-company event last year: “There are 150 million orphans in the world. We want to solve this problem and give them a new family: the WeWork family.” In L.A., Neumann told his employees that the newly formed We Company would now have three prongs — WeWork, WeLive, and WeGrow — with a single, grandiose mission: “to elevate the world’s consciousness.””

• by espeed on 6/10/19, 9:18 PM

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

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

  https://www.cbinsights.com/research/report/wework-strategy-t...

• by ddffre on 6/11/19, 3:59 AM

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

• by rchaud on 6/11/19, 12:00 AM

  For all the criticism that modern media gets regarding journalistic standards around coverage of big business, it's remarkable that they will lead with eye-popping valuation numbers in their headlines when they know that they are more or less a fiction concocted by VCs.

• by loriverkutya on 6/11/19, 8:39 AM

  I worked in a WeWork in London for 6 month (it was one of the main reason I left.) I don't even considering initial interview with anybody using WeWork after that.

• by the_arun on 6/10/19, 10:19 PM

  There is a podcast for the interview Guy Raz did for “How I built this” with Miguel McKelvey https://podcasts.apple.com/us/podcast/how-i-built-this-with-... . Thought it was a pretty good startup story

• by jshowa3 on 6/10/19, 8:40 PM

  Sounds like a cult to me.

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

• by mdorazio on 6/10/19, 7:53 PM

  Cynical answer: he convinced VCs that his particular brand of shared office space was better than everyone else's, actual revenue be damned, and they believed him. That's it. Straight from the article: "Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"

• by naveen99 on 6/10/19, 9:07 PM

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

• by sonnyblarney on 6/10/19, 9:06 PM

  "“valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"

  Literally valuation based on 'spirituality'.

  Not only do I call 'bubble' but also 'BS'.

  Very wary of companies leveraging 'morality' in whatever form (esp. all the way up to 'Spirituality'), unless it's somehow deeply authentic (i.e. a company that makes 'green' eqipment can claim 'greeness' that's fine), and are something to be cynical about. I find it kind of repulsive.

  My feeling is that WeWork must be the 'high tech startup' opportunity for all those non-tech 'Goop' reader types.

  ... like the NXVM of startup land.

  Tony Robbins of working real estate + SoftBank.

  “There are 150 million orphans in the world. We want to solve this problem and give them a new family: the WeWork family.” In L.A., Neumann told his employees that the newly formed We Company would now have three prongs — WeWork, WeLive, and WeGrow — with a single, grandiose mission: “to elevate the world’s consciousness.”

  Just beautiful ...

  WeWork’s size and scale could put it in a position to help deal with some of the world’s largest problems, like the refugee crisis, saying, “I need to have the biggest valuation I can, because when countries are shooting at each other, I want them to come to me.”

  How does anyone take this guy seriously?

  In the comments here there seems to be a lack of calling out on the so many of the gob-smacking authoritarian/hypocrisy red-flags going on here.

  The guy's line is preaching morality, spirituality and inclusuion ... while doing the opposite i.e. dropping the least productive 20% staff every year? 'All dudes' in charge? (Nothign necessarily wrong there (maybe red flags), but it's definitely hypocritical)

  All of the Kabbalah stuff and social preaching at offsites?

  'It's like a capitalist Kibbutz' ... this is double-speak.

  And that his background doesn't legitimately speak to any of this, i.e. total lack of legitimacy?

  The trick to this kind personality is 1) words have no bearing on reality 2) total lack of self-awareness or consideration such that he can come across as 'honest' even when spouting garbage.

  Who else could possibly be talking about 'saving the refugees of the world' like this with a straight face?

  This guy is the Donald Trump of Vegans.

• by dsr_ on 6/10/19, 10:07 PM

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

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

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

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