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WeWork Is Raising Funds at $35B Valuation

117 points by vthallam 8y ago

deleted 8y ago
[deleted]
synaesthesisx 8y ago
Anyone else find it interesting that WeWork doesn't own any real estate? They literally lease and sublet office space (although they provide amenities...do those justify the valuation?). Granted there is some brand value, but what's stopping a building owner from offering hot desks + coffee themselves?
- jaredhansen 8y ago
  >but what's stopping a building owner from offering hot desks + coffee themselves? That is not at all what WeWork offers. I'm typing this from a Regus office space (probably the best known incumbent), and having worked out of WeWork offices at other times, the difference between the two experiences couldn't be more stark. A lot of companies try to claim to be "tech companies" when they're really just doing some mundane thing, in the same way as ever, but with a "tech" sheen on the website. (Maybe some green kanji characters scrolling down a black background, that sort of thing.) WeWork really is different. I've seen some of the tech they deploy to improve the density ratio of the buildings, and to track different aspects of their customers' experience, and on and on. I'll grant that there aren't many barriers to entry in a small-scale, "hey, here's a desk and hot coffee" local market -- but very few companies can create the kind of global footprint that WeWork now has, which is a big part of the main strategy, going after the office needs of the Global 2k.
  - zaidf 8y ago
    I've used both Regus and WeWork and would pick Regus over WeWork any day. I am so much more productive at a more laid-back, quiet (both sound and visual noise) environment than the hustle and bustle that WeWork takes pride in. WeWork calls this energy, I call it noise.
    - chasely 8y ago
      Seconded. I'm at WeWork now, and had to upgrade offices just so I could be somewhere that was quieter. Once my contract is up I'll be looking for a more out-of-the-way office where I don't need to put on headphones several times a day.
      - subdane 8y ago
        Thirded. WeWork has horrible sound design.
  - mxschumacher 8y ago
    for reference, IWG's market cap (the parent of Regus) is $3.8bn
  - josephjrobison 8y ago
    I hear you on that end of tracking customer experience. That being said, they trump up their internal social network as part of their valuation, but it barely gets used in my WeWork and I can see globally that it doesn’t get used much except for selling and some reference requests. It’s used at a rate of like less than one posting a month per person.
  - FigureTheGreat 8y ago
    >very few companies can create the kind of global footprint that WeWork now has If other companies were able to lose $900m/yr and still operate I bet they would be able to create that type of global footprint
    - jaredhansen 8y ago
      Yes, but that's a rather large if, isn't it now? Access to capital is a moat all its own.
- jkuria 8y ago
  Not owning real estate is the reason for the high valuation. Hilton and Marriott discovered this a long time ago, and more recently AirBnb.
- mi100hael 8y ago
  Most commercial buildings are held by investors/funds who tend to own thousands of units. They probably have an in-house staff of property managers who places tenants, schedules repairs/improvements, etc. Managing co-working space would be a totally new way of doing business for these funds which represents a risk they're not currently interested in taking.
  - daveguy 8y ago
    Plus, the property owners can just raise the rent on WeWork and only take the upside with little operating risk.
  - jonknee 8y ago
    To be fair there is not a single commercial REIT worth more than $35B [1]. WeWork is certainly large enough to own real estate, but they want to be valued like a tech company and you can't do that if you look more like a REIT. https://finviz.com/screener.ashx?v=111&f=ind_reitoffice&o=-marketcap https://finviz.com/screener.ashx?v=111&f=ind_reitoffice&o=-m...
    - mehwoot 8y ago
      Dexus, a company that manages real estate only in Australia has $26 billion of property under management, split about 50% owned by them and 50% managing for other people. Their total portfolio is under 150 properties. That's all in a country with 20 million ish people. You could get a lot bigger than that. But of course it wouldn't be the quickest way to grow since you'd need insane captial. If your competitive advantage is the extra return you're squeezing from the properties, makes far more sense to lease them so you can have more, rather than be buying them upfront. https://www.dexus.com/who-we-are https://www.dexus.com/who-we-are
  - deleted 8y ago
    [deleted]
- jartelt 8y ago
  Traditional property owners don't have the skills to build the technology system needed to manage a large co-working space.
- baybal2 8y ago
  >Anyone else find it interesting that WeWork doesn't own any real estate? They literally lease and sublet office space (although they provide amenities...do those justify the valuation?). Granted there is some brand value, but what's stopping a building owner from offering hot desks + coffee themselves? Owning commercial real estate in today's market == losing money. Rent to buy ratio is all time high.
- arthurcolle 8y ago
  hot desks?
justboxing 8y ago
Not trolling, really don't understand how WeWork is valued at 35 BILLION when they don't even own the real-estate properties that they are leasing. How is this absurd valuation -- or for that matter, even the 17 BILLION previous valuation -- justified esp considering (according to the article) they are losing money ? > The company’s bond offering documents showed fast-growing sales but even faster-increasing losses. WeWork had total revenue of $886 million but a net loss of $933 million in 2017, according to the documents.
- swampthinker 8y ago
  Net loss, holy cow. $1.8B burn on $900M in revenue.
  - acchow 8y ago
    The general strategy must be undercut the market to buy market share, and then transform the market entirely. I don't understand the precise mechanisms in the case of WeWork (it's not as clear as, say, Uber + self driving cars). Can someone explain?
    - enraged_camel 8y ago
      They bought Meetup recently so maybe they are planning some sort of synergy?
      - toasterlovin 8y ago
        I just received an email from them touting the ease with which I can rent space from them (free for some introductory period) for the meetup I run. The problem is that many (most, I'm guessing) meetups are funded by an individual. Unless their space is drastically less expensive than a lot of the alternatives I found when trying to find a space for my meetup, nobody is going to be able to afford to use their space.
- georgespencer 8y ago
  As someone else has pointed out, not owning the real estate is part of the reason for the high valuation. A good franchise business will force the franchisee to buy the real estate and give the franchise the opportunity to buy the real estate at a fixed cost (either fixed outright or a multiple of revenue for the location), effectively giving them no downside on capital depreciation on the site (i.e. the value of the site going down) or the ongoing dilaps costs. They only have upside: they can buy the site if it's doing really well. And meanwhile, you're buying your training, goods, services, and paying a portion of your revenues to the franchise. WeWork is like a franchise which has no interest in owning your real estate. They and others have realised the opportunity to take advantage of a couple of factors in the macro (more fluidity in working working lives -- telecommuting, flexible work --, startups, low interest rates meaning units can be vacant and on balance sheet without too much pain for an owner) and build a smart offering around that: got an empty building OR bored of the overheads and headaches of managing an office space yourself? We'll lease it from you for a fixed price and then take any upside. You get smoothed cashflow and a fixed yield, and we get whatever upside we can make. They don't have any of the overheads, complexity, costs, or risks of owning the real estate. The IP and brand they're building (brand is an important factor here!) are not wedded to geography. Shoreditch isn't cool for startups any more? WeWork is gone.
saryant 8y ago
Taken with their "community adjusted EBITDA" and I really want to hear a good-faith explanation of how this situation doesn't end horribly. A valuation divorced from any reality and a company using fantasyland financial metrics. http://www.businessinsider.com/wework-community-adjusted-ebitda-is-reminiscent-of-tech-bubble-albert-edwards-says-2018-5 http://www.businessinsider.com/wework-community-adjusted-ebi...
jacob019 8y ago
Seems the space is getting crowded. I rent from Industrious, a WeWork knockoff that's nicer IMO; I get a weekly newsletter and it seems like a new location is opening every week.
datainplace 8y ago
I am looking for office space right now, and I left the local WeWork office 30 minutes ago. Its very simple, they do things a lot better. That is the space I want to rent. When I talk to cheaper office's they feel cheaper. Also their contracts are simple. I want to think about my business, not building out an office space. Finally, the fact that I now have a meeting room I can reserve in multiple cities across the globe makes it almost a no brainier. The drawback? They really know how to jam a lot of people into a very small space, which might be why their valuation is so high.
greggyb 8y ago
Typing this from a Make Office (WeWork competitor). I am not surprised at their cashflow situation. A local office recently poached a bunch of members from the Make location I'm at. They were offering 6 months free rent. It seems like a "share at all cost" kind of strategy. Especially considering the churn rate I see at Make, I'd be surprised if they do much more than break even on the customers they got with a 6-month credit.
- avip 8y ago
  %occupied must be one of their primary metrics.
avip 8y ago
WeWork is the next BetterPlace, only with way less interesting product.
josephjrobison 8y ago
WeWork does a few things well - obviously they know how to roll out a ton of offices very fast like McDonalds, they’re good at marketing and PR, and they’re great at interior design. They’re smart about getting other companies to sponsor events and provide the goods. A WeWork funded activity is like 5 boxes of cereal and some milk and they call it a “cereal bar” - that’s like $20. Their front desk people are nice, but always seemed overwhelmed and don’t help beyond surface level. I’m learning that when it comes to your last month, the customer service goes out the window and they turn into sharks. One day late on my notice and they force me to pay a full month to not have an “illegal moveout”. Buyer beware.
z0a 8y ago
If the tech bubble and real estate bubble had a baby, it's name would be WeWork. How is a company that had a net loss of $933 million and that owes $18 billion in rent even remotely worth $35 billion. I'd consider the lemonade stand on the corner to be more of a business than WeWork in the true sense of the word. What's inherently hard about what WeWork is doing? With enough money, anyone can rent out buildings, chop it up, and make it appealing to hipsters with some interior work, then over charge companies and individuals to rent out tiny spaces.
- code4tee 8y ago
  When you consider that much of WeWork’s revenue is likey just VC dollars paying the expenses of their tenants then the whole thing looks even crazier. VC money paying revenue of a startup that uses that revenue to justify raising more money from VCs. I have some bridges to sell.
  - nicodjimenez 8y ago
    While this is true, there's plenty of non VC backed companies, consultancies, and startups at WeWork. I never liked the place myself, but it does provide value. A lot of money out there is dumb money, and a lot of it is smart money, and there's nothing wrong with having some percentage of your revenue be dumb money. AWS certainly does but nobody would question the sound fundamentals of AWS as a business. WeWork has a better balance in that regard than many others.
  - aventrix 8y ago
    "When you consider that much of WeWork’s revenue is likey just VC dollars paying the expenses of their tenants" Is that a known fact or just a guess? The prices are low enough that it seems like it could easily appeal to bootstrapped companies or small businesses.
    - jordan_litko 8y ago
      Anecdotally,we're a bootstrapped business and a happy wework tenant.
skate22 8y ago
My company is pretty corporate. They have some limited seating in a we work building. Employees that perform very highly have a chance to get a seat in the we work building. It may be a small perk, but the extra hours / effort people put in to get / retain their spot more than pays for what we spend on the seats. If this easily re-createable environment was the norm, it wouldnt motivate internally. If the company only created it for a snall portion of the company, employees would resent leadership. It's been a very effective business investment for the company i work at.
- nradov 8y ago
  That sounds like your company has poor facilities and incompetent management if the employees are trying to escape from the main office. It's hard to see that as a sustainable competitive advantage for WeWork.
  - skate22 8y ago
    The main facilities are more than fine, its a job not a resort haha. Management could be better, but I have a very small sample to base that claim off of. That being said, a sexier environment is just one of many ways to motivate people. Rewarding people who work harder is one of the better management decisions in my oppinion. Merit based bonuses are the main way my company handles this, but there are more perks for the individuals who take initiative & constantly get shit done (as it should be)
    - nradov 8y ago
      Competent managers reward based on business value generation, not hard work. In a typical tech company, segregating employees into two different classes of office space would lead to excessive internal competition and office politics which kills morale and inhibits teamwork.
      - skate22 8y ago
        I dissagree that only business value added should be rewarded. Sometimes your manager will come to you with an idea that gets squashed 2 months down the road. I could do great at what i was tasked to do, but did not end up adding any value. You don't hold back from praising their work. That would kill morale. To your second point, i started in the first environment & eventually got a seat. I never resented people who were over there. I saw some friends get there before me and i was happy for them. There was no internal competition, just another nice reward to thank employees. I wouldnt want it to go away even if i lost my seat.
jaypaulynice 8y ago
So all these tech startups are just good at raising fund? Is that a business model nowadays? It’s like this startup I worked for and I swear what we did best was hire people to do nothing...
noway421 8y ago
One dangerous part I think investors have forgotten in this whole going-away-from-public-markets financing craze is that companies can now hold investors hostage. It's now all or nothing play in which the investors need to pour more and more money in the subsequent rounds in order to justify the ramp up cost which gets you to the heavenly break even somewhere in next five years. There's no longer an option to get out. IPO on 100b valuation or bust. Public companies would never have luxury to take such gambles, their stock would crash. (but from the other point of view, tesla is somehow still doing it)
- mlthoughts2018 8y ago
  Perhaps often by design? Maybe sitting rows of expensive engineers in opulent exposed brick open plan offices like they are office furniture is like creating a venus fly trap for investors? It would partly explain why engineering productivity is paid such little attention.
chasd00 8y ago
I office out of wework in downtown Dallas. As far as co-working goes it's the best setup I've seen so far (out of maybe 6 that I've tried). I don't know much about their valuation but what you get is worth the money you spend. At the end of the day, that's all that really counts.
dalfonso 8y ago
I had a dedicated desk at a WeWork for about a year. Before that, I had a desk at Regus location for about a year. - While local coworking spaces could match the decor, vibe, etc. your local coworking space didn't have locations in other cities. I got 5? credits that I could use to work out of other WeWork locations. - WeWork definitely had a tech-first attitude. If you wanted to reserve meeting rooms, register a guest, sign-up for events, etc, they wanted you to do that through their mobile app or website. Regus may have had a site, but they didn't push you towards it. - WeWork had a "marketplace" where you could get discounts on various tech/non-tech things like accounting software, business cards, services, etc. Probably another good revenue stream. They could be pitching it as the "App Store" for startups. - In my location, in the LA area, tech wasn't the majority. I would say 75% of the people I met were in some sort of service (real estate agents, lawyers, consultants, recruiters, etc,). I don't think they're worth $35B (Delta Airlines' market cap is $38B, Atlassian market cap is $15B for some benchmarks), but they definitely do have some positives.
baybal2 8y ago
Dear WeWork guys, if you are reading this :), these are few tips how to run a rental office space: 1. Good furniture. You either buy super duper expensive italian handwork stuff, or generic IKEA. Nothing in between. 2. Think of smaller spaces, down to few rooms for 6 people in the same building. Getting a wholesale rent rate on those, will be I say, easier than that for warehouse sized halls you rent today. 3. Rent in premium highrise towers. Your clientele is more than eager to work out of these places. 4. Reduce working hours, and charge extra for late stayers!!! You can't work when you are being disturbed by cleaning staff. Having everybody leave for the time cleaners do their work, will make life of both cleaners and renters easier. 5. Forbid eating at workplace. Having people carrying coffee bumping into me 3 times in 2 months, made me leave your cowo.
mistrial9 8y ago
when are nerds going to figure out that renting services at a techie price, from other people who form a company that has big valuation, is a new version of Feudalism.
kgwgk 8y ago
Matt Levine today: https://www.bloomberg.com/view/articles/2018-06-14/banks-get-distracted-by-the-world-cup https://www.bloomberg.com/view/articles/2018-06-14/banks-get... "I have to say, if SoftBank is going to become the entire market for hot private technology startups, then every valuation is going to be marked-to-SoftBank, and the numbers will start to lose their meaning. SoftBank: Would you like some money at a $10 billion valuation? Startup: Sure. SoftBank: Here you go. Would you like some more at a $20 billion valuation? Startup: Sure. SoftBank: Here you go. How about a $40 billion valuation? Startup: This is dumb but it’s not like we’re going to say no. SoftBank: Here you go. Startup: Thanks brb buying a yacht. SoftBank: Our mark-to-market investment returns are tremendous, we must be good at this."
jillesvangurp 8y ago
I spent some time working out of WeWork in Berlin (one of their 3 offices there). A few observations: - Being there is expensive for individuals. It seems to be mostly small companies and projects renting space. They get a decent deal of having an office and all stuff that comes with that as part of the package. - They seem to use space efficiently, I did not spot many vacancies and it was packed with people. - It looked to me like they are not having demand issues and they are basically billing per seat. - Setting up these spaces must be costing them a bit as a one time investment. The space looks nice and clearly they are going for quality here. Seems to be part of their brand. I imagine the latter is what is driving recent losses, because they have been expanding like crazy. The flip side is that if each of those new offices has similar occupancy, they are growing their revenue as well. The initial investment can be amortized over the lifetime of the lease probably, which presumably is many years. As soon as they stop growing, they should be making money. My guess is they are instead expanding as fast as they can get away with. This means that these losses are in fact solid investments. Somebody else in this thread is citing 40% profit margins; this sounds legitimate to me. The per building revenue should be substantial based on what I've seen.
mstaoru 8y ago
I'm typing this from one of WeWork's Shanghai locations, the loud music is blaring behind me so I wear 3M Peltor construction headset, the sun through the glass roof blinds my screen, and I have to squint to be able to read what I type. I'm just back to HN from Medium which didn't load because the Internet speed is abysmal (packet loss to Baidu LG is at 12% right now with medium ping at 170ms, if I switch to my phone hotspot it's 1% and 32ms). I just bought some drinking water outside because their RO filter is probably not serviced ever and I have stomach issues after drinking it, my TDS pen reads 180ppm from their water which is about the same as my tap water at home. But my membership is part of the contract so I'm not paying for it, so I can't complain. $35B, $350B, these numbers feel very abstract to me. They're probably collecting and selling a lot of data about us, otherwise, I don't see much value over other local players here which all have good design and nice crowd. And no banging music.

117 points by vthallam 8y ago

deleted 8y ago

[deleted]

Anyone else find it interesting that WeWork doesn't own any real estate? They literally lease and sublet office space (although they provide amenities...do those justify the valuation?). Granted there is some brand value, but what's stopping a building owner from offering hot desks + coffee themselves?

jaredhansen 8y ago
>but what's stopping a building owner from offering hot desks + coffee themselves? That is not at all what WeWork offers. I'm typing this from a Regus office space (probably the best known incumbent), and having worked out of WeWork offices at other times, the difference between the two experiences couldn't be more stark. A lot of companies try to claim to be "tech companies" when they're really just doing some mundane thing, in the same way as ever, but with a "tech" sheen on the website. (Maybe some green kanji characters scrolling down a black background, that sort of thing.) WeWork really is different. I've seen some of the tech they deploy to improve the density ratio of the buildings, and to track different aspects of their customers' experience, and on and on. I'll grant that there aren't many barriers to entry in a small-scale, "hey, here's a desk and hot coffee" local market -- but very few companies can create the kind of global footprint that WeWork now has, which is a big part of the main strategy, going after the office needs of the Global 2k.
- zaidf 8y ago
  I've used both Regus and WeWork and would pick Regus over WeWork any day. I am so much more productive at a more laid-back, quiet (both sound and visual noise) environment than the hustle and bustle that WeWork takes pride in. WeWork calls this energy, I call it noise.
  - chasely 8y ago
    Seconded. I'm at WeWork now, and had to upgrade offices just so I could be somewhere that was quieter. Once my contract is up I'll be looking for a more out-of-the-way office where I don't need to put on headphones several times a day.
    - subdane 8y ago
      Thirded. WeWork has horrible sound design.
- mxschumacher 8y ago
  for reference, IWG's market cap (the parent of Regus) is $3.8bn
- josephjrobison 8y ago
  I hear you on that end of tracking customer experience. That being said, they trump up their internal social network as part of their valuation, but it barely gets used in my WeWork and I can see globally that it doesn’t get used much except for selling and some reference requests. It’s used at a rate of like less than one posting a month per person.
- FigureTheGreat 8y ago
  >very few companies can create the kind of global footprint that WeWork now has If other companies were able to lose $900m/yr and still operate I bet they would be able to create that type of global footprint
  - jaredhansen 8y ago
    Yes, but that's a rather large if, isn't it now? Access to capital is a moat all its own.
jkuria 8y ago
Not owning real estate is the reason for the high valuation. Hilton and Marriott discovered this a long time ago, and more recently AirBnb.
mi100hael 8y ago
Most commercial buildings are held by investors/funds who tend to own thousands of units. They probably have an in-house staff of property managers who places tenants, schedules repairs/improvements, etc. Managing co-working space would be a totally new way of doing business for these funds which represents a risk they're not currently interested in taking.
- daveguy 8y ago
  Plus, the property owners can just raise the rent on WeWork and only take the upside with little operating risk.
- jonknee 8y ago
  To be fair there is not a single commercial REIT worth more than $35B [1]. WeWork is certainly large enough to own real estate, but they want to be valued like a tech company and you can't do that if you look more like a REIT. https://finviz.com/screener.ashx?v=111&f=ind_reitoffice&o=-marketcap https://finviz.com/screener.ashx?v=111&f=ind_reitoffice&o=-m...
  - mehwoot 8y ago
    Dexus, a company that manages real estate only in Australia has $26 billion of property under management, split about 50% owned by them and 50% managing for other people. Their total portfolio is under 150 properties. That's all in a country with 20 million ish people. You could get a lot bigger than that. But of course it wouldn't be the quickest way to grow since you'd need insane captial. If your competitive advantage is the extra return you're squeezing from the properties, makes far more sense to lease them so you can have more, rather than be buying them upfront. https://www.dexus.com/who-we-are https://www.dexus.com/who-we-are
- deleted 8y ago
  [deleted]
jartelt 8y ago
Traditional property owners don't have the skills to build the technology system needed to manage a large co-working space.
baybal2 8y ago
>Anyone else find it interesting that WeWork doesn't own any real estate? They literally lease and sublet office space (although they provide amenities...do those justify the valuation?). Granted there is some brand value, but what's stopping a building owner from offering hot desks + coffee themselves? Owning commercial real estate in today's market == losing money. Rent to buy ratio is all time high.
arthurcolle 8y ago
hot desks?

justboxing 8y ago

Not trolling, really don't understand how WeWork is valued at 35 BILLION when they don't even own the real-estate properties that they are leasing. How is this absurd valuation -- or for that matter, even the 17 BILLION previous valuation -- justified esp considering (according to the article) they are losing money ? > The company’s bond offering documents showed fast-growing sales but even faster-increasing losses. WeWork had total revenue of $886 million but a net loss of $933 million in 2017, according to the documents.

swampthinker 8y ago
Net loss, holy cow. $1.8B burn on $900M in revenue.
- acchow 8y ago
  The general strategy must be undercut the market to buy market share, and then transform the market entirely. I don't understand the precise mechanisms in the case of WeWork (it's not as clear as, say, Uber + self driving cars). Can someone explain?
  - enraged_camel 8y ago
    They bought Meetup recently so maybe they are planning some sort of synergy?
    - toasterlovin 8y ago
      I just received an email from them touting the ease with which I can rent space from them (free for some introductory period) for the meetup I run. The problem is that many (most, I'm guessing) meetups are funded by an individual. Unless their space is drastically less expensive than a lot of the alternatives I found when trying to find a space for my meetup, nobody is going to be able to afford to use their space.
georgespencer 8y ago
As someone else has pointed out, not owning the real estate is part of the reason for the high valuation. A good franchise business will force the franchisee to buy the real estate and give the franchise the opportunity to buy the real estate at a fixed cost (either fixed outright or a multiple of revenue for the location), effectively giving them no downside on capital depreciation on the site (i.e. the value of the site going down) or the ongoing dilaps costs. They only have upside: they can buy the site if it's doing really well. And meanwhile, you're buying your training, goods, services, and paying a portion of your revenues to the franchise. WeWork is like a franchise which has no interest in owning your real estate. They and others have realised the opportunity to take advantage of a couple of factors in the macro (more fluidity in working working lives -- telecommuting, flexible work --, startups, low interest rates meaning units can be vacant and on balance sheet without too much pain for an owner) and build a smart offering around that: got an empty building OR bored of the overheads and headaches of managing an office space yourself? We'll lease it from you for a fixed price and then take any upside. You get smoothed cashflow and a fixed yield, and we get whatever upside we can make. They don't have any of the overheads, complexity, costs, or risks of owning the real estate. The IP and brand they're building (brand is an important factor here!) are not wedded to geography. Shoreditch isn't cool for startups any more? WeWork is gone.

saryant 8y ago

Taken with their "community adjusted EBITDA" and I really want to hear a good-faith explanation of how this situation doesn't end horribly. A valuation divorced from any reality and a company using fantasyland financial metrics. http://www.businessinsider.com/wework-community-adjusted-ebitda-is-reminiscent-of-tech-bubble-albert-edwards-says-2018-5 http://www.businessinsider.com/wework-community-adjusted-ebi...

jacob019 8y ago

Seems the space is getting crowded. I rent from Industrious, a WeWork knockoff that's nicer IMO; I get a weekly newsletter and it seems like a new location is opening every week.

datainplace 8y ago

I am looking for office space right now, and I left the local WeWork office 30 minutes ago. Its very simple, they do things a lot better. That is the space I want to rent. When I talk to cheaper office's they feel cheaper. Also their contracts are simple. I want to think about my business, not building out an office space. Finally, the fact that I now have a meeting room I can reserve in multiple cities across the globe makes it almost a no brainier. The drawback? They really know how to jam a lot of people into a very small space, which might be why their valuation is so high.

greggyb 8y ago

Typing this from a Make Office (WeWork competitor). I am not surprised at their cashflow situation. A local office recently poached a bunch of members from the Make location I'm at. They were offering 6 months free rent. It seems like a "share at all cost" kind of strategy. Especially considering the churn rate I see at Make, I'd be surprised if they do much more than break even on the customers they got with a 6-month credit.

avip 8y ago
%occupied must be one of their primary metrics.

avip 8y ago

WeWork is the next BetterPlace, only with way less interesting product.

josephjrobison 8y ago

WeWork does a few things well - obviously they know how to roll out a ton of offices very fast like McDonalds, they’re good at marketing and PR, and they’re great at interior design. They’re smart about getting other companies to sponsor events and provide the goods. A WeWork funded activity is like 5 boxes of cereal and some milk and they call it a “cereal bar” - that’s like $20. Their front desk people are nice, but always seemed overwhelmed and don’t help beyond surface level. I’m learning that when it comes to your last month, the customer service goes out the window and they turn into sharks. One day late on my notice and they force me to pay a full month to not have an “illegal moveout”. Buyer beware.

z0a 8y ago

If the tech bubble and real estate bubble had a baby, it's name would be WeWork. How is a company that had a net loss of $933 million and that owes $18 billion in rent even remotely worth $35 billion. I'd consider the lemonade stand on the corner to be more of a business than WeWork in the true sense of the word. What's inherently hard about what WeWork is doing? With enough money, anyone can rent out buildings, chop it up, and make it appealing to hipsters with some interior work, then over charge companies and individuals to rent out tiny spaces.

code4tee 8y ago
When you consider that much of WeWork’s revenue is likey just VC dollars paying the expenses of their tenants then the whole thing looks even crazier. VC money paying revenue of a startup that uses that revenue to justify raising more money from VCs. I have some bridges to sell.
- nicodjimenez 8y ago
  While this is true, there's plenty of non VC backed companies, consultancies, and startups at WeWork. I never liked the place myself, but it does provide value. A lot of money out there is dumb money, and a lot of it is smart money, and there's nothing wrong with having some percentage of your revenue be dumb money. AWS certainly does but nobody would question the sound fundamentals of AWS as a business. WeWork has a better balance in that regard than many others.
- aventrix 8y ago
  "When you consider that much of WeWork’s revenue is likey just VC dollars paying the expenses of their tenants" Is that a known fact or just a guess? The prices are low enough that it seems like it could easily appeal to bootstrapped companies or small businesses.
  - jordan_litko 8y ago
    Anecdotally,we're a bootstrapped business and a happy wework tenant.

skate22 8y ago

My company is pretty corporate. They have some limited seating in a we work building. Employees that perform very highly have a chance to get a seat in the we work building. It may be a small perk, but the extra hours / effort people put in to get / retain their spot more than pays for what we spend on the seats. If this easily re-createable environment was the norm, it wouldnt motivate internally. If the company only created it for a snall portion of the company, employees would resent leadership. It's been a very effective business investment for the company i work at.

nradov 8y ago
That sounds like your company has poor facilities and incompetent management if the employees are trying to escape from the main office. It's hard to see that as a sustainable competitive advantage for WeWork.
- skate22 8y ago
  The main facilities are more than fine, its a job not a resort haha. Management could be better, but I have a very small sample to base that claim off of. That being said, a sexier environment is just one of many ways to motivate people. Rewarding people who work harder is one of the better management decisions in my oppinion. Merit based bonuses are the main way my company handles this, but there are more perks for the individuals who take initiative & constantly get shit done (as it should be)
  - nradov 8y ago
    Competent managers reward based on business value generation, not hard work. In a typical tech company, segregating employees into two different classes of office space would lead to excessive internal competition and office politics which kills morale and inhibits teamwork.
    - skate22 8y ago
      I dissagree that only business value added should be rewarded. Sometimes your manager will come to you with an idea that gets squashed 2 months down the road. I could do great at what i was tasked to do, but did not end up adding any value. You don't hold back from praising their work. That would kill morale. To your second point, i started in the first environment & eventually got a seat. I never resented people who were over there. I saw some friends get there before me and i was happy for them. There was no internal competition, just another nice reward to thank employees. I wouldnt want it to go away even if i lost my seat.

jaypaulynice 8y ago

So all these tech startups are just good at raising fund? Is that a business model nowadays? It’s like this startup I worked for and I swear what we did best was hire people to do nothing...

noway421 8y ago

One dangerous part I think investors have forgotten in this whole going-away-from-public-markets financing craze is that companies can now hold investors hostage. It's now all or nothing play in which the investors need to pour more and more money in the subsequent rounds in order to justify the ramp up cost which gets you to the heavenly break even somewhere in next five years. There's no longer an option to get out. IPO on 100b valuation or bust. Public companies would never have luxury to take such gambles, their stock would crash. (but from the other point of view, tesla is somehow still doing it)

mlthoughts2018 8y ago
Perhaps often by design? Maybe sitting rows of expensive engineers in opulent exposed brick open plan offices like they are office furniture is like creating a venus fly trap for investors? It would partly explain why engineering productivity is paid such little attention.

chasd00 8y ago

I office out of wework in downtown Dallas. As far as co-working goes it's the best setup I've seen so far (out of maybe 6 that I've tried). I don't know much about their valuation but what you get is worth the money you spend. At the end of the day, that's all that really counts.

dalfonso 8y ago

I had a dedicated desk at a WeWork for about a year. Before that, I had a desk at Regus location for about a year. - While local coworking spaces could match the decor, vibe, etc. your local coworking space didn't have locations in other cities. I got 5? credits that I could use to work out of other WeWork locations. - WeWork definitely had a tech-first attitude. If you wanted to reserve meeting rooms, register a guest, sign-up for events, etc, they wanted you to do that through their mobile app or website. Regus may have had a site, but they didn't push you towards it. - WeWork had a "marketplace" where you could get discounts on various tech/non-tech things like accounting software, business cards, services, etc. Probably another good revenue stream. They could be pitching it as the "App Store" for startups. - In my location, in the LA area, tech wasn't the majority. I would say 75% of the people I met were in some sort of service (real estate agents, lawyers, consultants, recruiters, etc,). I don't think they're worth $35B (Delta Airlines' market cap is $38B, Atlassian market cap is $15B for some benchmarks), but they definitely do have some positives.

baybal2 8y ago

Dear WeWork guys, if you are reading this :), these are few tips how to run a rental office space: 1. Good furniture. You either buy super duper expensive italian handwork stuff, or generic IKEA. Nothing in between. 2. Think of smaller spaces, down to few rooms for 6 people in the same building. Getting a wholesale rent rate on those, will be I say, easier than that for warehouse sized halls you rent today. 3. Rent in premium highrise towers. Your clientele is more than eager to work out of these places. 4. Reduce working hours, and charge extra for late stayers!!! You can't work when you are being disturbed by cleaning staff. Having everybody leave for the time cleaners do their work, will make life of both cleaners and renters easier. 5. Forbid eating at workplace. Having people carrying coffee bumping into me 3 times in 2 months, made me leave your cowo.

mistrial9 8y ago

when are nerds going to figure out that renting services at a techie price, from other people who form a company that has big valuation, is a new version of Feudalism.

kgwgk 8y ago

Matt Levine today: https://www.bloomberg.com/view/articles/2018-06-14/banks-get-distracted-by-the-world-cup https://www.bloomberg.com/view/articles/2018-06-14/banks-get... "I have to say, if SoftBank is going to become the entire market for hot private technology startups, then every valuation is going to be marked-to-SoftBank, and the numbers will start to lose their meaning. SoftBank: Would you like some money at a $10 billion valuation? Startup: Sure. SoftBank: Here you go. Would you like some more at a $20 billion valuation? Startup: Sure. SoftBank: Here you go. How about a $40 billion valuation? Startup: This is dumb but it’s not like we’re going to say no. SoftBank: Here you go. Startup: Thanks brb buying a yacht. SoftBank: Our mark-to-market investment returns are tremendous, we must be good at this."

jillesvangurp 8y ago

I spent some time working out of WeWork in Berlin (one of their 3 offices there). A few observations: - Being there is expensive for individuals. It seems to be mostly small companies and projects renting space. They get a decent deal of having an office and all stuff that comes with that as part of the package. - They seem to use space efficiently, I did not spot many vacancies and it was packed with people. - It looked to me like they are not having demand issues and they are basically billing per seat. - Setting up these spaces must be costing them a bit as a one time investment. The space looks nice and clearly they are going for quality here. Seems to be part of their brand. I imagine the latter is what is driving recent losses, because they have been expanding like crazy. The flip side is that if each of those new offices has similar occupancy, they are growing their revenue as well. The initial investment can be amortized over the lifetime of the lease probably, which presumably is many years. As soon as they stop growing, they should be making money. My guess is they are instead expanding as fast as they can get away with. This means that these losses are in fact solid investments. Somebody else in this thread is citing 40% profit margins; this sounds legitimate to me. The per building revenue should be substantial based on what I've seen.

mstaoru 8y ago

I'm typing this from one of WeWork's Shanghai locations, the loud music is blaring behind me so I wear 3M Peltor construction headset, the sun through the glass roof blinds my screen, and I have to squint to be able to read what I type. I'm just back to HN from Medium which didn't load because the Internet speed is abysmal (packet loss to Baidu LG is at 12% right now with medium ping at 170ms, if I switch to my phone hotspot it's 1% and 32ms). I just bought some drinking water outside because their RO filter is probably not serviced ever and I have stomach issues after drinking it, my TDS pen reads 180ppm from their water which is about the same as my tap water at home. But my membership is part of the contract so I'm not paying for it, so I can't complain. $35B, $350B, these numbers feel very abstract to me. They're probably collecting and selling a lot of data about us, otherwise, I don't see much value over other local players here which all have good design and nice crowd. And no banging music.