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Out of all the recent IPOs, WeWork has both the most certain and uncertain future of them all. The spaces are clearly differentiated, hard to replicate (without
by areoform 8y ago
Out of all the recent IPOs, WeWork has both the most certain and uncertain future of them all. The spaces are clearly differentiated, hard to replicate (without a significant capital injection from a limited number of players who have a stake in WeWork anyway) and have the clearest economic model of all the recent startups; offer services + community (to the extent a place like this can offer one) + great workspaces to companies looking to mimic FANG benefits without investing significant capital.
But everything rests on the edge of a knife. The underlying price sensitivity, the economics of providing the service and the rent of the space. Their model of cut-rate rents is subject to local trends and their investment in each property means that it is not easy for them to shift locations and it would be a significant loss if local landlords got out of hand. As a global company, not every market has strong renter's protections and it makes me wonder how they'll protect their assets when people realize that they could get more from them. Then there is the CEO that leased properties he owned to the We Company, making millions in the process - https://www.wsj.com/articles/weworks-ceo-makes-millions-as-landlord-to-wework-11547640000 https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l... (this bit of impropriety should raise eyebrows and raises questions about the company's ability to prevent such rolling conflict of interests going forward).
It is unclear to me how they'll position themselves for the long-term given the variability in real-estate. We are in the run-up to a recession, but after that when it's boom times again and prices rise rapidly, again, how will WeWork survive? Do they plan on buying properties during the bust? What's the long-term plan over here that ensures that they keep on top of the food chain? What is the lock for their spaces?
Edit: The company might be losing money in the pursuit for growth but the model is clear in the sense that they provide services + benefits (swimming pools, beer, massage bars etc etc) on top of leasing out space for a fixed amount X. Unlike Uber, it is easy to imagine them minmaxing this to make money. It's not hard and they lack the kind of competition (Lyft) that would trap them at this low price point as few places in the different jurisdictions that they operate in can offer similar services due to the large upfront investment involved.
- itamarst 8y ago"Clearest economic model"? They're losing almost 2 BILLION dollars a year (https://www.nytimes.com/2019/03/25/business/dealbook/wework-loss-billion.html https://www.nytimes.com/2019/03/25/business/dealbook/wework-...)
- idlewords 8y agoThey lease property long-term, then rent it out short-term at a staggering loss. That's a model of clarity
- itamarst 8y agoFair. I used to work at company that rented from WeWork. And we were in their awful glass cubicles, like working in a Borg ship, and we wanted some privacy, so we asked about putting up some removal decals. They said no, it violated their brand guidelines. Clarity, always clarity.
- idlewords 8y agoThat is true commitment to transparency.
- kevin_thibedeau 8y agoJust build a cubicle within your cubicle.
- warent 8y agoTheir revenue growth is accelerating and they're only losing money because they're investing it all on growth. The year they stop expanding/buying/renting new spaces, they'll bring in a huge net profit.
- dpeck 8y agoWhat FANG benefits are you referring to? I have a few clients who work at WeWorks and the nitro coffee and kambucha on tap is fine and well but I wouldn’t call it lavish. Having a few hot and cold drink options for visitors is just common curtesy and basic part of doing business.
- jethro_tell 8y agoThe ones that don't actually cost money like access to a $400 foos ball table and a giant been bag chair
- tachyonbeam 8y agoFree potato chips and sodas.
- jeffbax 8y agoYeah, comparing WeWork to FANG is pretty silly. The benefits that matter are the massive salary on top of max 401k matching and 3 gourmet meals a day. Free coffee and beer doesn't begin to compare (not that I don't think what WeWork offers is useful)
- greenyoda 8y ago> they lack the kind of competition that would trap them at this low price point as few places in the different jurisdictions that they operate in can offer similar services due to the large upfront investment involved If these types of services become popular, couldn't any commercial landlord start offering these services in the buildings they already own?
- ben509 8y agoI have used their WeWork, for what that's worth. There's a good amount of tech in managing badges, their website, allocating rooms and IT. (Though, TBH, it's not exactly stellar web design.) The team that manages the buildings does a good bit more than a typical landlord. I think many landlords would make awful clones and lose a lot of money, at least at first.
- rwmj 8y agoThere's a business right there, selling white label office management software direct to landlords. Which in turn raises the question: Why do WeWork bother with renting the properties? Uber doesn't rent cars, they just provide software and a network to drivers and riders, and something similar might work for renters and property owners (AirBnB for offices, essentially).
- ben509 8y agoThey want control over the look and feel of the buildings; it's all part of a brand identity. (Of working in a panopticon, but that's popular, I guess.)
- michaelt 8y agoUK serviced office provider Regus offers "franchise opportunities" [1] if you know any landlords who'd like to turn their offices into a wework-like-business. [1] https://news.ycombinator.com/reply?id=19783108&goto=item%3Fid%3D19781549%2319783108 https://news.ycombinator.com/reply?id=19783108&goto=item%3Fi...
- 8y ago
- Dirlewanger 8y agoI think WeWork is the most recession-sensitive. When the next one finally does hit in the near-future, they're fucked.
- iAinsley 8y agoMy impression is that the We Company (holding company), will diversify into social spaces for social things, including short term hoteling: a la co-living, airbnb/Marriott, event spaces, popups, etc. You're right, the gym membership subscription model will quickly fall apart during the next downturn.
- AndrewStephens 8y ago> Then there is the CEO that leased properties he owned to the We Company, making millions in the process - https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l.. https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l.... (this bit of impropriety should raise eyebrows and raises questions about the company's ability to prevent such rolling conflict of interests going forward). As an investor, why would I want to go go through the rigmarole of buying shares and calculating losses for my taxes when I could just send a wad of my money to Adam Neumann every month for much the same effect.
- YeahSureWhyNot 8y agoif the their CEO believed in WeWork he would have sold his properties and buy shares but no, he is milking money invested in WeWork to drum up profits of his personal properties. Just this fact says enough about that company and what kind of an investment it will turn out to be.
- yhoiseth 8y agoYou can diversify while still believing in the individual investments.
- YeahSureWhyNot 8y agodiversifying is when you invest into different industries or markets. this guys is investing in the same building just using a different vehicle.
- freewilly1040 8y agoHow is it hard to replicate? Lots of people know how to add beer taps to office spaces. There might not be competition now, while they are operating at a gigantic loss, but at a break even price point I think it'll be a different story. If they can't make money in this boom market cycle, what makes you think they'll make money in the next one?
- pmart123 8y agoJudging by all the NYC competitors that have cropped up, I would say it is not hard to replicate at all. The biggest benefit to co-working spaces is short lease terms and the ability to scale up(down) space. Foreseeable, this could apply to a new company or a company opening an office in another city. I doubt you would use WeWork once you are leasing 10,000+ square feet of space, but perhaps HQ by WeWork has merits. As a startup founder that has leased spaces from co-working spaces, the price, location and quality of the space mattered much more than the brand renting the space.
- hobofan 8y agoSame in Berlin. At a past company, we've happily switched from WeWork to Rent24 paying a fraction of the rent for a bit less involved offering, and can just highly recommend it. It could rant all day long about WeWork Potsdamer Platz, but I think I've done so on every bigger WeWork thread here before...
- yani 8y agoHehe. The CEO article is the one I thought of when I saw the news. Well done sharing it here
- saltminer 8y ago> As a global company, not every market has strong renter's protections and it makes me wonder how they'll protect their assets when people realize that they could get more from them. I was under the impression that residential leases had protections, but commercial leases did not (if you're a business you probably have money for a lawyer to look over the contracts and take the landlord to court if needed).
- rwmj 8y agoIsn't it just Regus with more quirky layouts? Regus's parent company had £2.5bn revenue last year.
- princeb 8y agoregus has a sister company called spaces that is a closer thematic competitor to wework.
- code4tee 8y agoThe WeWork model has proven very easy to copy and in competitive markets there are a lot of other popular “WeWorks” other than “WeWork” so I don’t buy the idea that it’s hard to replicate. Not that different than Uber. It was a great idea but it’s an easy business to copy with little brand loyalty once new entrants appear in a market.
- dahdum 8y agoI think another factor in the next recession will be the actual usage. My local Wework hit 100% dedicated desk occupancy, but if you walked around M-F business hours it was nearly a ghost town. Huge numbers of these desks are paid by companies and rarely used, they’ll be the first to go in a downturn.