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WeWork isn’t a tech company; it’s a soap opera
- jakelazaroff 7y agoI wonder when this trend of calling companies "tech companies" — just because they happen to use technology — will end. WeWork clearly is a real estate company; Uber is a taxi company with an app; etc.
- rolltiide 7y agoYeah its mostly a factor of what VCs they tap and their portfolio companies coupled with how a company spends. High burn high growth Draper Capital? Tech company.
- pcora 7y agoA hell of a taxi company with that many engineers and research and development areas. But I agree on WeWork as a real estate company. They are not creating anything.
- chasing 7y agoWhen it stops making someone money.
- Jestar342 7y agoI think it's the trend of bringing tech to an existing market. When that stops, we'll probably stop calling it tech companies. Uber is the perfect example of a "tech company" - they brought technology (and in this context "tech", arguably, means "the internet") to an industry that was previously dominated by standing on a street and waving down a cab/taxi. However I think it is rather pithy to just call them a taxi company with an app, right? There's a lot of tech "magic" involved in Uber from the real-time connections on a such a massive scale, to the geo-fencing, price/route estimations, and the massive amounts of infrastructure management and maintenance needed to bring that to however many millions of people use the service.
- lotsofpulp 7y agoIn my mind, the main feature of a tech company is the ability to scale due to almost zero marginal costs, compared to other companies which need much more time and resources, which is also why tech companies can have such huge profit per employee numbers.
- ghaff 7y agoThat's very specific to software that doesn't need much support. I think Intel is probably considered a tech company and they certainly can't scale at near-zero marginal cost.
- jcranberry 7y ago>However I think it is rather pithy to just call them a taxi company with an app, right? Perhaps you mean reductive? A pithy statement would be one which has identified the core of something or is very meaningful despite being terse. It is very positive.
- pdonis 7y ago> There's a lot of tech "magic" involved in Uber I agree this is true of Uber, but is it true of WeWork? It seems like the comparison with Uber just makes WeWork look even less like a tech company.
- autokad 7y agoI agree, I don't see how wework is a tech company other then the fact they probably service mostly tech companies. I was stationed at wework for a while, I liked it. But I don't see how tech is involved
- CydeWeys 7y agoWeWork to me seems similar to a chain gym. Both have shared physical facilities and manage a membership database that allows you to get in (and also provide WiFi). Yes, there's computer systems involved, but any company of any reasonable size is using computers these days.
- situational87 7y agoIt's a logical extension of the ponzi scheme that exists in the venture capital/startup world in tech. The fact that so many startups fail is irrelevant to the early investors in these companies, as long as you get in at or before Series A you have a good exit 90% of the time. Just force some artificial growth and wait for the next round of investors. Everyone who comes later... not so much. Very few good outcomes. So they're now just adding some more levels to the pyramid to try and push the scam down the line to the IPO market. It should be illegal, and would be if we had a functional SEC instead of what is effectively an empty building.
- woah 7y agoDo you have any numbers or anything concrete to back up that argument?
- simplecomplex 7y agoVCs get management fees typically 2% of fund size. VC incentives are misaligned with LPs. Very similar to hedge funds. As long as they keep raising the money keeps flowing and they can delay showing a return. Whether the fund fails is irrelevant. There’s an endless supply of rich LPs like there’s an endless supply of kids with a “startup”.
- rootusrootus 7y agoI agree on WeWork, but Uber is clearly not a taxi company. They're closer to being a mobile app developer, though that still feels like it falls short of an accurate description.
- btown 7y agoUber made the right call in that it's asset-light; they don't long-term lease medallions or have long-term contracts with landlords (any more than a similarly sized technology company would). The We subsidiaries, on the other hand, are dreadfully asset-heavy. They can't just pack up and move out of a city that's underperforming. And as we all know, agile is as much about knowing when/how to stop doing something as it is about moving fast in doing new things. My only sadness is that this is so apparent that it will be immediately reflected in We's price, and there's likely not much opportunity to short these guys.
- browningstreet 7y agoI mostly agree with you, but I think what's happening here is reminiscent of the e-commerce vs brick&mortar debates from years ago. Ultimately, Amazon started as an e-commerce business that has a whole ton of brick and mortar capital and infrastructure. For a long time, tech companies wanted to do everything virtually (apps, cloud, etc) and people NOT from the tech industry had an understanding of the brick & mortar world and harnessed tech to create a boom of some kind. I think Uber is like that, in that the level of tech needed -- not just an app, but a global infrastructure that has to stay up and takes payments in a lot of countries -- when married with the real world, created a kind of behemoth. They're also financial structure jockeys, and We is more contracts & funding and not really all that much tech.
- OJFord 7y ago> but a global infrastructure that has to stay up and takes payments in a lot of countries To play devil's advocate though, that's just the 'back office' updated to replace manual book keeping with automatic software. (Well, 'just'.) I think we can usefully describe companies as both 'tech-heavy company in the <domain>' and '<domain> company that uses tech' depending where the emphasis should be for a particular sentence. It just doesn't really mean anything to me alone.
- OJFord 7y agoCan you define it (as opposed to giving examples) in a way that calls any non-hardware-producing company a tech company though? I sort of want to agree, but it seems like any software manufacturer is 'a <domain> company that uses tech, not a tech company' if you keep going. WeWork, absolutely though. Honestly, the news to me here is that anyone thought it was or called it a tech company.
- wolco 7y agoGarmin makes the tech. Strava provides a tech service on top. Ubiome - software for lab results
- notatoad 7y agoIf your revenue isn't driven by your technology, then you aren't a tech company. If it is, then you are. There's tons of software companies that make money by selling (directly, or by charging licensing, usage fees, etc) for their software. WeWork isn't selling software, or any other form of technology. They're renting property.
- OJFord 7y agoSo if Uber's model was subscription-only software that enabled ~unlimited~ fair usage many rides, it would be a tech company, but as it is it isn't? I'm not disagreeing with the conclusions about WeWork and Uber, I just think it's hard or not possible to define what it is, and what does it really mean anyway: to varying degrees any company in any sector is enabled by 'tech'.
- notatoad 7y ago>if Uber's model was subscription-only software that enabled ~unlimited~ fair usage many rides I have no idea what this sentence means. But if Uber was a company that sold software to taxi companies then they'd be a tech company. As it is they sell car rides, not software, and so are a taxi company more than they are a tech company.
- gooseus 7y agoI think the question is, if you removed their tech, would they still have a product? For WeWork, yes, absolutely. Uber, not so much. Of course, being dependent on tech doesn't make you a tech company, but I think it's a simple heuristic to quickly falsify the WeWork cases.
- Agathos 7y agoAre banks, airlines, hospitals, or big retailers not named Amazon tech companies? If you took their tech away now, could they stay in business?
- SkyPuncher 7y agoIt will end when the regulation catches up. I worked in the gig economy space for two years. Literally, the only reason to be a "tech company" is to claim you simply provide the technology and aren't responsible for how people use it (aka employment law)
- nabnob 7y agoIt's a property company that's planning tracking everything people do in their buildings. >WeWork's latest acquisition is a small software company with 24 employees. Euclid is a spatial analytics platform...Euclid's website says the company is "focused on redefining the workplace experience of the future." Translation: optimizing every aspect of the physical workplace so workers are their most productive. Euclid does this by tracking how people move around physical spaces. Its technology can track how many people showed up to a meeting or to that after-work happy hour. The company can see where employees tend to congregate and for how long. It's all done over Wi-Fi. https://www.inc.com/betsy-mikel/wework-is-trying-a-creepy-new-strategy-it-just-might-signal-end-of-workplace-as-we-know-it.html https://www.inc.com/betsy-mikel/wework-is-trying-a-creepy-ne...
- novok 7y agoIt's a physical workspace analytics company! /s
- odiroot 7y agoYep, at some point in the past every business started to use cars to bring supplies or delivery products. Are they all car companies? And before were all companies horse companies?
- tedivm 7y agoFor the number of engineers they have you'd think they'd have figured out how to build a decent wifi network with some actual security in it. Instead every WeWork has the same password for the wifi (literally a variant on `P@ssw0rd`) and it is super easy to spy on other people's connections. The hilarious thing is they actually built a secure wifi network for their staff, so they clearly recognize the need. They also use the dumbest access points- they don't support roaming and connect you to the least congested point regardless of speed. It used to be a morning ritual of mine to toggle wifi on and off again until I had a decent connection.
- UncleMeat 7y agoWifi is largely insecure anyway. You should largely assume that the network is malicious no matter what and just rely on application layer security.
- geofft 7y agoThat's a reasonable position to take for networks in general like coffee shops, but if I'm paying WeWork to provide office infrastructure, I expect the network to not be malicious, just like I expect not to need to boil and chlorine-treat the water I get from their water fountains.
- simonebrunozzi 7y agoNot everybody knows or appreciates the use of a VPN. I don't think yours is enough justification for WeWork for not having built a proper service.
- ghaff 7y agoWhat is a "proper service" in this case? Many company networks routinely allow access using fairly straightforward and rarely rotated passwords. Of course, access to actual company resources like email require 2FA etc. But as others note, the main purpose of having a password at all is to stop casual passersby from leeching off your network.
- logfromblammo 7y agoArticle author was confused by the org charts and diagrams, but it looked to me like the founders are setting the public company up to be machine for transferring investor money to themselves while maintaining voting control and without delivering any additional value. Can someone better versed in finance explain to me how this is not a blatant flimflam to grab the IPO cash?
- readams 7y agoThe structure of the company is mostly about making sure that Adam Neuman can minimize his tax burden while maximizing his compensation. It's not really about stealing the IPO cash, but on the other hand nobody is better positioned to take advantage of the value generated by the company than Adam Neuman, and you can be sure, based on the history, that the governance of the company will be driven by primarily what is good for Adam.
- logfromblammo 7y agoI don't really see a significant difference between "stealing the IPO cash" and restructuring multiple business entities such that the company's new valuation is predicated on increasing revenues, yet those additional revenues will actually be siphoned off via increased expenses to more closely held companies, rather than reinvested into the public entity, or distributed to its shareholders. Who is dumb enough to fall for this nonsense? I get that a lot of public companies make shady sweetheart/nepotism deals with private companies part-owned by their executives and board members, or friends and family of same, but why would you willingly be principal for an untrustworthy agent?
- AndrewBissell 7y agoThe question you need to be asking is "who is corrupt enough to fall for this nonsense?" The IPO will probably distribute the flaming bag of poo to various pensions, ETFs, and other funds where a PM can be leveraged as a single point of failure.
- kickopotomus 7y agoI don't disagree with the notion that WeWork is a shady "tech" company but this article is terribly written and hard to follow. I couldn't even make it halfway through. > The thing _begins_ with an epigram: “We dedicate this to the energy of we — greater than any one of us, but inside all of us.” Yeah, every S-1 I have read starts with marketing materials. How is this at all relevant? > I am just going to drop The We Company’s org chart here because it honestly leaves me speechless Do not just add random images to your article and not explain or discuss them. The org chart was not even relevant to what you were discussing. I basically gave up after that because it took the author 4 more paragraphs to even fully state their "soap opera" thesis.
- kccqzy 7y agoThe org chart was absolutely relevant. It was evidence that the company was structured in an incredible way that's just waiting for disasters to enfold.
- kickopotomus 7y agoI absolutely agree that it is relevant to the discussion but not where/how the author introduced it. The image is just distracting and confusing without any sort of commentary. The author even plainly states that they don't understand it in the caption: > This is the planned structure for The We Company after its IPO, as it appears in its S-1 form. I’d try to explain it, but I don’t understand what the fuck is happening. If you don't get it but you want readers to be aware of it then either just link to it or put it at the end after you have made your argument. Don't place it at the beginning before you have even fully explained the premise of the article.
- endlessvoid94 7y agoJust because the author "doesn't understand what the fuck is going on here" does not make it a bad investment, a terrible company, and so on.
- unreal37 7y agoI liked the article. And agree with it's premise. Softbank has apparently driven up the valuation of We to $47 billion or so for no apparent reason. The entire company structure exists to serve the founder. The company even paid $4 million to buy the rights to "We" from him so that they can change their name from WeWork to We. It will be interesting to watch.
- zachware 7y agoWhat's so structurally fascinating, in a very morbid way, is the difference between the balance sheets of the most heavily-funded late stage companies. I have an opinion but regardless of it, if a no-asset/no-liability company is losing money and the music stops, they can cut costs and survive. It's messy but it happens. WeWork is a completely different beast. It's occupancy costs + G&A are 105% of revenue. If it can't sustain its losses with free flowing capital it can't cut long-term liabilities as easily as headcount and perks (again, this is morbid), so its only option would be bankruptcy. So in this case it would seem that the most rational way to invest in it, if you absolutely had to, would be in its debt. I have to assume, though, given this ridiculous structure, that the opco would be shielded. Man, we can't predict the future but it's pretty clear that if something does go wrong, it would be an AIG-level mess to unwind the complexities.
- coldcode 7y agoLooking at that S1 once its public the stock will be mostly worthless. But the founders will be billionaires.
- barbecue_sauce 7y agoI would say that the fact that you never see anyone from WeWork post on Hacker News is a good indicator that it's not a tech company.
- cedricd 7y agoBut how would you know?
- imbored 7y agoI give it less than 2 years before the massive fraud investigations and lawsuits start.
- par 7y agoIncredible scam pulled off by Adam and Rebekah Neuman. Color me impressed.
- imbored 7y ago> While Adam hasn’t taken a salary for his We Company work — neither has Rebekah — the company issued him a $7 million loan in June 2016. (It is repaid, with interest.) > There are a few reasons to launch an IPO: a big one is to take on new investment. IPOs also let insiders cash out. Before 2019, Adam had not received any equity awards, the documents say. But as The We Company got larger, the board of directors decided to give Adam reason to do an IPO, so Adam received options to purchase more than 42 million shares. I'm confused. No salary, no equity awards, yet this guy is rich as hell? I guess cause he still owns what he got as a founder?
- eof 7y agoUntil recently I thought part of WeWork’s allure was they were a real estate play underneath the office value add. Incredible to me this isn’t the case and they have this type of status. Especially with the recent “exposé” showing the CEO owns some of the buildings WeWork is leasing from.
- thomascgalvin 7y agoThere's a real estate play, but it's the CEO who's benefiting, not WeWork itself. A lot of the properties WeWork occupies are leased from Adam Neumann himself, or an entity he owns.
- jrochkind1 7y ago> I am just going to drop The We Company’s org chart here because it honestly leaves me speechless... Indeed, I suspect that kind of a weird org chart of inter-related legal entities is pretty typical for a real estate company... because, as the OP suggests, that's really what they are.
- ak217 7y agoAlso morbidly fascinating is why real estate companies are so much more into compartmentalizing themselves into all these LLCs/LPs/corps. Most of the time they seem to do it to maximize the tax advantages and entitlements (and contain losses) in specific locales. In California, most commercial buildings are held by a trust designed to never transfer majority control, to preserve Prop 13 property tax breaks.
- aeorgnoieang 7y agoI think it also pertains to how individual deals sometimes include additional investors or other parties to the deal/transaction, e.g. the parent company partners with another local company for a specific deal and thus creates a separate LLC/LP for just that deal.
- baxtr 7y agoThe Verge simply doesn't get it. WeWork will leverage their real estate assets and come up with an AI-based cryptocurrency to monetize their community base. They will call it "The Country of We." Just wait for it. The time will come.
- not_a_cop75 7y agoThe difference between reality and satire is getting smaller and smaller all the time.
- labster 7y agoNot just a You-topia, it’s a We-topia. This is how We build an enlightened world for all of We.
- rhizome 7y agoPut it on the WeChain.
- stronglikedan 7y agoAnd discuss it on WeChan.
- theWheez 7y agoSent from our WePhone
- 8bithero 7y agoYou mean WeChat... Oh, wait...
- darkhorse13 7y agohttp://www.we.net.bd/ http://www.we.net.bd/
- madengr 7y agoWeWork can't crash and burn fast enough. Maybe it will be a trigger for the next crash, when people realize the other "tech" companies are not tech companies. Most "tech" companies are marketing.
- duxup 7y agoI'm not very knowledgeable about WeWork... but what exactly do they bring to the table that wasn't being done before business wise? They just seem to have office space like any other company that might. Presumably the properties they bought or lease or whatever were somewhat profitable before ... but now WeWork owns them and ... doesn't make money? That seems, bad. I'm skeptical of say Uber's long term sustainability but at least with their app and business model they were doing something different that maybe could eventually pan out (ok it won't... but there's something there). But WeWork just seems like office space leasing ... on top of office space leasing, except they lose money...
- paggle 7y agoThe thing is that the big owners of office space don't want to be bothered with doing anything. They have made vast sums of money for decades by doing as close to nothing as possible -- they just hold the real estate, and rent it out only to people who are willing to sign 5-year leases. In most cases they would rather let it sit empty and appreciate quietly rather than renting it out for less than 5 years. WeWork has come in and made a relatively tiny business by installing a "front door" to this office space. They allow the property owner to continue to do absolutely nothing, while making the property easier to consume with shorter leases, a common access pattern for WiFi, coffee, etc. and a modern billing system. The money made by WeWork, to these property owners, approximates to zero. They hold collectively trillions of dollars of real estate and some vegan weirdos want to make $50B off of them? They don't care. They'll just sit around watching their property appreciate without having to care a whit about what's going on inside.
- driverdan 7y agoThey have better marketing.
- SamWhited 7y agoAs far as I can tell the only benefit they provide over other smaller coworking spaces (most of which are a lot better) is that there are a lot of them. You can get a mebership at a WeWork in Austin, then pop into the one in Tokyo to get some work done while you're visiting. That being said, that's probably not worth the expense, terrible technology, or loudness of weworks for most people.
- SamWhited 7y agoThis is the place where literally every one has the wifi password "P@ssw0rd" (or something similar, I forget) and instead of just connecting an HDMI cable to your laptop in the conference rooms you have to download some spyware that only works on Windows and Mac (despite the fact that their primary client is tech companies, many of whom use Linux or other OS's). Also never try printing, that just doesn't work, and the conference rooms are impossible to book if you're at an even slightly popular location. They also have a crappy website that they claim "builds community" or something, but everyone I've ever worked with just dreaded going on it because it meant wading through advertising and spammy posts from the handful of companies that actually tried to use the forums just to get a little customer support for the wifi or whatever was going wrong that day (and there was always something). I've worked in WeWorks a lot, sadly, but never again if I have any say in the matter. There are plenty of cool one-off coworking spaces that do a much better job. The downside of course is that you can't drop into one in any city, but that's what coffee shops are for.
- roland35 7y agoIt seems like their isn't much benefit to brand loyalty here - I would imagine it is easy to simply do a google search for a short term work place in a new city if you need a change of scenery from the coffee shop!
- jdhawk 7y agoOr they should create a network (like Free ATMs) and allow roaming to a limited extent.
- driverdan 7y agoThis paragraph at the end stood out to me: > ...The We Company, used to be called WeWork, but it changed its name. The new name was owned, Bloomberg’s Ellen Huet reports, by We Holdings LLC — so WeWork paid $5.9 million to acquire “we” and changed its name last month. We Holdings — you guessed it! — manages stocks and assets owned by… WeWork’s founders. That's a huge conflict of interest. How would something like that be approved?
- tempestn 7y agoApproved by whom? Someone might look at it after the fact, but nothing stops a company from buying or selling with its shareholders. (In fact it's quite common for private companies to pay owners for things like office space.) But yes, it should be at fair market value; you're not supposed to buy something for one price just to flip it to your company for a higher price (effectively taking compensation as a capital gain).
- nostromo 7y agoIn theory, the board. The board represents investors. And usually the big investors will have a seat on the board. The board should have intervened here.
- driverdan 7y agoThat's my point. The LLC owners / WeWork shareholders should have recused themselves due to conflict of interest and the board should have shot it down. This seems really sketchy to me, an end run to get money out of the company.
- lancesells 7y agoDefinitely seem sketchy and should give some people second thoughts about investing.
- tempestn 7y agoAh, yes, in that case I agree. I thought the parent comment was referring to an agency like the SEC.
- NohatCoder 7y agoI just wonder why banks continue to loan to this company? Their expenses are pretty consistently double their income. They grow by selling the product for way too little. Do they expect that customers are going to stick around if they double their prices?
- paggle 7y agoI mean... it's neither? It is a real estate company. Why is everything a "tech company" or a scam?
- 1v1id 7y agoDid you read the article? It's not saying that it's a soap opera because it's not a tech company, it's saying it because of the crazy family that runs it and the questionable financials around it.
- ZainRiz 7y ago@patio11 is a huge fans of their business model: "I think this and remote work are the best bull case for WeWork. In 2025, every Fortune 500 company will have 10k+ remote workers, and every purchasing department will approve a reimbursement for WeWork with no questions asked." https://twitter.com/patio11/status/1161796809741627392 https://twitter.com/patio11/status/1161796809741627392
- vanadium 7y ago> "[...] every purchasing department will approve a reimbursement for WeWork with no questions asked." I think this is just a smidge over-optimistic, considering what I know of finance teams at companies I've worked at, past and present. Here in Midwest population centers, remote work is starting to become more widely adopted from a "work from home" perspective. The moment there's an expense report attached to pay for another office space, you're coming into HQ and that remote work arrangement is going to be reviewed rather quickly.
- draw_down 7y agoYeah, discussions of remote work almost always overlook this. Companies are absolutely going to use it to offload office costs onto employees. Working from home already does that.
- paxys 7y agoSkips over the fact that a big chunk of people work remotely because they want to work from their homes, not sit in an office.
- endlessvoid94 7y agoThis is awful journalism. Just awful.
- puranjay 7y agoI'm tired of my WeWork. I'm tired of the relentless positivity ("Thank God for Mondays!") and faux corporate cheerfulness. I freelanced because I wanted out of that corporatism where I'm reminded that I don't just have to work; I have to be happy while doing it. WeWork's championing of "makers" and "creativity" and all that gobbledock might work for some people, but I just want a space to work out of that has good WiFi and quiet people. I don't need to be told that I have to be happy doing my work, or that my work is important or world-changing.
- nkrisc 7y agoIt's corporate cult-as-a-service for those who don't have an office that provides that for them.
- deleted 7y ago[deleted]
- euler_angles 7y agoThis post just made We* seem like a big scheme just to make the founder wealthy. Am I missing something?
- mrnobody_67 7y agoYou can say that about pretty much any start-up, though in public most founders are all about the mission and changing the world (insert "HBO Silicon Valley" meme here). We has just been particularly blatant about it.
- stephc_int13 7y agoWhy does all this WeWork thing smells like a Ponzi scheme or something?
- checktheorder 7y agoBecause you have a very accurate nose.
- MFLoon 7y agoWell, to the extent that all rentierism is the great grandfather of pyramid schemes.
- naringas 7y agoif WeWork is a tech compnay, what's their technology?
- leroy_masochist 7y agoMy lasting impression of the year-ish I spent at one of their NY locations was: - The coffee was free, and great - The person behind the front desk had recently graduated from Princeton and seemed way too smart for the job and bored - The beer on tap was free after 5, was locked up before then, and was invariably some weird fruity craft beer that probably cost a lot - Printing a single page involved first waiting in line for 5-10 minutes and then entering a 10-digit code into a really crappy office printer touch screen, then manually re-authorizing the job you had just set to print. Like DMV level inefficiency All told, general impression was, "wow, they actually pulled off getting a tech valuation for a real estate play".
- chocolatebunny 7y agoSo I'm trying to look into IWG (which the article claims is WeWork's primary rival) since it looks like they'll have less competition in a year or two. It looks like they're traded in the London Stock Exchange. Google seems to claim that they're owned by Berkshire Hathaway Energy but I can't find any evidence for that.