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WeWork Isn’t a Tech Company

292 points by jmsflknr 7y ago

buboard 7y ago
... and yet it will be valued as one. At this point it doesn't matter if anything really is tech or not. Rich people just want to park their money away from banks. (As an aside, i think WeWork’s S1 has turned to a remarkable feat of marketing, making buzz around the company in cycles who are likely to be their customers)
- jbarberu 7y ago
  To me it seems even stockpiling coal might be a better use of that money...
- adamc 7y ago
  Rich people who buy non-tech-company stock and tech-company valuations seem likely to become less rich over time. An index fund might be a sounder investment.
  - kolbe 7y ago
    When the time is right, Adam will change the company voting structure and get WeWork put into the S&P 500. If all goes well, it will be at a $500b mkt cap, and everyone in VOO and SPY will be the ones paying that price.
    - WhompingWindows 7y ago
      Incorrect, You don't just "get put into" the SP500, you need to meet the qualifications first. I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. --It must be a U.S. company. --The market cap must be $5.3 billion or more. --The public float must consist of at least 50% of outstanding shares. --It must have positive reported earnings in the most recent quarter, as well as over the four most recent quarters. --The stock must have an active market and must trade for a reasonable share price. https://www.fool.com/knowledge-center/what-is-the-sp-500.aspx https://www.fool.com/knowledge-center/what-is-the-sp-500.asp...
      - kolbe 7y ago
        > I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. No one said anything about "anytime soon" (1) They are a US company. (2) They raised at a $40bn valuation in their last funding round, so I don't know why you think a $5.3bn market cap is out of the range of possibility. (3) The float will be whatever it is. (4) WeWork is a real estate company. Real estate companies tend to make profit. The biggest issue most people have with WeWork is that their profits look small. (5) Whatever that means. They will be in an active market, but reasonable is in the eye of the beholder.
        ericd 7y ago
        Softbank is currently making up the valuation, and by doing so, setting the value for their existing holdings. Take those valuations with a large grain of salt, it's not like a publicly traded security where you can be reasonably sure of getting around that market value if you decided to sell right now.
        kolbe 7y ago
        I suggest you look into the history of companies like TLRY and the current state of BYND.
        ericd 7y ago
        Can you summarize what you’re trying to point out with those two? Is it just that the market is bubbly and willing to support insane valuations?
        kolbe 7y ago
        Beyond Meat recently was trading in the open market at $230. They decided they wanted to sell 4% of the company in a secondary offering, and they were only able to get $160/share. Tilray had similar problems trying to monetize their high valuation. The point is that bubbly tech prices in public markets are no less fragile than bubbly ones in private markets.
- tryitnow 7y ago
  Bingo. Although I don't know about rich people wanting to park their money away from banks. It's more like we have a massive capital glut, there's so much capital sloshing around we don't know what do with it. So some wealthy people will buy bonds with negative yields, others will buy equity at inflated valuations like WeWork. Strange times.
  - roymurdock 7y ago
    Large and continued slowdown in global productivity combined with huge amounts of liquidity/easing from the world's largest central banks. Pretty good time to have a lot of money (it's always a good time to have a lot of money), to own a business in a developing economy, to start a "tech" company to be acquired in a developed economy, to be in private equity, or to fraud/bluff your way into a lot of money in a developed economy (true productivity-increasing products/technologies are currently few and far between but globalization of technology and outsourcing is still going strong). Not a great time to be poor, a saver, a licensed professional, or worker of any sort in a developed economy (aside from working at a "tech" company).
just_myles 7y ago
Correct. I thought it was in the real estate business.
machbio 7y ago
Very Interesting that the company that Supports Wework is in YC Summer batch [1] > Narrator: Narrator is a full-service data team for startups of any size. The team behind Narrator built WeWork’s data infrastructure, and wants to target more startups as early customers. The company says they’re generating $91,000 per month with this business model, but they aren’t stopping there. Narrator wants to build as a cross-company universal standard for data and grow out this library of shared analyses. This strategy allows the company to repurpose the analyses they produce and offer it to new customers. [1]https://techcrunch.com/2019/08/20/here-are-the-82-startups-that-launched-on-day-2-of-ycs-s19-demo-days/ https://techcrunch.com/2019/08/20/here-are-the-82-startups-t...
- Agathos 7y ago
  So We is a real estate company, that doesn't own its own real estate, that wants to be seen as a technology company, that doesn't develop its own technology.
- traek 7y ago
  Nothing I can find indicates that Narrator "supports" WeWork or has WeWork as a client, only that Narrator's founding team all used to work at WeWork [0]. [0] https://techcrunch.com/2019/08/16/y-combinator-backed-narrator-wants-to-become-the-operating-system-for-data-science/ https://techcrunch.com/2019/08/16/y-combinator-backed-narrat...
avocado4 7y ago
Why would anybody claim it's a tech company? What kind of tech do they leverage to differentiate?
- todd3834 7y ago
  I think it’s based on their customers being mostly tech companies or individuals
  - deleted 7y ago
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- baybal2 7y ago
  > Why would anybody claim it's a tech company? Because a company calling itself "tech" and "sophisticated" automatically gets higher stock market valuation by unscrupulous investment analysts. Thus, a company is priced higher the more techy and sophisticated is its image. Have you heard of Chinese companies' price jumping just from them adding word "blockchain" or "o2o" to their name? This is what it is. https://www.independent.co.uk/news/business/analysis-and-features/is-the-chinese-stock-market-bubble-about-to-burst-10346773.html https://www.independent.co.uk/news/business/analysis-and-fea... Though everybody runs to point fingers on "oriental mindset" of some fund managers, few notice that this happens in the West in a form that is even more extreme. A perfect example of that is a company called Netflix. They sell videos over the internet, but they are priced a whole ∞ more than companies selling videos on physical tapes
  - deleted 7y ago
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- buboard 7y ago
  I think there is an expectation that with the money they will make from IPO, they will build a tech company about, well, “something”, like how AWS sprung from amazons core business. This is really a “fake it till u make it” Tech company
- rtkwe 7y ago
tjpaudio 7y ago
Might as well be a REIT, and as its books stand, its a crappy one. I wouldn't touch wework unless it had a dividend. What their CEO has done with inside dealing should be considered fraud to investors.
paxys 7y ago
I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?
- quaquaqua1 7y ago
  >"What isn't a tech company?" It would seem that these days, Wall Street and private equity can agree that a "company that isn't growing" definitely isn't a tech company, even if it uses technology :)
  - Finnucane 7y ago
    I work in publishing, and we don't use _any_ tech. My job just involves standing out in a field yelling at clouds.
- baddox 7y ago
  Is it really that important to define the term precisely? It doesn't seem like the term is used precisely, so what's the point in defining it precisely?
  - chrisseaton 7y ago
    So what's the point in the term at all? What are you using it to do if you know the person you're speaking to cannot infer anything at all from the word?
    - baddox 7y ago
      My claim is that the overwhelming majority of people have no problem understanding the label. The term is not precisely defined, and can be debated in slim gray areas, but the term does not in practice cause miscommunication in the vast majority of cases.
rossdavidh 7y ago
I'm starting to think that WeWork may be an interesting experiment on the current state of the stock market. It's not just HBR; Bloomberg and virtually every other mainstream financial news analysis outlet has had an article explaining why WeWork is overvalued at its current IPO price. If it, nonetheless, sells at this price, it seems that it will more or less prove that IPOs don't have much to do with the fundamentals.
- quaquaqua1 7y ago
  Yup, definitely. An IPO is a liquidity event (money goes to owners) paid for by some group of individuals who believe they will make more money down the road by purchasing this stock. The way that those individuals arrived at that decision can either be through really technical analysis, or "I heard about it from my dog", or anywhere in between.
dawhizkid 7y ago
It isn't right now, but if you buy at this valuation you're betting that they can diversify away from memberships as their main source of revenue to something more "techy." Personally I am bearish because I don't think they can hire the engineering talent to pull that off. They should've gone on a tech hiring spree long ago if that was their intention but I know of no prominent tech leaders who work there.
- KaoruAoiShiho 7y ago
  Have they said this? What technology are they adding to their business?
- Benjammer 7y ago
  >They should've gone on a tech hiring spree long ago They've been hiring (and acquihiring) like mad in NYC for the entire year. They just took over the old Spotify office near Union Square as their new "tech HQ," and all of engineering sits there now.
rlucas 7y ago
It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred. WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread. This works as long as there are lots of customers who will pay a premium for short term flexibility. We can presume that will be somewhat cyclical, although in fairness they also probably have caught a secular trend toward remote / coworking / flexibility. When the cycle turns down, those short termers are done but the long term promises to suppliers keep going ... That also leaves aside the question of leases with escalators. I have heard a rumor that some WeWork locations have substantial out-year escalator clauses (meaning the rates they owe to suppliers sharply increase in future), meaning that even if customers stay on board, WeWork will face a need to raise prices substantially to meet its obligations.
- nostromo 7y ago
  This isn't that dissimilar from lots of industries. Every airline that takes a loan to buy a plane is banking on future demand for air travel, for example. Or take Amazon Web Services, which is building data centers to lease out on a short term basis. Yes, there are tremendous risks involved, depending on the lease terms. But it's not at all unusual.
  - munk-a 7y ago
    I don't really buy that, WeWork is benefiting off of a demand that is constantly shifting hands - people who are using the workspace should be using it temporarily - maybe they're a contractor on sabbatical, maybe they're starting a company and don't have the momentum and size to consider a lease... but those needs will change. Airlines live an entirely different business, nobody but the super ridiculously rich will ever own their own plane - and AWS benefits from economy of scale, they can deliver computational power below the cost of inhousing the ops cost in all but the most extreme circumstances, running a room full of servers has a lot of costs that don't scale down gracefully. WeWork might be able to survive long term on two factors 1. Prestige & Environs - working in this sort of shared space may be viewed as luxurious in the long term due to rubbing elbows with other well-to-do folks, sorta like going to the opera. 2. Reliability of cost - Owning a condo is a strictly better decision than renting an apartment, but there are spikes in costs when appliances break down and building work needs to be done... though I think to properly reap the benefit of this WeWork needs to be and remain extremely proactive in maintenance, if some vulture capitalists get into the decision making process and let maintenance slip for a bit it'll erase all of this value by forcing the cost (in terms of inconvenience and unavailability) onto the consumer - it's possible this could also be lost if they fail to keep a nice margin of capacity above usage... again, as soon as someone wants to go to work and is unable to secure the space and is forced to either rent or lease conventional office space their competitive edge will dissolve. I am highly skeptical of the long term prospects if WeWork fails to maintain their prestige and banking your company on prestige is an inherently risky approach IMO.
deleted 7y ago
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JJMcJ 7y ago
A lot of "tech" companies aren't. One reason, to avoid the scrutiny describing their actual business would expose them to more scrutiny, e.g., Uber is transportation company, not a software company. Once the BBC described Google as an "American advertising company", now that's cold.
- barkingcat 7y ago
  Google as an "American advertising company" is a good summary of the jurisdiction of their head office, and where the bulk of their income comes from.
- SamBam 7y ago
  I think, from the article, that the reason that Uber would be considered a tech company and not a transportation company is a matter of assets and how it can scale. Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country. Uber is a tech company because it really only owns software and lawyers. The cost of bringing 10,000 new vehicles on the road is minimal -- they simply increase the incentives to drivers in that area. Likewise, Air BnB is a tech company, for the same reason. WeWork, however, is simply an office real estate company. Its business model is closer to a hotel chain.
  - davio 7y ago
    Uber is probably more of a contract labor firm
  - AlexandrB 7y ago
    > Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country. Ironically, if Uber achieves its self-driving dreams it will have acquire all of these things.
    - 7y ago
CodeSheikh 7y ago
It is a real estate company to the very least.
acomjean 7y ago
They do own meetup.com, so unless they divested it they have a web services division..
patkai 7y ago
Related: while reading this thread I got an email with a job advertisement for COBOL programmers. It starts with "SIXT is an IT company with a very large car pool". Big words for a car rental firm, but I do hope they will be a tech company.
mrtksn 7y ago
I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tech company because they have "scalable virtual models that can be exponentially magnified overnight with little additional costs" but this seems to bu untrue since they did not took over the world. Maybe they are just humble but I think it's simply that their business model is "low touch high scale" and this is being mistaken with Microsoft's ability to develop technology and sell it infinite times with at no addditional cost per copy. What stops WeWork from embracing the Uber model? Maybe you have an empty flat, you can turn it into WeWork location by furnishing the place according to the WeWork standarts and install some kind of kiosk and smart lock system. Uber makes the driver to use cars that obey certain standarts, why wouldn't WeWork do the same and "scale overnight"?
- TheOtherHobbes 7y ago
  It's different because according to the filing, the founder's relationship with the business - and its finances - is best described as "very unusual."
- marcinzm 7y ago
  >What stops WeWork from embracing the Uber model? Maybe you have an empty flat, you can turn it into WeWork location by furnishing the place according to the WeWork standarts and install some kind of kiosk and smart lock system. Uber makes the driver to use cars that obey certain standarts, why wouldn't WeWork do the same and "scale overnight"? Everything is possible but that's worthless until someone actually does it. Uber, AirBnB, etc. have already done those things. WeWork hasn't. Until it does, it's perfectly valid to say it hasn't proven it can and to assume it can't.
- the_gastropod 7y ago
  > In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. Some day, maybe they could?! But their current business is selling short term office space leases. They have massive liabilities in their long-term leases. If Uber (an absurd business in its own right) bought all the cars and paid their drivers salaries, that'd be a closer approximation to what WeWork is doing. It would be just another taxi company, and worth at least an order of magnitude less than it is today.
baristaGeek 7y ago
It's a startup though. The same way that GAP (the sweatshirts) wasn't a tech company but was a startup that raised Venture Capital before going public.
paggle 7y ago
“Tech” is now a requirement of so many different businesses that the concept of a “tech” company needs to change. There is now a spectrum of “techness” where your companies like Spanx are on the left (still needing marketing automation, logistics, and a bunch of other tech), AMD is on the right, and Facebook etc are somewhere in the middle as a blend of tech and marketing. It hardly matters where you draw an imaginary vertical line and call everything to the right “tech” as the tech is now an input to the business the way that electricity is.
DebtDeflation 7y ago
Interesting article, but putting aside abstract definitions of a "tech company" based on variable costs and scaling, exactly what "tech" does WeWork even have that companies like Regus don't?
einpoklum 7y ago
After having read the title: Whoever thought WeWork was a tech company? It's a real-estate company (assuming it's not a stockholder-targeting scam...)
jgalt212 7y ago
It's fun and all to dump on WeWork, but at the end of the day they are going to get what they want. Why? Because no one on planet earth pays more fees to the banks than Softbank.
tim333 7y ago
I'm not sure the founder sees it as a tech or real estate company but something more: >In 2017, 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.” He has long maintained that categorizing WeWork as a real-estate concern is too limiting; it is a “community company” with huge ambitions. “We are here in order to change the world,” Neumann said that same year. “Nothing less than that interests me.”
- tim333 7y ago
  SoftBank's Masa Son is quite interesting talking about it https://youtu.be/L53B2UZ9lpY?t=1187 https://youtu.be/L53B2UZ9lpY?t=1187
- DebtDeflation 7y ago
  >our energy and spirituality >it is a “community company” >“We are here in order to change the world,” Can some explain to me what renting out shared workspaces has to do with any of this?
  - Nasrudith 7y ago
    Simple - it is marketing bullshit to lionize renting out shared workspaces. It has precedence like the use of "blast processing".
anthony_doan 7y ago
So WeWork is more like McDonald? I wonder how close they are to McDonald in business model.
- steve19 7y ago
  I thought McDonalds owns a lot of real estate? WeWork just had leases. WeWork is more like hotel chains that have long term leases or licenses for the buildings.
tt 7y ago
Video of our team's analysis on this subject: https://www.youtube.com/watch?v=d2RwG7U_GEU https://www.youtube.com/watch?v=d2RwG7U_GEU
yalogin 7y ago
Of course its not a tech company. They might want to paint themselves that way, but they operate in the real estate space. Which is why I think they have a severe downside if a recession comes.
acchow 7y ago
Anyone know what percentage of their employees are programmers?
- benatkin 7y ago
  The percent of open positions in Technology according to https://careers.wework.com https://careers.wework.com is 25.8%. Glancing at Technology it appears to be mostly engineering or engineering management. Of course the number of open positions isn't the same because they're looking to staff up or staff down, but to me it seems about typical for a tech company with 20+ employees (a software-heavy 5 person startup might have 3 or 4 coders).
rosege 7y ago
They don't have an R&D budget which a tech company of this size should have. They are similar to Regis which is actually profitable.
deleted 7y ago
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abalone 7y ago
I would like to understand this better because WeWork has a lot of open positions right now. Is it all a front? Much of this article seems to focus on it not having the margins and network effects of Apple, Facebook, etc. Devil’s advocate: Amazon has dinky margins and was unprofitable for many of its early years. Physical servers have “wear and tear”. But they are a winner because they have developed competencies and efficiencies that let them rent out infrastructure that fast growing companies would rather not own and manage. Could WeWork be like AWS for office space? Looking at their open positions they have teams around evaluating, visualizing and instrumenting spaces. In addition to the flexibility to scale up and down. There’s a lot that’s sketch about their company structure but if companies are going to outsource say payments to 3rd parties like Stripe, why wouldn’t they do it for office space which is a huge PITA?
- deleted 7y ago
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- sytelus 7y ago
  You don't want to look at margins by subtracting expenses from revenue. For a growing company, this can be zero or even negative. The key thing is this: Are customers paying top dollars for the space they sell then elsewhere? That answer seems to be yes which means they have better margin than competitors given their brand and amnesties. However, they might decide to reinvest all that money to build assets in other markets which will put their balancesheet in red.
sprafa 7y ago
Amazing that we need an article to say something we all already know because the company is so deceitful.
kbos87 7y ago
If WeWork could figure out how to do what it’s doing without actually owning real estate or holding long term leases, it might be closer to a tech company. That isn’t the case, though. Their network are their own buildings and their financial structure looks much more like that of an asset heavy real estate holding company.

292 points by jmsflknr 7y ago

... and yet it will be valued as one. At this point it doesn't matter if anything really is tech or not. Rich people just want to park their money away from banks. (As an aside, i think WeWork’s S1 has turned to a remarkable feat of marketing, making buzz around the company in cycles who are likely to be their customers)

jbarberu 7y ago
To me it seems even stockpiling coal might be a better use of that money...
adamc 7y ago
Rich people who buy non-tech-company stock and tech-company valuations seem likely to become less rich over time. An index fund might be a sounder investment.
- kolbe 7y ago
  When the time is right, Adam will change the company voting structure and get WeWork put into the S&P 500. If all goes well, it will be at a $500b mkt cap, and everyone in VOO and SPY will be the ones paying that price.
  - WhompingWindows 7y ago
    Incorrect, You don't just "get put into" the SP500, you need to meet the qualifications first. I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. --It must be a U.S. company. --The market cap must be $5.3 billion or more. --The public float must consist of at least 50% of outstanding shares. --It must have positive reported earnings in the most recent quarter, as well as over the four most recent quarters. --The stock must have an active market and must trade for a reasonable share price. https://www.fool.com/knowledge-center/what-is-the-sp-500.aspx https://www.fool.com/knowledge-center/what-is-the-sp-500.asp...
    - kolbe 7y ago
      > I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. No one said anything about "anytime soon" (1) They are a US company. (2) They raised at a $40bn valuation in their last funding round, so I don't know why you think a $5.3bn market cap is out of the range of possibility. (3) The float will be whatever it is. (4) WeWork is a real estate company. Real estate companies tend to make profit. The biggest issue most people have with WeWork is that their profits look small. (5) Whatever that means. They will be in an active market, but reasonable is in the eye of the beholder.
      - ericd 7y ago
        Softbank is currently making up the valuation, and by doing so, setting the value for their existing holdings. Take those valuations with a large grain of salt, it's not like a publicly traded security where you can be reasonably sure of getting around that market value if you decided to sell right now.
        kolbe 7y ago
        I suggest you look into the history of companies like TLRY and the current state of BYND.
        ericd 7y ago
        Can you summarize what you’re trying to point out with those two? Is it just that the market is bubbly and willing to support insane valuations?
        kolbe 7y ago
        Beyond Meat recently was trading in the open market at $230. They decided they wanted to sell 4% of the company in a secondary offering, and they were only able to get $160/share. Tilray had similar problems trying to monetize their high valuation. The point is that bubbly tech prices in public markets are no less fragile than bubbly ones in private markets.
tryitnow 7y ago
Bingo. Although I don't know about rich people wanting to park their money away from banks. It's more like we have a massive capital glut, there's so much capital sloshing around we don't know what do with it. So some wealthy people will buy bonds with negative yields, others will buy equity at inflated valuations like WeWork. Strange times.
- roymurdock 7y ago
  Large and continued slowdown in global productivity combined with huge amounts of liquidity/easing from the world's largest central banks. Pretty good time to have a lot of money (it's always a good time to have a lot of money), to own a business in a developing economy, to start a "tech" company to be acquired in a developed economy, to be in private equity, or to fraud/bluff your way into a lot of money in a developed economy (true productivity-increasing products/technologies are currently few and far between but globalization of technology and outsourcing is still going strong). Not a great time to be poor, a saver, a licensed professional, or worker of any sort in a developed economy (aside from working at a "tech" company).

just_myles 7y ago

Correct. I thought it was in the real estate business.

machbio 7y ago

Very Interesting that the company that Supports Wework is in YC Summer batch [1] > Narrator: Narrator is a full-service data team for startups of any size. The team behind Narrator built WeWork’s data infrastructure, and wants to target more startups as early customers. The company says they’re generating $91,000 per month with this business model, but they aren’t stopping there. Narrator wants to build as a cross-company universal standard for data and grow out this library of shared analyses. This strategy allows the company to repurpose the analyses they produce and offer it to new customers. [1]https://techcrunch.com/2019/08/20/here-are-the-82-startups-that-launched-on-day-2-of-ycs-s19-demo-days/ https://techcrunch.com/2019/08/20/here-are-the-82-startups-t...

Agathos 7y ago
So We is a real estate company, that doesn't own its own real estate, that wants to be seen as a technology company, that doesn't develop its own technology.
traek 7y ago
Nothing I can find indicates that Narrator "supports" WeWork or has WeWork as a client, only that Narrator's founding team all used to work at WeWork [0]. [0] https://techcrunch.com/2019/08/16/y-combinator-backed-narrator-wants-to-become-the-operating-system-for-data-science/ https://techcrunch.com/2019/08/16/y-combinator-backed-narrat...

avocado4 7y ago

Why would anybody claim it's a tech company? What kind of tech do they leverage to differentiate?

todd3834 7y ago
I think it’s based on their customers being mostly tech companies or individuals
- deleted 7y ago
  [deleted]
baybal2 7y ago
> Why would anybody claim it's a tech company? Because a company calling itself "tech" and "sophisticated" automatically gets higher stock market valuation by unscrupulous investment analysts. Thus, a company is priced higher the more techy and sophisticated is its image. Have you heard of Chinese companies' price jumping just from them adding word "blockchain" or "o2o" to their name? This is what it is. https://www.independent.co.uk/news/business/analysis-and-features/is-the-chinese-stock-market-bubble-about-to-burst-10346773.html https://www.independent.co.uk/news/business/analysis-and-fea... Though everybody runs to point fingers on "oriental mindset" of some fund managers, few notice that this happens in the West in a form that is even more extreme. A perfect example of that is a company called Netflix. They sell videos over the internet, but they are priced a whole ∞ more than companies selling videos on physical tapes
- deleted 7y ago
  [deleted]
buboard 7y ago
I think there is an expectation that with the money they will make from IPO, they will build a tech company about, well, “something”, like how AWS sprung from amazons core business. This is really a “fake it till u make it” Tech company
rtkwe 7y ago

tjpaudio 7y ago

Might as well be a REIT, and as its books stand, its a crappy one. I wouldn't touch wework unless it had a dividend. What their CEO has done with inside dealing should be considered fraud to investors.

paxys 7y ago

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

quaquaqua1 7y ago
>"What isn't a tech company?" It would seem that these days, Wall Street and private equity can agree that a "company that isn't growing" definitely isn't a tech company, even if it uses technology :)
- Finnucane 7y ago
  I work in publishing, and we don't use _any_ tech. My job just involves standing out in a field yelling at clouds.
baddox 7y ago
Is it really that important to define the term precisely? It doesn't seem like the term is used precisely, so what's the point in defining it precisely?
- chrisseaton 7y ago
  So what's the point in the term at all? What are you using it to do if you know the person you're speaking to cannot infer anything at all from the word?
  - baddox 7y ago
    My claim is that the overwhelming majority of people have no problem understanding the label. The term is not precisely defined, and can be debated in slim gray areas, but the term does not in practice cause miscommunication in the vast majority of cases.

rossdavidh 7y ago

I'm starting to think that WeWork may be an interesting experiment on the current state of the stock market. It's not just HBR; Bloomberg and virtually every other mainstream financial news analysis outlet has had an article explaining why WeWork is overvalued at its current IPO price. If it, nonetheless, sells at this price, it seems that it will more or less prove that IPOs don't have much to do with the fundamentals.

quaquaqua1 7y ago
Yup, definitely. An IPO is a liquidity event (money goes to owners) paid for by some group of individuals who believe they will make more money down the road by purchasing this stock. The way that those individuals arrived at that decision can either be through really technical analysis, or "I heard about it from my dog", or anywhere in between.

dawhizkid 7y ago

It isn't right now, but if you buy at this valuation you're betting that they can diversify away from memberships as their main source of revenue to something more "techy." Personally I am bearish because I don't think they can hire the engineering talent to pull that off. They should've gone on a tech hiring spree long ago if that was their intention but I know of no prominent tech leaders who work there.

KaoruAoiShiho 7y ago
Have they said this? What technology are they adding to their business?
Benjammer 7y ago
>They should've gone on a tech hiring spree long ago They've been hiring (and acquihiring) like mad in NYC for the entire year. They just took over the old Spotify office near Union Square as their new "tech HQ," and all of engineering sits there now.

rlucas 7y ago

It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred. WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread. This works as long as there are lots of customers who will pay a premium for short term flexibility. We can presume that will be somewhat cyclical, although in fairness they also probably have caught a secular trend toward remote / coworking / flexibility. When the cycle turns down, those short termers are done but the long term promises to suppliers keep going ... That also leaves aside the question of leases with escalators. I have heard a rumor that some WeWork locations have substantial out-year escalator clauses (meaning the rates they owe to suppliers sharply increase in future), meaning that even if customers stay on board, WeWork will face a need to raise prices substantially to meet its obligations.

nostromo 7y ago
This isn't that dissimilar from lots of industries. Every airline that takes a loan to buy a plane is banking on future demand for air travel, for example. Or take Amazon Web Services, which is building data centers to lease out on a short term basis. Yes, there are tremendous risks involved, depending on the lease terms. But it's not at all unusual.
- munk-a 7y ago
  I don't really buy that, WeWork is benefiting off of a demand that is constantly shifting hands - people who are using the workspace should be using it temporarily - maybe they're a contractor on sabbatical, maybe they're starting a company and don't have the momentum and size to consider a lease... but those needs will change. Airlines live an entirely different business, nobody but the super ridiculously rich will ever own their own plane - and AWS benefits from economy of scale, they can deliver computational power below the cost of inhousing the ops cost in all but the most extreme circumstances, running a room full of servers has a lot of costs that don't scale down gracefully. WeWork might be able to survive long term on two factors 1. Prestige & Environs - working in this sort of shared space may be viewed as luxurious in the long term due to rubbing elbows with other well-to-do folks, sorta like going to the opera. 2. Reliability of cost - Owning a condo is a strictly better decision than renting an apartment, but there are spikes in costs when appliances break down and building work needs to be done... though I think to properly reap the benefit of this WeWork needs to be and remain extremely proactive in maintenance, if some vulture capitalists get into the decision making process and let maintenance slip for a bit it'll erase all of this value by forcing the cost (in terms of inconvenience and unavailability) onto the consumer - it's possible this could also be lost if they fail to keep a nice margin of capacity above usage... again, as soon as someone wants to go to work and is unable to secure the space and is forced to either rent or lease conventional office space their competitive edge will dissolve. I am highly skeptical of the long term prospects if WeWork fails to maintain their prestige and banking your company on prestige is an inherently risky approach IMO.

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JJMcJ 7y ago

A lot of "tech" companies aren't. One reason, to avoid the scrutiny describing their actual business would expose them to more scrutiny, e.g., Uber is transportation company, not a software company. Once the BBC described Google as an "American advertising company", now that's cold.

barkingcat 7y ago
Google as an "American advertising company" is a good summary of the jurisdiction of their head office, and where the bulk of their income comes from.
SamBam 7y ago
I think, from the article, that the reason that Uber would be considered a tech company and not a transportation company is a matter of assets and how it can scale. Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country. Uber is a tech company because it really only owns software and lawyers. The cost of bringing 10,000 new vehicles on the road is minimal -- they simply increase the incentives to drivers in that area. Likewise, Air BnB is a tech company, for the same reason. WeWork, however, is simply an office real estate company. Its business model is closer to a hotel chain.
- davio 7y ago
  Uber is probably more of a contract labor firm
- AlexandrB 7y ago
  > Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country. Ironically, if Uber achieves its self-driving dreams it will have acquire all of these things.
  - 7y ago

CodeSheikh 7y ago

It is a real estate company to the very least.

acomjean 7y ago

They do own meetup.com, so unless they divested it they have a web services division..

patkai 7y ago

Related: while reading this thread I got an email with a job advertisement for COBOL programmers. It starts with "SIXT is an IT company with a very large car pool". Big words for a car rental firm, but I do hope they will be a tech company.

mrtksn 7y ago

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tech company because they have "scalable virtual models that can be exponentially magnified overnight with little additional costs" but this seems to bu untrue since they did not took over the world. Maybe they are just humble but I think it's simply that their business model is "low touch high scale" and this is being mistaken with Microsoft's ability to develop technology and sell it infinite times with at no addditional cost per copy. What stops WeWork from embracing the Uber model? Maybe you have an empty flat, you can turn it into WeWork location by furnishing the place according to the WeWork standarts and install some kind of kiosk and smart lock system. Uber makes the driver to use cars that obey certain standarts, why wouldn't WeWork do the same and "scale overnight"?

TheOtherHobbes 7y ago
It's different because according to the filing, the founder's relationship with the business - and its finances - is best described as "very unusual."
marcinzm 7y ago
>What stops WeWork from embracing the Uber model? Maybe you have an empty flat, you can turn it into WeWork location by furnishing the place according to the WeWork standarts and install some kind of kiosk and smart lock system. Uber makes the driver to use cars that obey certain standarts, why wouldn't WeWork do the same and "scale overnight"? Everything is possible but that's worthless until someone actually does it. Uber, AirBnB, etc. have already done those things. WeWork hasn't. Until it does, it's perfectly valid to say it hasn't proven it can and to assume it can't.
the_gastropod 7y ago
> In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. Some day, maybe they could?! But their current business is selling short term office space leases. They have massive liabilities in their long-term leases. If Uber (an absurd business in its own right) bought all the cars and paid their drivers salaries, that'd be a closer approximation to what WeWork is doing. It would be just another taxi company, and worth at least an order of magnitude less than it is today.

baristaGeek 7y ago

It's a startup though. The same way that GAP (the sweatshirts) wasn't a tech company but was a startup that raised Venture Capital before going public.

paggle 7y ago

“Tech” is now a requirement of so many different businesses that the concept of a “tech” company needs to change. There is now a spectrum of “techness” where your companies like Spanx are on the left (still needing marketing automation, logistics, and a bunch of other tech), AMD is on the right, and Facebook etc are somewhere in the middle as a blend of tech and marketing. It hardly matters where you draw an imaginary vertical line and call everything to the right “tech” as the tech is now an input to the business the way that electricity is.

DebtDeflation 7y ago

Interesting article, but putting aside abstract definitions of a "tech company" based on variable costs and scaling, exactly what "tech" does WeWork even have that companies like Regus don't?

einpoklum 7y ago

After having read the title: Whoever thought WeWork was a tech company? It's a real-estate company (assuming it's not a stockholder-targeting scam...)

jgalt212 7y ago

It's fun and all to dump on WeWork, but at the end of the day they are going to get what they want. Why? Because no one on planet earth pays more fees to the banks than Softbank.

tim333 7y ago

I'm not sure the founder sees it as a tech or real estate company but something more: >In 2017, 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.” He has long maintained that categorizing WeWork as a real-estate concern is too limiting; it is a “community company” with huge ambitions. “We are here in order to change the world,” Neumann said that same year. “Nothing less than that interests me.”

tim333 7y ago
SoftBank's Masa Son is quite interesting talking about it https://youtu.be/L53B2UZ9lpY?t=1187 https://youtu.be/L53B2UZ9lpY?t=1187
DebtDeflation 7y ago
>our energy and spirituality >it is a “community company” >“We are here in order to change the world,” Can some explain to me what renting out shared workspaces has to do with any of this?
- Nasrudith 7y ago
  Simple - it is marketing bullshit to lionize renting out shared workspaces. It has precedence like the use of "blast processing".

anthony_doan 7y ago

So WeWork is more like McDonald? I wonder how close they are to McDonald in business model.

steve19 7y ago
I thought McDonalds owns a lot of real estate? WeWork just had leases. WeWork is more like hotel chains that have long term leases or licenses for the buildings.

tt 7y ago

Video of our team's analysis on this subject: https://www.youtube.com/watch?v=d2RwG7U_GEU https://www.youtube.com/watch?v=d2RwG7U_GEU

yalogin 7y ago

Of course its not a tech company. They might want to paint themselves that way, but they operate in the real estate space. Which is why I think they have a severe downside if a recession comes.

acchow 7y ago

Anyone know what percentage of their employees are programmers?

benatkin 7y ago
The percent of open positions in Technology according to https://careers.wework.com https://careers.wework.com is 25.8%. Glancing at Technology it appears to be mostly engineering or engineering management. Of course the number of open positions isn't the same because they're looking to staff up or staff down, but to me it seems about typical for a tech company with 20+ employees (a software-heavy 5 person startup might have 3 or 4 coders).

rosege 7y ago

They don't have an R&D budget which a tech company of this size should have. They are similar to Regis which is actually profitable.

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abalone 7y ago

I would like to understand this better because WeWork has a lot of open positions right now. Is it all a front? Much of this article seems to focus on it not having the margins and network effects of Apple, Facebook, etc. Devil’s advocate: Amazon has dinky margins and was unprofitable for many of its early years. Physical servers have “wear and tear”. But they are a winner because they have developed competencies and efficiencies that let them rent out infrastructure that fast growing companies would rather not own and manage. Could WeWork be like AWS for office space? Looking at their open positions they have teams around evaluating, visualizing and instrumenting spaces. In addition to the flexibility to scale up and down. There’s a lot that’s sketch about their company structure but if companies are going to outsource say payments to 3rd parties like Stripe, why wouldn’t they do it for office space which is a huge PITA?

deleted 7y ago
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sytelus 7y ago
You don't want to look at margins by subtracting expenses from revenue. For a growing company, this can be zero or even negative. The key thing is this: Are customers paying top dollars for the space they sell then elsewhere? That answer seems to be yes which means they have better margin than competitors given their brand and amnesties. However, they might decide to reinvest all that money to build assets in other markets which will put their balancesheet in red.

sprafa 7y ago

Amazing that we need an article to say something we all already know because the company is so deceitful.

kbos87 7y ago

If WeWork could figure out how to do what it’s doing without actually owning real estate or holding long term leases, it might be closer to a tech company. That isn’t the case, though. Their network are their own buildings and their financial structure looks much more like that of an asset heavy real estate holding company.