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My guess is that initially they focused on a market that was underserved by tech (short-term real estate). That by itself is probably enough to get some initia
by mason55 7y ago
My guess is that initially they focused on a market that was underserved by tech (short-term real estate). That by itself is probably enough to get some initial funding.
Then you show that you're actually executing, at least as far as being able to grow and manage a real business with real revenues, which can easily get you another round.
From there they did two things. The first was to start to securitize the business. You can see this with things like their ARK spinoff, which allowed them to start raising money from real estate investors. Sure, real estate is a slow growth business, but it's backed by real assets, and it allowed them to start pitching to a new kind of investor while they left the equity investors in the original WeWork.
The second thing was what you mentioned, their pivot to "cornering the market". If you view VC investing, and especially SoftBank, as an attempt to find businesses that are going to eat the world with software, then you can see where WeWork's seemingly random pivot to "We" came from. You pitch the business is a fully vertically-integrated lifestyle where people live, work and send their kids to school. The potential returns on something like that would be insane, so if you can sell even a 1% chance of success you can see how it would be alluring.
It's also possible that "eat the world" was the pitch all along. I could see a world where Adam Neumann was smart enough to see the wholly integrated We as the end game from the beginning and pitch the real estate stuff as a path to getting there. The revenue and growth would be more predictable than something like a software product. The losses would obviously be more predictable too but predictable losses with a clear path to growth might not be such a bad thing if your end goal has a necessary condition of "be as big as possible".
- lonelappde 7y ago> underserved by tech Are we just calling "California hipster marketing" "tech" now?
- acchow 7y agoWhat hipster marketing is here? WeWork is also a New York company.
- goobynight 7y agoThe key here is that it success doesn't even have to be likely for VCs to jump in on something that everyone/everyone from a very large category (workers) might end up using e.g. Uber, WeWork, electric scooter sharing. That is, the demand is clearly already there. Rather than working from profit and trying to scale demand they are working on profitability of a huge market as the technical problem. They have more money than investment targets, so they basically fund a few moonshot projects that look like they have a 1%+ chance rather than a 0% chance. I suppose the thesis is that once one of these eventually wins, the losses on the rest will be more than recovered. You just have to do enough 1 out of 100 projects.
- goatinaboat 7y agoYou pitch the business is a fully vertically-integrated lifestyle where people live, work and send their kids to school I can see how this would seem compelling to a 22-year-old Google employee of the sort that gave us Google Glass and Google Plus, but was there any research done that this was a thing that normal people would want?
- mason55 7y agoIf you make it attractive enough I can see people doing it. Use synergy/vertical integration/economies of scale to give people discounts and make their lives more convenient and they'll be willing to give up a lot in terms of things like privacy. In my opinion the real risk would be the antitrust regulators.
- foobiekr 7y agoIt kind of describes the Google extended-university-experience thing though. Google employees live in a social ecosystem; you don’t just do Yoga, you do Google Yoga. And so on. Some subset of people find this gross and creepy but it’s something a lot of young people demonstrably go for.
- perl4ever 7y agoEat the world? You can only gather the returns from turning the world into grey goo once, and then what do you spend it on?