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I know this has been covered before, but WeWork isn't really a tech company. They're a real estate company. They buy buildings and then rent space. And they cer

I know this has been covered before, but WeWork isn't really a tech company. They're a real estate company. They buy buildings and then rent space. And they certainly don't scale the same way tech companies do.

blang 7y ago
I think that's why the parent put "tech" in quotes.
- LargeWu 7y ago
  I guess I was referring to the quote that was posted, which certainly seemed to lump WeWork in with tech IPO's.
  - filmgirlcw 7y ago
    Well, although many now understand WeWork isn’t a tech company (and some of us were saying this YEARS ago — I personally said this at least twice on CNBC as far back as 2014), WeWork raised money and did it’s IPO roadshow and achieved the valuation it has achieved by positioning itself as a tech company, even tho it is just a real estate company with slightly complicated owning/leasing structures. Soft Bank invested what if has invested, expecting to get the return it would get on a tech company — not real estate. The reckoning that is happening now is much deserved, but if WeWork got the benefit of being called a tech company when it was flying high (and it did — including here on HN), I’m not going to give the company or its investors an “out” now that it’s all falling apart. This was a decidedly non-tech company that convinced its investors it was tech. And now that the rouse is up, the bloodbath that follows begins in earnest.
    - roymurdock 7y ago
      investors don't really care what "tech" truly means in the classical sense (using/selling computers or apps as a central part of the business). investors care about what kind of return they can expect from a certain class of company. "Tech" has come to mean a company with high revenue/user growth, low marginal cost of production, big moats, not necessarily profitable, but on track to IPO and with large institutional/public demand for investment. WeWork is obviously not a tech company like Microsoft or Apple are tech companies and nobody is arguing or should really even care about that, investors surely don't. But it also fails to check some of the boxes of new class of "tech" companies and that is being reflected in the current valuation battle. or maybe the underwrites just really overshot the mark after SoftBank pressured them with its own high valuation estimate.
spenvo 7y ago
They don't buy them, I believe they lease them
- LargeWu 7y ago
  Fair enough, my mistake. I wouldn't say that fundamentally changes their business model though.
  - mountainofdeath 7y ago
    But it does. A lease is somewhere between a capital expenditure and a normal expense. It's not a tangible asset like a building is so it can't be factored into the book value and are instead ongoing liabilities. In WeWork's case, these are multi year leases that cost almost as much to get out of as to pay outright.
- thefj 7y ago
  It's more complicated than that... They also have a different arm that buys the buildings. https://www.wsj.com/articles/wework-the-workspace-giant-wants-to-be-its-own-landlord-using-other-investors-money-1526212801 https://www.wsj.com/articles/wework-the-workspace-giant-want...
- jakelazaroff 7y ago
  From their own CEO, no less: https://www.businessinsider.com/wework-ceo-adam-neumann-office-space-landlord-2019-1 https://www.businessinsider.com/wework-ceo-adam-neumann-offi...
mbesto 7y ago
This trope is going to die soon (as its discussed on twitter and HN like weekly now). "Tech company" is an operating model, not an industry/market. "We" is a real estate leasing/operating company heavily enabled by tech.
- JMTQp8lwXL 7y ago
  I wonder how WeWork uses technology to enable them. I'd imagine it'd be along the lines of using AI or ML to identify properties that would be profitable to sublease.
  - edw 7y ago
    Yes, they do have a team that uses "AI" and/or "ML" to identify properties. How effective that team has been or the extent to which that team's existence makes them a tech company are entirely different questions.
    - redisman 7y ago
      Probably something like the Whole Foods algorithm. Find a wealthy area that fits your target demographics.
      - JMTQp8lwXL 7y ago
        That sounds like a very simple algorithm. Get census data, sort by zip code median income, and filter results to above a minimum dollar amount. Doesn't make it any less of an algorithm.
    - heurist 7y ago
      I'm in real estate analytics and know that at least for my area, they used a real estate broker to find properties like anyone else would. Brokers know f-all about AI/ML/analytics (I tried to sell it to them for years all over the country and never got through to them. My fault or theirs, who knows.). They might be using AI/ML in other ways but RE in general is data-averse. Especially in office, most cities have a small area with most class A space and local brokers know it like the back of their hands.
madengr 7y ago
Google is advertising. Facebook/Twitter/etc are social networking. Uber is transportation. Amazon sells stuff. Silicon Valley lost its tech when it lost its silicon. You are not a tech company unless you sell technology to other companies, and that is your main stream of revenue.
- shuckles 7y ago
  "Tech" is a label which can obviously mean anything as broad was "builds skyscrapers" but in this context means companies with very low marginal costs. That is specifically what WeWork is not, as every new customer requires the acquisition of physical office space.
- DaiPlusPlus 7y ago
  I’d wager they’re tech companies if their business model is built on proprietary technology that allows them to take a business idea and scale it quickly. Uber’s a tech company because their technology for taxi dispatch allows them to dispatch millions of cars without a single human manning a telephone. Amazon is a tech company because their inventory management system (unique at the time: when they didn’t have bins of identical items in their warehouses unlike their competitors in the early 2000s. If Amazon was just using Magento then you’d have a point - but when a company’s beating heart depends on the canny exploitation of their own technology - they’re a tech company.
- xiphias2 7y ago
  Google's value would take a huge hit if somebody made a search engine that is better than Google's, so it's still a tech company. It's still mainly seaech (advertising is its business model, though ad positioning is state-of-the-art). Facebook has network effect and Über has it's driver network, which is more important than the app itself. They are all very different types of companies. WeWork is similar to Über: it has real costs of buying atoms instead of.juat handling bits.
  - etskinner 7y ago
    Uber doesn't use Ü in its name
jsloss 7y ago
They rent buildings (long term leases) and then rent out spaces (short term leases). It scales. But you’re right, not in any way like a tech company. The fact that they say tech is at their core is a joke. The only reason to use their app to to book a meeting room or remember your printing code.
- frenchie4111 7y ago
  At their core they are probably not a “tech” company in the traditional sense (a SaaS business). However, I think you are misunderstanding what they mean by tech company. WeWork is more akin to Flexport. Their bet is that they can run their business 10x better than their competitors by vertically integrating their tech and investing heavily in sensors and efficiency technology. They don’t really intended to sell tech to people, they intend to use tech to bleed the most money they can out of their core business, short term leases.
  - MegaButts 7y ago
    I have never seen WeWork compared to Flexport before. You don't consider Flexport to be a tech company?
  - throwaway5752 7y ago
    Similarly to AirBnB and Uber. Same kind of thing - use technology create a company of larger scale and coordination than previously existed in a space. I think the general WeWork idea is great. Investing in it is another story.
  - jrockway 7y ago
    I am not sure I buy this. Sensors are great and everything, but the electricity for the LED lighting is not what makes buying or renting buildings in major cities expensive.
  - askl56 7y ago
    So what you're saying is that they are not currently a tech company but that they intend to become one?
BinaryIdiot 7y ago
> They're a real estate company. Are they, though? Their CEO owns another company that buys up properties and then WeWork rents to them. I don't know how much real estate WeWork owns anymore. Though I think you're closer calling them that than a tech company.
- chx 7y ago
  This concern is overblown, there are very few buildings with which this happeened. (This doesn't mean the company is viable at all on the long run.)
muddi900 7y ago
They are Regus, but with cucumber water

blang 7y ago

I think that's why the parent put "tech" in quotes.

LargeWu 7y ago
I guess I was referring to the quote that was posted, which certainly seemed to lump WeWork in with tech IPO's.
- filmgirlcw 7y ago
  Well, although many now understand WeWork isn’t a tech company (and some of us were saying this YEARS ago — I personally said this at least twice on CNBC as far back as 2014), WeWork raised money and did it’s IPO roadshow and achieved the valuation it has achieved by positioning itself as a tech company, even tho it is just a real estate company with slightly complicated owning/leasing structures. Soft Bank invested what if has invested, expecting to get the return it would get on a tech company — not real estate. The reckoning that is happening now is much deserved, but if WeWork got the benefit of being called a tech company when it was flying high (and it did — including here on HN), I’m not going to give the company or its investors an “out” now that it’s all falling apart. This was a decidedly non-tech company that convinced its investors it was tech. And now that the rouse is up, the bloodbath that follows begins in earnest.
  - roymurdock 7y ago
    investors don't really care what "tech" truly means in the classical sense (using/selling computers or apps as a central part of the business). investors care about what kind of return they can expect from a certain class of company. "Tech" has come to mean a company with high revenue/user growth, low marginal cost of production, big moats, not necessarily profitable, but on track to IPO and with large institutional/public demand for investment. WeWork is obviously not a tech company like Microsoft or Apple are tech companies and nobody is arguing or should really even care about that, investors surely don't. But it also fails to check some of the boxes of new class of "tech" companies and that is being reflected in the current valuation battle. or maybe the underwrites just really overshot the mark after SoftBank pressured them with its own high valuation estimate.

spenvo 7y ago

They don't buy them, I believe they lease them

LargeWu 7y ago
Fair enough, my mistake. I wouldn't say that fundamentally changes their business model though.
- mountainofdeath 7y ago
  But it does. A lease is somewhere between a capital expenditure and a normal expense. It's not a tangible asset like a building is so it can't be factored into the book value and are instead ongoing liabilities. In WeWork's case, these are multi year leases that cost almost as much to get out of as to pay outright.
thefj 7y ago
It's more complicated than that... They also have a different arm that buys the buildings. https://www.wsj.com/articles/wework-the-workspace-giant-wants-to-be-its-own-landlord-using-other-investors-money-1526212801 https://www.wsj.com/articles/wework-the-workspace-giant-want...
jakelazaroff 7y ago
From their own CEO, no less: https://www.businessinsider.com/wework-ceo-adam-neumann-office-space-landlord-2019-1 https://www.businessinsider.com/wework-ceo-adam-neumann-offi...

mbesto 7y ago

This trope is going to die soon (as its discussed on twitter and HN like weekly now). "Tech company" is an operating model, not an industry/market. "We" is a real estate leasing/operating company heavily enabled by tech.

JMTQp8lwXL 7y ago
I wonder how WeWork uses technology to enable them. I'd imagine it'd be along the lines of using AI or ML to identify properties that would be profitable to sublease.
- edw 7y ago
  Yes, they do have a team that uses "AI" and/or "ML" to identify properties. How effective that team has been or the extent to which that team's existence makes them a tech company are entirely different questions.
  - redisman 7y ago
    Probably something like the Whole Foods algorithm. Find a wealthy area that fits your target demographics.
    - JMTQp8lwXL 7y ago
      That sounds like a very simple algorithm. Get census data, sort by zip code median income, and filter results to above a minimum dollar amount. Doesn't make it any less of an algorithm.
  - heurist 7y ago
    I'm in real estate analytics and know that at least for my area, they used a real estate broker to find properties like anyone else would. Brokers know f-all about AI/ML/analytics (I tried to sell it to them for years all over the country and never got through to them. My fault or theirs, who knows.). They might be using AI/ML in other ways but RE in general is data-averse. Especially in office, most cities have a small area with most class A space and local brokers know it like the back of their hands.

madengr 7y ago

Google is advertising. Facebook/Twitter/etc are social networking. Uber is transportation. Amazon sells stuff. Silicon Valley lost its tech when it lost its silicon. You are not a tech company unless you sell technology to other companies, and that is your main stream of revenue.

shuckles 7y ago
"Tech" is a label which can obviously mean anything as broad was "builds skyscrapers" but in this context means companies with very low marginal costs. That is specifically what WeWork is not, as every new customer requires the acquisition of physical office space.
DaiPlusPlus 7y ago
I’d wager they’re tech companies if their business model is built on proprietary technology that allows them to take a business idea and scale it quickly. Uber’s a tech company because their technology for taxi dispatch allows them to dispatch millions of cars without a single human manning a telephone. Amazon is a tech company because their inventory management system (unique at the time: when they didn’t have bins of identical items in their warehouses unlike their competitors in the early 2000s. If Amazon was just using Magento then you’d have a point - but when a company’s beating heart depends on the canny exploitation of their own technology - they’re a tech company.
xiphias2 7y ago
Google's value would take a huge hit if somebody made a search engine that is better than Google's, so it's still a tech company. It's still mainly seaech (advertising is its business model, though ad positioning is state-of-the-art). Facebook has network effect and Über has it's driver network, which is more important than the app itself. They are all very different types of companies. WeWork is similar to Über: it has real costs of buying atoms instead of.juat handling bits.
- etskinner 7y ago
  Uber doesn't use Ü in its name

jsloss 7y ago

They rent buildings (long term leases) and then rent out spaces (short term leases). It scales. But you’re right, not in any way like a tech company. The fact that they say tech is at their core is a joke. The only reason to use their app to to book a meeting room or remember your printing code.

frenchie4111 7y ago
At their core they are probably not a “tech” company in the traditional sense (a SaaS business). However, I think you are misunderstanding what they mean by tech company. WeWork is more akin to Flexport. Their bet is that they can run their business 10x better than their competitors by vertically integrating their tech and investing heavily in sensors and efficiency technology. They don’t really intended to sell tech to people, they intend to use tech to bleed the most money they can out of their core business, short term leases.
- MegaButts 7y ago
  I have never seen WeWork compared to Flexport before. You don't consider Flexport to be a tech company?
- throwaway5752 7y ago
  Similarly to AirBnB and Uber. Same kind of thing - use technology create a company of larger scale and coordination than previously existed in a space. I think the general WeWork idea is great. Investing in it is another story.
- jrockway 7y ago
  I am not sure I buy this. Sensors are great and everything, but the electricity for the LED lighting is not what makes buying or renting buildings in major cities expensive.
- askl56 7y ago
  So what you're saying is that they are not currently a tech company but that they intend to become one?

BinaryIdiot 7y ago

> They're a real estate company. Are they, though? Their CEO owns another company that buys up properties and then WeWork rents to them. I don't know how much real estate WeWork owns anymore. Though I think you're closer calling them that than a tech company.

chx 7y ago
This concern is overblown, there are very few buildings with which this happeened. (This doesn't mean the company is viable at all on the long run.)

muddi900 7y ago

They are Regus, but with cucumber water