9 ms·

> WeWork is probably legitimately in the $15B range How do you arrive at that number? I've seen comparisons to firms like IWR / Regus that imply a much lower

by arbuge 7y ago

> WeWork is probably legitimately in the $15B range How do you arrive at that number? I've seen comparisons to firms like IWR / Regus that imply a much lower number would be appropriate, even if WeWork was as profitable as those firms (which it isn't even remotely... it loses money hand over fist).

wayoutthere 7y ago
You have a point; $15B is on the high side and I can’t defend it. But they do have a brand, which is what makes an undifferentiated service like office space valuable. I still contend that most of the value of Uber is tied up in their brand, and I think the same is true of We. I’m not sure either of their operations are all that valuable.
- MegaButts 7y ago
  > I still contend that most of the value of Uber is tied up in their brand, and I think the same is true of We. I’m not sure either of their operations are all that valuable. What good is a brand if it's losing money?
  - wayoutthere 7y ago
    Because a brand is all about revenue. The entire purpose of VC financing is to build a brand with outsized mindshare before the market is mature enough to have established players and then fix the operations later.
    - MegaButts 7y ago
      But aren't they still supposed to fix the operations before they IPO, or at least enough to convince investors it's a good buy? We're not talking about companies that hope to stay private for the foreseeable future - these are companies that are trying (and failing) to IPO or very recently had unsuccessful IPOs. A brand is only so useful if it's attached to a money fire.
      - wayoutthere 7y ago
        Absolutely agree, the whole WeWork IPO has been a dumpster fire. They should have had their house in order long before an S-1.
    - munk-a 7y ago
      It is sort of amazing that this is still happening - when your brand is heavily reliant on network based social effects then taking a loss to build up that network is hard to swallow but potentially correct. But, if I were to build a steel mill and take this approach it'd be idiotic - some tech companies do benefit from network effects, but others do not. WeWork simply doesn't - if it'd been an office space renter with an emphasis on style and the social environment that had started in SF and spread organically it totally could have made it, but money was wrecklessly pumped into a business that shouldn't ever be in the red (outside of asset acquisition including software components, that's totally reasonable).
      - wayoutthere 7y ago
        I completely agree with you. But the problem with markets with strong network effects is that those network effects usually aren’t obvious until you’ve struck gold. The markets with obvious network effects tend to be too heavily competitive to actually ever get there.
        Glibaudio 7y ago
        This is an interesting observation. Can you share a link/case study? Kind of makes sense, but curious of how you developed your certainty. thnx
  - Someone 7y ago
    Eventually: nothing. That may take a while, though. As an example, check what the “Commodore” brand went through. https://en.wikipedia.org/wiki/Commodore_International#Demise https://en.wikipedia.org/wiki/Commodore_International#Demise: ”Commodore declared bankruptcy on April 29, 1994, and ceased to exist” https://en.wikipedia.org/wiki/Commodore_International#Post-Commodore_International_Ltd https://en.wikipedia.org/wiki/Commodore_International#Post-C.... : “In late 2004, Tulip sold the Commodore trademarks to Yeahronimo Media Ventures for €22 million” That’s 10 years after they went bankrupt, and the story didn’t even end there.
    - kjs3 7y ago
      Yeah, but Commodore did ~US$1B in sales per year in the early 80s. So, sure, there's some residual value in a well known brand, €22 million is a tiny pittance compared to the pre-fall valuation of the brand. Will C= become another multi-billion dollar company under Yeahronimo? Maybe, but given other resurrected nostalgia brands (see: Bell+Howell shilling crap flashlights on late night TV) I wouldn't bet on it.
- opencl 7y ago
  Regus has more locations, owns the buildings instead of subleasing them, is profitable, and is valued at 3.6B. 15B would be not be a sane valuation for Wework even if they weren't bleeding money at an alarming rate.
  - tlb 7y ago
    Regus offices are soulless. If you try to run a startup out of one, you'll have a harder time hiring and everyone will want to go home at 5 pm. The amazing thing about WeWork is that the offices are fun. The one I know in SF is an OK place to hang out in the evening. So I disagree it's just a brand. WeWork's product is better. Maybe other temporary office companies will figure out how to make their offices fun, but I sort of doubt it. Companies rarely learn how to be more fun if they didn't start off that way. If WeWork is the only fun office space, they'll be hugely profitable someday.
    - rsanheim 7y ago
      > everyone will want to go home at 5 pm. You say that like it is a bad thing.
      - singingboyo 7y ago
        Like it or not, from a company owner's perspective, it is. Also, it's not like a soulless or poorly configured office has negative effects only after 5pm. I know someone who's in a WeWork office temporarily - they love it, because the old space was poorly configured and amplified stress. Go figure, they've also mentioned they feel more productive and are getting more done. But they're not they're any longer than they were before.
        Nursie 7y ago
        Actually a company owner with a brain doesn't want their people to burn out, so limits late nights and overtime.
    - travem 7y ago
- JohnFen 7y ago
  They do have a brand, but it's a brand that comes with a lot of baggage.
- aetherson 7y ago
  So the problem of these companies that are many billions of dollars having "most of their value tied up in their brand" is that the brand becomes... kind of inextricable from the operations. Who would buy a $10B brand? Much less a $30B one or whatever? The answer is almost exclusively "companies that already have a better brand than you do." Like, Apple could buy Uber, and then do its own ride-sharing service, and brand that ride-sharing service Uber... but they don't need to. They're Apple. Any potential ride-sharing service that would like to build its own operations and the bootstrap itself to wider name recognition by buying Uber's brand won't be paying tens of billions of dollars. So what's left? We and Uber need to reform their own operations to make money, which is the exact problem that nobody thinks they can do. What does their supposedly powerful brand get them?
  - alasdair_ 7y ago
    >Who would buy a $10B brand? Phillip Morris (a cigarette company) paid over $13BN for Kraft Foods, the vast majority of which was simply for the "Kraft" brand. And this was a long time ago. Brands have enormous value.
    - edoceo 7y ago
      It wasn't for all the money they make from selling food products? Kraft generates predictable revenue and profit.
      - alasdair_ 7y ago
        >It wasn't for all the money they make from selling food products? Kraft generates predictable revenue and profit. Not really for that, no. In GAAP accounting "goodwill" is the generic term for "extraneous stuff that we can't quantify" i.e. the brand - the vast majority of the purchase price for Kraft was labled "goodwill" in the public accounting statements Phillip Morris issued. There is a pretty good writeup on this in Naiomi Klein's book "No Logo"
    - puranjay 7y ago
      Brand names matter more in food and health verticals. People are far more brand driven when it comes to putting things in their body than they are about ridesharing or office space
- manigandham 7y ago
  Brands only have value if they can be used to create customers and profit. Apple, Microsoft, Google are massively valuable. Blockbuster, Sears, Theranos are not. WeWork is a bubble about to burst. Uber is still unknown. The value of both brands is complete speculation and highly inflated by hopes and dreams.
- cm2187 7y ago
  Does the brand really matter for office space? I can’t think a company, even a small one, not shopping around for such an important matter, and also not looking for facilities that are convenient in term of location rather than going to the other side of the city because it is a well known brand.

by arbuge 7y ago

wayoutthere 7y ago

You have a point; $15B is on the high side and I can’t defend it. But they do have a brand, which is what makes an undifferentiated service like office space valuable. I still contend that most of the value of Uber is tied up in their brand, and I think the same is true of We. I’m not sure either of their operations are all that valuable.

MegaButts 7y ago
> I still contend that most of the value of Uber is tied up in their brand, and I think the same is true of We. I’m not sure either of their operations are all that valuable. What good is a brand if it's losing money?
- wayoutthere 7y ago
  Because a brand is all about revenue. The entire purpose of VC financing is to build a brand with outsized mindshare before the market is mature enough to have established players and then fix the operations later.
  - MegaButts 7y ago
    But aren't they still supposed to fix the operations before they IPO, or at least enough to convince investors it's a good buy? We're not talking about companies that hope to stay private for the foreseeable future - these are companies that are trying (and failing) to IPO or very recently had unsuccessful IPOs. A brand is only so useful if it's attached to a money fire.
    - wayoutthere 7y ago
      Absolutely agree, the whole WeWork IPO has been a dumpster fire. They should have had their house in order long before an S-1.
  - munk-a 7y ago
    It is sort of amazing that this is still happening - when your brand is heavily reliant on network based social effects then taking a loss to build up that network is hard to swallow but potentially correct. But, if I were to build a steel mill and take this approach it'd be idiotic - some tech companies do benefit from network effects, but others do not. WeWork simply doesn't - if it'd been an office space renter with an emphasis on style and the social environment that had started in SF and spread organically it totally could have made it, but money was wrecklessly pumped into a business that shouldn't ever be in the red (outside of asset acquisition including software components, that's totally reasonable).
    - wayoutthere 7y ago
      I completely agree with you. But the problem with markets with strong network effects is that those network effects usually aren’t obvious until you’ve struck gold. The markets with obvious network effects tend to be too heavily competitive to actually ever get there.
      - Glibaudio 7y ago
        This is an interesting observation. Can you share a link/case study? Kind of makes sense, but curious of how you developed your certainty. thnx
- Someone 7y ago
  Eventually: nothing. That may take a while, though. As an example, check what the “Commodore” brand went through. https://en.wikipedia.org/wiki/Commodore_International#Demise https://en.wikipedia.org/wiki/Commodore_International#Demise: ”Commodore declared bankruptcy on April 29, 1994, and ceased to exist” https://en.wikipedia.org/wiki/Commodore_International#Post-Commodore_International_Ltd https://en.wikipedia.org/wiki/Commodore_International#Post-C.... : “In late 2004, Tulip sold the Commodore trademarks to Yeahronimo Media Ventures for €22 million” That’s 10 years after they went bankrupt, and the story didn’t even end there.
  - kjs3 7y ago
    Yeah, but Commodore did ~US$1B in sales per year in the early 80s. So, sure, there's some residual value in a well known brand, €22 million is a tiny pittance compared to the pre-fall valuation of the brand. Will C= become another multi-billion dollar company under Yeahronimo? Maybe, but given other resurrected nostalgia brands (see: Bell+Howell shilling crap flashlights on late night TV) I wouldn't bet on it.
opencl 7y ago
Regus has more locations, owns the buildings instead of subleasing them, is profitable, and is valued at 3.6B. 15B would be not be a sane valuation for Wework even if they weren't bleeding money at an alarming rate.
- tlb 7y ago
  Regus offices are soulless. If you try to run a startup out of one, you'll have a harder time hiring and everyone will want to go home at 5 pm. The amazing thing about WeWork is that the offices are fun. The one I know in SF is an OK place to hang out in the evening. So I disagree it's just a brand. WeWork's product is better. Maybe other temporary office companies will figure out how to make their offices fun, but I sort of doubt it. Companies rarely learn how to be more fun if they didn't start off that way. If WeWork is the only fun office space, they'll be hugely profitable someday.
  - rsanheim 7y ago
    > everyone will want to go home at 5 pm. You say that like it is a bad thing.
    - singingboyo 7y ago
      Like it or not, from a company owner's perspective, it is. Also, it's not like a soulless or poorly configured office has negative effects only after 5pm. I know someone who's in a WeWork office temporarily - they love it, because the old space was poorly configured and amplified stress. Go figure, they've also mentioned they feel more productive and are getting more done. But they're not they're any longer than they were before.
      - Nursie 7y ago
        Actually a company owner with a brain doesn't want their people to burn out, so limits late nights and overtime.
  - travem 7y ago
JohnFen 7y ago
They do have a brand, but it's a brand that comes with a lot of baggage.
aetherson 7y ago
So the problem of these companies that are many billions of dollars having "most of their value tied up in their brand" is that the brand becomes... kind of inextricable from the operations. Who would buy a $10B brand? Much less a $30B one or whatever? The answer is almost exclusively "companies that already have a better brand than you do." Like, Apple could buy Uber, and then do its own ride-sharing service, and brand that ride-sharing service Uber... but they don't need to. They're Apple. Any potential ride-sharing service that would like to build its own operations and the bootstrap itself to wider name recognition by buying Uber's brand won't be paying tens of billions of dollars. So what's left? We and Uber need to reform their own operations to make money, which is the exact problem that nobody thinks they can do. What does their supposedly powerful brand get them?
- alasdair_ 7y ago
  >Who would buy a $10B brand? Phillip Morris (a cigarette company) paid over $13BN for Kraft Foods, the vast majority of which was simply for the "Kraft" brand. And this was a long time ago. Brands have enormous value.
  - edoceo 7y ago
    It wasn't for all the money they make from selling food products? Kraft generates predictable revenue and profit.
    - alasdair_ 7y ago
      >It wasn't for all the money they make from selling food products? Kraft generates predictable revenue and profit. Not really for that, no. In GAAP accounting "goodwill" is the generic term for "extraneous stuff that we can't quantify" i.e. the brand - the vast majority of the purchase price for Kraft was labled "goodwill" in the public accounting statements Phillip Morris issued. There is a pretty good writeup on this in Naiomi Klein's book "No Logo"
  - puranjay 7y ago
    Brand names matter more in food and health verticals. People are far more brand driven when it comes to putting things in their body than they are about ridesharing or office space
manigandham 7y ago
Brands only have value if they can be used to create customers and profit. Apple, Microsoft, Google are massively valuable. Blockbuster, Sears, Theranos are not. WeWork is a bubble about to burst. Uber is still unknown. The value of both brands is complete speculation and highly inflated by hopes and dreams.
cm2187 7y ago
Does the brand really matter for office space? I can’t think a company, even a small one, not shopping around for such an important matter, and also not looking for facilities that are convenient in term of location rather than going to the other side of the city because it is a well known brand.