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I'm not quite sure if I really agree with the premise of this article. This isn't some type of Uber vs. Lyft analogy. WeWork dwarfs all the other coworking spac

I'm not quite sure if I really agree with the premise of this article. This isn't some type of Uber vs. Lyft analogy. WeWork dwarfs all the other coworking spaces. Customers aren't going to leave WeWork because they fear it going out of business (after-all that's the point of month-to-month). The turnover happens from unhappy customers. This also seems to imagine given all their recent troubles that WeWork isn't going to dramatically improve operations. WeWork has never gone back to make things efficient since inception, so it wouldn't be a huge surprise if there's a lot they've left on the table. WeWork owns so many leases from landlords; the landlords might be strong-armed into concessions. It's not unreasonable to expect a lot of their metrics are going to improve (and cut costs drastically down), especially with a new set of management. I just signed up for WeWork in Lima, Peru this week. There's definitely customers. Everything is clean/organized. Although, the music is definitely a bit distracting ...

bearcobra 7y ago
IWG is bigger than WeWork in terms of square footage, locations and revenue
- adventured 7y ago
  IWG is no longer bigger on revenue given WeWork's far higher growth rate. IWG is at around $3.1 to $3.2 billion per year in revenue, trailing four quarters, with slow growth. They did $1.6 billion in revenue in the first half of 2019. WeWork did $1.54 billion in revenue for the first six months of 2019 with a fast growth rate. Unless WeWork's business has done a complete 180 and is suddenly contracting (there is no information indicating that is happening), they have likely caught and surpassed IWG on quarterly revenue at this point and will have higher revenue for all of 2019.
  - miles 7y ago
    > IWG is no longer bigger on revenue given WeWork's far higher growth rate. WeWork can’t afford much more revenue at this rate: WeWork IPO filing shows it's losing nearly $5,200 per customer https://www.cbsnews.com/amp/news/wework-ipo-office-sharing-prospectus-s-1-shows-losses/ https://www.cbsnews.com/amp/news/wework-ipo-office-sharing-p... Whereas IWG actually earns a profit on its revenue: WeWork Is Valued 10 Times Greater Than This Profitable, Public Rival https://www.wsj.com/amp/articles/wework-is-valued-10-times-greater-than-this-profitable-public-rival-11566298801 https://www.wsj.com/amp/articles/wework-is-valued-10-times-g...
    - ineedasername 7y ago
      The argument is that WeWork can stop losing money at nearly any time it wants by halting new facility growth and focusing on filling what it has, as most of it's losses stem from growth projects. At least, that's the theory. It seems we'll get a chance to see what happens when they try and hit the "pivot to profit" button. Maybe they should have, like, a whole bunch of people help them hit that button really hard? Maybe hit it twice, just to be sure.
      - pmart123 7y ago
        It’s reasonable to assume if they could have hit a button to demonstrate profitable unit economics or profit in long running spaces, they would have amended the S-1 to show this as the IPO valuation was collapsing.
        ineedasername 7y ago
        This ability to turn on profitability was decently spelled out in their S-1. It was too late to amend it further to reemphasize the point because investors had already massively soured on the deal and would not take mere assurances at face value. In order to overcome that, WeWork needs to take time, at least a quarter or two, to hit that button and show they're at least on a course to profitability. Before they can get back to IPO land and hope for even a $15 to $20 billion valuation, they need to demonstrate the truth of their statements on turning profitable. Even then I'd place that at the high end of a valuation, 7.5x to 10x revenue is still enormous for a real estate firm
  - wpietri 7y ago
    > there is no information indicating that is happening I mean, aside from their CEO being pushed out and their IPO being shelved because they were losing money hand over fist. Which means they can't raise the $7 billion they wanted to continue expanding. They were buying growth. They can't afford to buy growth anymore. So it's entirely possible that they'll shrink. And that's not even counting all the negative press, which has to be discouraging potential clients.
- sbr464 7y ago
  I mean, have you been to a Regus space? It’s not in the same ballpark (regarding modern amenities), in the smallest way.
  - ttul 7y ago
    Yes, but Regus (now called IWG) runs Spaces, which is catching up quickly with WeWork. Unlike WeWork, their balance sheet is amazing. WeWork will have to endure a staggering restructuring.
  - untog 7y ago
    No, but it is a sustainable business, so they've got that going for them.
    - sbr464 7y ago
      Having worked closely with oil & gas I’d be curious how Regus would do without “that client”.
  - hermanradtke 7y ago
    The ones in downtown LA are mighty close to a WeWork feel.
    - kevinlou 7y ago
      The one in downtown proper, or the one at The Row? As someone mentioned in another comment, Spaces picks property that doesn't command a price premium vs. WeWork where it's always a prime location.
  - AJ007 7y ago
    When I was at a Regus space years ago, we had an amenity I never saw at WeWork - solid, opaque walls.
colmvp 7y ago
As a counter point, I left WeWork because Spaces (one of the competitors in the article) had more flexible plans for co-working and was overall cheaper. I also disliked the fact that they kept having all types of loud music in the background. The Spaces location I go to does play music, but they typically have it at a lower volume and the music is usually mellow (ultimately, I'd rather have no music but w/e). I wondered why the Spaces subscription was cheaper than the WeWork I went to, and if I had to guess, it might have to do with the locations they've chosen in my city aren't in the super prime locations like WeWork. Most of the WeWork's in my city are near major downtown intersections/corridors where office space is at an extreme premium. They also offer slightly less amenities. For example, WeWork had cleaning staff come in pretty frequently while Spaces probably only has them come at some point during the day/evening. Plus they don't have free coffee or a gourmet selection of tea like WeWork. But all in all, I'm pretty satisfied with switching. It has the same sort of feel as WeWork what with lots of interesting companies renting the dedicated office spaces, but it's quite a bit easier on the wallet for myself.
- ineedasername 7y ago
  *>they don't have free coffee or a gourmet selection of tea like WeWork." That's the thing, just like "free" breakfast or coffee at hotels, there's always a cost baked into the price. But there's something to be said for the psychology as an "all in" price rather than nickel-and-dime, or having to brew your own coffee. Though for $100 a month, I'll absolutely brew my own coffee.
soneca 7y ago
WeWork is launching a lot of new spaces. The company I work was almost decided on moving to one of these new ones but with the crisis, potentially layouts, so increased risks of a worse service or even more serious complications; it is already kind of decided that we are going to another place. WeWork growth promise, the basis for any investment (that seem to be very much needed now) depends on a lot of new spaces and these are the most affected by the public crisis. It can create a very damaging vicious cycle.
jillesvangurp 7y ago
Exactly, WeWork is turning into a normal business with competition. I think of them as similar to a hotel chain. Hotel chains basically own or lease real estate that they rent out on a per night basis to individuals. The reason the hotel business has multinationals owning large amounts of hotels world wide is because that kind of scale provides certain benefits in terms of operational cost, brand recognition, etc. WeWork bootstrapped a multinational with hundreds of locations world wide using investor money and are now serving hundreds of thousands of users that apparently like them enough to pay a premium for using their space. So far so good. But it's something that others can copy and there are a lot of smaller and bigger competitors starting to offer similar services that are showing healthy growth. The premise of WeWork's valuation is that it can continue to charge a premium because of their scale. However, if other competitors emerge, it becomes exactly like the hotel business and they'll be competing on price and quality. Given enough competing spaces, their customers will simply flock to the ones with the best price and offering. That is going to limit the ROI for investors and probably is causing them to have second thoughts about dumping billions in it. Hence the IPO withdrawal.
- ineedasername 7y ago
  >That is going to limit the ROI for investors and probably is causing them to have second thoughts about dumping billions in it. Precisely. Apart from corporate governance, the problem was never really the business fundamentals since with careful oversight they really should be able to flip the switch from massive growth to profitability. The major issue with that is investors put their money in at 20x revenue premised on growth when it now looks like it's a more traditional 4x revenue business, at least for the near term.
- derefr 7y ago
  > Given enough competing spaces, their customers will simply flock to the ones with the best price and offering. Just waiting for “Expedia for coworking spaces” to come and commoditize them :)
  - speedplane 7y ago
    > Just waiting for “Expedia for coworking spaces” to come and commoditize them :) I've been waiting for this too, but the more I think about it, the less likely I think it'll actually happen. People spend at least 5 days and 40 hours a week in their work environment, often across many years. In contrast, when traveling, you spend just a handful of hours in a flight or a few days in a hotel. When you're spending a short time on something, you're less likely to see details, and commodification is easier. When you spend days, weeks, years in a place, tiny minutea jump out and no two spaces are exactly the same. As a comparison, think about residential real-estate. There still has been very little commodification of residential real-estate, because neighborhoods, amenities, schools, safety, light, and even the color of the grass play a factor. Work-spaces are less extreme, but similar dynamics play out. Even if thousands of WeWork copy-cats pop-up around the world (as is currently happening), I wouldn't expect serious commodification.
ineedasername 7y ago
I think it's less an issue of stealing existing customers than it is filling the vacuum that would have been filled by a massively expanding WeWork. If WeWork has indeed tapped into a growth market in their flexible term leasing & quality environments, then competitors will have an opportunity to soak up demand that might otherwise have gone to the expanding WeWork offerings. I think you're generally right about them not losing customers, but they may lose some: Short leases mean ease of mobility, so if a competitor offers similar quality at a lower price, or if you've outgrown your current We space and would need to move into a larger one anyway, you might be enticed to switch. However, that sort of competition would apply with or without WeWork's current issues.
- speedplane 7y ago
  > Short leases mean ease of mobility, so if a competitor offers similar quality at a lower price, or if you've outgrown your current We space and would need to move into a larger one anyway, you might be enticed to switch. Most articles about WeWork ignore half of its business model. The first part, which is heavily discussed, is acquiring long term leases, and then leasing out short term rentals. If this was their entire company, it would clearly fail as they're basically absorbing the risk of any long term risk of their tenants. But the other component of WeWork's business is to create vibrant work environments that people want to work in. They have excelled at this, bringing the silicon valley relaxed low formality tech vibe to every city across the planet. The vast majority of office workers still work in stuffy environments, that are uninspired, formal, and depressing. Bloggers and startups may have created WeWork, but now employees at law firms, finance companies, and accounting agencies are starting to demand a similar environment. Having good offices is becoming important to hiring the best talent. Sure WeWork has competitors and inspired corporations can always build their own WeWork-esq office space, but assuming this trend continues, WeWork has a ton of headroom.
  - ineedasername 7y ago
    The thing about attracting traditional businesses looking to offer their employees a silicon valley low formality work environment is that such businesses can probably do it themselves with a traditional lease for less than the premium charged by WeWork. I could be wrong about the above, it might be cheaper or simpler to pay WeWork. But for accounting, law, and finance: Those are industries with high level needs for privacy & confidentiality that would be a problem in a co-working environment. They need work spaces that are separated from other businesses, which obviates the benefits of a mixed co working environment.
hobofan 7y ago
> WeWork dwarfs all the other coworking spaces. In the world in total? Sure. In individual cities? Barely. WeWork is always pitted against local competitors. I would guess that most of their customers are single-location, and for the bigger ones that are renting in multiple locations, they haven't really created any useful value-add.
easytiger 7y ago
I think the assumption is that given imminent cashflow issues We Work will have to contract in less/unprofitable markets. Also new business will generally be damaged by the ongoing farce. I also know of 2 (large) customers who moved from We work in the last year because employees were sick of the "unprofessional" workplace. One example was dogs pissing in the office!

bearcobra 7y ago

IWG is bigger than WeWork in terms of square footage, locations and revenue

adventured 7y ago
IWG is no longer bigger on revenue given WeWork's far higher growth rate. IWG is at around $3.1 to $3.2 billion per year in revenue, trailing four quarters, with slow growth. They did $1.6 billion in revenue in the first half of 2019. WeWork did $1.54 billion in revenue for the first six months of 2019 with a fast growth rate. Unless WeWork's business has done a complete 180 and is suddenly contracting (there is no information indicating that is happening), they have likely caught and surpassed IWG on quarterly revenue at this point and will have higher revenue for all of 2019.
- miles 7y ago
  > IWG is no longer bigger on revenue given WeWork's far higher growth rate. WeWork can’t afford much more revenue at this rate: WeWork IPO filing shows it's losing nearly $5,200 per customer https://www.cbsnews.com/amp/news/wework-ipo-office-sharing-prospectus-s-1-shows-losses/ https://www.cbsnews.com/amp/news/wework-ipo-office-sharing-p... Whereas IWG actually earns a profit on its revenue: WeWork Is Valued 10 Times Greater Than This Profitable, Public Rival https://www.wsj.com/amp/articles/wework-is-valued-10-times-greater-than-this-profitable-public-rival-11566298801 https://www.wsj.com/amp/articles/wework-is-valued-10-times-g...
  - ineedasername 7y ago
    The argument is that WeWork can stop losing money at nearly any time it wants by halting new facility growth and focusing on filling what it has, as most of it's losses stem from growth projects. At least, that's the theory. It seems we'll get a chance to see what happens when they try and hit the "pivot to profit" button. Maybe they should have, like, a whole bunch of people help them hit that button really hard? Maybe hit it twice, just to be sure.
    - pmart123 7y ago
      It’s reasonable to assume if they could have hit a button to demonstrate profitable unit economics or profit in long running spaces, they would have amended the S-1 to show this as the IPO valuation was collapsing.
      - ineedasername 7y ago
        This ability to turn on profitability was decently spelled out in their S-1. It was too late to amend it further to reemphasize the point because investors had already massively soured on the deal and would not take mere assurances at face value. In order to overcome that, WeWork needs to take time, at least a quarter or two, to hit that button and show they're at least on a course to profitability. Before they can get back to IPO land and hope for even a $15 to $20 billion valuation, they need to demonstrate the truth of their statements on turning profitable. Even then I'd place that at the high end of a valuation, 7.5x to 10x revenue is still enormous for a real estate firm
- wpietri 7y ago
  > there is no information indicating that is happening I mean, aside from their CEO being pushed out and their IPO being shelved because they were losing money hand over fist. Which means they can't raise the $7 billion they wanted to continue expanding. They were buying growth. They can't afford to buy growth anymore. So it's entirely possible that they'll shrink. And that's not even counting all the negative press, which has to be discouraging potential clients.
sbr464 7y ago
I mean, have you been to a Regus space? It’s not in the same ballpark (regarding modern amenities), in the smallest way.
- ttul 7y ago
  Yes, but Regus (now called IWG) runs Spaces, which is catching up quickly with WeWork. Unlike WeWork, their balance sheet is amazing. WeWork will have to endure a staggering restructuring.
- untog 7y ago
  No, but it is a sustainable business, so they've got that going for them.
  - sbr464 7y ago
    Having worked closely with oil & gas I’d be curious how Regus would do without “that client”.
- hermanradtke 7y ago
  The ones in downtown LA are mighty close to a WeWork feel.
  - kevinlou 7y ago
    The one in downtown proper, or the one at The Row? As someone mentioned in another comment, Spaces picks property that doesn't command a price premium vs. WeWork where it's always a prime location.
- AJ007 7y ago
  When I was at a Regus space years ago, we had an amenity I never saw at WeWork - solid, opaque walls.

colmvp 7y ago

As a counter point, I left WeWork because Spaces (one of the competitors in the article) had more flexible plans for co-working and was overall cheaper. I also disliked the fact that they kept having all types of loud music in the background. The Spaces location I go to does play music, but they typically have it at a lower volume and the music is usually mellow (ultimately, I'd rather have no music but w/e). I wondered why the Spaces subscription was cheaper than the WeWork I went to, and if I had to guess, it might have to do with the locations they've chosen in my city aren't in the super prime locations like WeWork. Most of the WeWork's in my city are near major downtown intersections/corridors where office space is at an extreme premium. They also offer slightly less amenities. For example, WeWork had cleaning staff come in pretty frequently while Spaces probably only has them come at some point during the day/evening. Plus they don't have free coffee or a gourmet selection of tea like WeWork. But all in all, I'm pretty satisfied with switching. It has the same sort of feel as WeWork what with lots of interesting companies renting the dedicated office spaces, but it's quite a bit easier on the wallet for myself.

ineedasername 7y ago
*>they don't have free coffee or a gourmet selection of tea like WeWork." That's the thing, just like "free" breakfast or coffee at hotels, there's always a cost baked into the price. But there's something to be said for the psychology as an "all in" price rather than nickel-and-dime, or having to brew your own coffee. Though for $100 a month, I'll absolutely brew my own coffee.

soneca 7y ago

WeWork is launching a lot of new spaces. The company I work was almost decided on moving to one of these new ones but with the crisis, potentially layouts, so increased risks of a worse service or even more serious complications; it is already kind of decided that we are going to another place. WeWork growth promise, the basis for any investment (that seem to be very much needed now) depends on a lot of new spaces and these are the most affected by the public crisis. It can create a very damaging vicious cycle.

jillesvangurp 7y ago

Exactly, WeWork is turning into a normal business with competition. I think of them as similar to a hotel chain. Hotel chains basically own or lease real estate that they rent out on a per night basis to individuals. The reason the hotel business has multinationals owning large amounts of hotels world wide is because that kind of scale provides certain benefits in terms of operational cost, brand recognition, etc. WeWork bootstrapped a multinational with hundreds of locations world wide using investor money and are now serving hundreds of thousands of users that apparently like them enough to pay a premium for using their space. So far so good. But it's something that others can copy and there are a lot of smaller and bigger competitors starting to offer similar services that are showing healthy growth. The premise of WeWork's valuation is that it can continue to charge a premium because of their scale. However, if other competitors emerge, it becomes exactly like the hotel business and they'll be competing on price and quality. Given enough competing spaces, their customers will simply flock to the ones with the best price and offering. That is going to limit the ROI for investors and probably is causing them to have second thoughts about dumping billions in it. Hence the IPO withdrawal.

ineedasername 7y ago
>That is going to limit the ROI for investors and probably is causing them to have second thoughts about dumping billions in it. Precisely. Apart from corporate governance, the problem was never really the business fundamentals since with careful oversight they really should be able to flip the switch from massive growth to profitability. The major issue with that is investors put their money in at 20x revenue premised on growth when it now looks like it's a more traditional 4x revenue business, at least for the near term.
derefr 7y ago
> Given enough competing spaces, their customers will simply flock to the ones with the best price and offering. Just waiting for “Expedia for coworking spaces” to come and commoditize them :)
- speedplane 7y ago
  > Just waiting for “Expedia for coworking spaces” to come and commoditize them :) I've been waiting for this too, but the more I think about it, the less likely I think it'll actually happen. People spend at least 5 days and 40 hours a week in their work environment, often across many years. In contrast, when traveling, you spend just a handful of hours in a flight or a few days in a hotel. When you're spending a short time on something, you're less likely to see details, and commodification is easier. When you spend days, weeks, years in a place, tiny minutea jump out and no two spaces are exactly the same. As a comparison, think about residential real-estate. There still has been very little commodification of residential real-estate, because neighborhoods, amenities, schools, safety, light, and even the color of the grass play a factor. Work-spaces are less extreme, but similar dynamics play out. Even if thousands of WeWork copy-cats pop-up around the world (as is currently happening), I wouldn't expect serious commodification.

ineedasername 7y ago

I think it's less an issue of stealing existing customers than it is filling the vacuum that would have been filled by a massively expanding WeWork. If WeWork has indeed tapped into a growth market in their flexible term leasing & quality environments, then competitors will have an opportunity to soak up demand that might otherwise have gone to the expanding WeWork offerings. I think you're generally right about them not losing customers, but they may lose some: Short leases mean ease of mobility, so if a competitor offers similar quality at a lower price, or if you've outgrown your current We space and would need to move into a larger one anyway, you might be enticed to switch. However, that sort of competition would apply with or without WeWork's current issues.

speedplane 7y ago
> Short leases mean ease of mobility, so if a competitor offers similar quality at a lower price, or if you've outgrown your current We space and would need to move into a larger one anyway, you might be enticed to switch. Most articles about WeWork ignore half of its business model. The first part, which is heavily discussed, is acquiring long term leases, and then leasing out short term rentals. If this was their entire company, it would clearly fail as they're basically absorbing the risk of any long term risk of their tenants. But the other component of WeWork's business is to create vibrant work environments that people want to work in. They have excelled at this, bringing the silicon valley relaxed low formality tech vibe to every city across the planet. The vast majority of office workers still work in stuffy environments, that are uninspired, formal, and depressing. Bloggers and startups may have created WeWork, but now employees at law firms, finance companies, and accounting agencies are starting to demand a similar environment. Having good offices is becoming important to hiring the best talent. Sure WeWork has competitors and inspired corporations can always build their own WeWork-esq office space, but assuming this trend continues, WeWork has a ton of headroom.
- ineedasername 7y ago
  The thing about attracting traditional businesses looking to offer their employees a silicon valley low formality work environment is that such businesses can probably do it themselves with a traditional lease for less than the premium charged by WeWork. I could be wrong about the above, it might be cheaper or simpler to pay WeWork. But for accounting, law, and finance: Those are industries with high level needs for privacy & confidentiality that would be a problem in a co-working environment. They need work spaces that are separated from other businesses, which obviates the benefits of a mixed co working environment.

hobofan 7y ago

> WeWork dwarfs all the other coworking spaces. In the world in total? Sure. In individual cities? Barely. WeWork is always pitted against local competitors. I would guess that most of their customers are single-location, and for the bigger ones that are renting in multiple locations, they haven't really created any useful value-add.

easytiger 7y ago

I think the assumption is that given imminent cashflow issues We Work will have to contract in less/unprofitable markets. Also new business will generally be damaged by the ongoing farce. I also know of 2 (large) customers who moved from We work in the last year because employees were sick of the "unprofessional" workplace. One example was dogs pissing in the office!