4 ms·

How Can an 11-Year Old Company Lose $844m on $661m in Revenues? WeWork Shows How

32 points by ckastner 5y ago

peter303 5y ago
WeWorks business model is easy to clone. It also has no advantage of scale. In my city there are many mom-and-pop coworking spaces that easily compete with WeWork.
- dmwallin 5y ago
  That's not entirely true. Having a national presence can pay off in terms of being able to sign deals with larger clients.
  - ttymck 5y ago
    That's true, but WeWork also competes with national office space companies (Regus, Premier) -- so national presence is not exactly a unique competitive differentiator.
xhkkffbf 5y ago
Yes, I realize that We Work is a very questionable business model, but it's a bit unfair to evaluate it during the pandemic. I'm sure many investors are betting on people wanting to leave their home to work. If corporations downsize and give up their office space, that could me a big jump in customers. Once the pandemic fades.
- dahdum 5y ago
  Even if that happens and they reduce vacancy from 44% to 10%, it looks like each location will still barely cover the location operating expense, with nothing leftover to cover the others. In my admittedly naive view it’s a pretty gory sight.
  - gregoriol 5y ago
    It seems to be a common feature of startups nowadays, thinking of Uber and many others: disruption by just burnin money
    - nielsbot 5y ago
      This isn't new. I'm old enough to remember Kozmo.com and Webvan https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Webvan https://en.wikipedia.org/wiki/Webvan
    - nowherebeen 5y ago
      It's more about passing the bucket to the next person. These VC startups are betting the fact that once reality hits, they will be long gone.
  - redis_mlc 5y ago
    It's much worse than that. WeWork doesn't own most of their locations. As leases expire, their landlords can jack up rent until WeWork loses the leasehold improvements. This is the same fatal flaw that most US restaurants face, and why even successful ones move after 5 years. FYI: A few programmers have asked me, "What's wrong with WeWork? It's a great idea - nice offices!" Those people are ignoring the business model, which is horrific, as the article mentions. Also, temp spaces charge extra by the hour for meeting rooms. Even though tenants know this in advance, they get bitchy when they receive the itemized bill, and dump on fellow staff and even outside attendees - "You know, we had to pay $100 for that meeting room, and we didn't sign a deal. Did we really need to book a meeting room?", etc.
- ckastner 5y ago
  The pre-pandemic numbers are just as bad, though.
silexia 5y ago
While we are on the topic of people paying lots of money for something that appears to not have much value... -Modern art was sold by a billionaire recently for tens of millions of dollars per artwork. The art and question is literally just colored lines on a page. -Bitcoin and other cryptocurrencies we're supposed to be new currencies. No one uses a currency, so now people call it a "asset". It burns thousands of times. More energy than traditional electronic currencies that are actually used. -Lots of very high Price to Sales ratio Nasdaq stocks. Shake shack, Zillow, and a long list of other companies that may be nice businesses but are not worth more than 10x their annual revenues as market cap.
- deleted 5y ago
  [deleted]
rchaud 5y ago
Once a company receives funding at a scale rivaling that of state subsidized enterprises, there's a good chance it'll encounter the same pitfalls. - operational ineffiency due to lack of pressure to make profits - lack of competitiveness due to ability to undercut rivals on price, thabks to the endless amount of runway provided - lack of a reality check internally as the company is seemingly always expanding, always hiring.

32 points by ckastner 5y ago

WeWorks business model is easy to clone. It also has no advantage of scale. In my city there are many mom-and-pop coworking spaces that easily compete with WeWork.

dmwallin 5y ago
That's not entirely true. Having a national presence can pay off in terms of being able to sign deals with larger clients.
- ttymck 5y ago
  That's true, but WeWork also competes with national office space companies (Regus, Premier) -- so national presence is not exactly a unique competitive differentiator.

xhkkffbf 5y ago

Yes, I realize that We Work is a very questionable business model, but it's a bit unfair to evaluate it during the pandemic. I'm sure many investors are betting on people wanting to leave their home to work. If corporations downsize and give up their office space, that could me a big jump in customers. Once the pandemic fades.

dahdum 5y ago
Even if that happens and they reduce vacancy from 44% to 10%, it looks like each location will still barely cover the location operating expense, with nothing leftover to cover the others. In my admittedly naive view it’s a pretty gory sight.
- gregoriol 5y ago
  It seems to be a common feature of startups nowadays, thinking of Uber and many others: disruption by just burnin money
  - nielsbot 5y ago
    This isn't new. I'm old enough to remember Kozmo.com and Webvan https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Webvan https://en.wikipedia.org/wiki/Webvan
  - nowherebeen 5y ago
    It's more about passing the bucket to the next person. These VC startups are betting the fact that once reality hits, they will be long gone.
- redis_mlc 5y ago
  It's much worse than that. WeWork doesn't own most of their locations. As leases expire, their landlords can jack up rent until WeWork loses the leasehold improvements. This is the same fatal flaw that most US restaurants face, and why even successful ones move after 5 years. FYI: A few programmers have asked me, "What's wrong with WeWork? It's a great idea - nice offices!" Those people are ignoring the business model, which is horrific, as the article mentions. Also, temp spaces charge extra by the hour for meeting rooms. Even though tenants know this in advance, they get bitchy when they receive the itemized bill, and dump on fellow staff and even outside attendees - "You know, we had to pay $100 for that meeting room, and we didn't sign a deal. Did we really need to book a meeting room?", etc.
ckastner 5y ago
The pre-pandemic numbers are just as bad, though.

silexia 5y ago

While we are on the topic of people paying lots of money for something that appears to not have much value... -Modern art was sold by a billionaire recently for tens of millions of dollars per artwork. The art and question is literally just colored lines on a page. -Bitcoin and other cryptocurrencies we're supposed to be new currencies. No one uses a currency, so now people call it a "asset". It burns thousands of times. More energy than traditional electronic currencies that are actually used. -Lots of very high Price to Sales ratio Nasdaq stocks. Shake shack, Zillow, and a long list of other companies that may be nice businesses but are not worth more than 10x their annual revenues as market cap.

deleted 5y ago
[deleted]

rchaud 5y ago

Once a company receives funding at a scale rivaling that of state subsidized enterprises, there's a good chance it'll encounter the same pitfalls. - operational ineffiency due to lack of pressure to make profits - lack of competitiveness due to ability to undercut rivals on price, thabks to the endless amount of runway provided - lack of a reality check internally as the company is seemingly always expanding, always hiring.