Out of all the recent IPOs, WeWork has both the most certain and uncertain future of them all. The spaces are clearly differentiated, hard to replicate (without a significant capital injection from a limited number of players who have a stake in WeWork anyway) and have the clearest economic model of all the recent startups; offer services + community (to the extent a place like this can offer one) + great workspaces to companies looking to mimic FANG benefits without investing significant capital.
But everything rests on the edge of a knife. The underlying price sensitivity, the economics of providing the service and the rent of the space. Their model of cut-rate rents is subject to local trends and their investment in each property means that it is not easy for them to shift locations and it would be a significant loss if local landlords got out of hand. As a global company, not every market has strong renter's protections and it makes me wonder how they'll protect their assets when people realize that they could get more from them. Then there is the CEO that leased properties he owned to the We Company, making millions in the process - https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l... (this bit of impropriety should raise eyebrows and raises questions about the company's ability to prevent such rolling conflict of interests going forward).
It is unclear to me how they'll position themselves for the long-term given the variability in real-estate. We are in the run-up to a recession, but after that when it's boom times again and prices rise rapidly, again, how will WeWork survive? Do they plan on buying properties during the bust? What's the long-term plan over here that ensures that they keep on top of the food chain? What is the lock for their spaces?
Edit: The company might be losing money in the pursuit for growth but the model is clear in the sense that they provide services + benefits (swimming pools, beer, massage bars etc etc) on top of leasing out space for a fixed amount X. Unlike Uber, it is easy to imagine them minmaxing this to make money. It's not hard and they lack the kind of competition (Lyft) that would trap them at this low price point as few places in the different jurisdictions that they operate in can offer similar services due to the large upfront investment involved.
I used to work at company that rented from WeWork. And we were in their awful glass cubicles, like working in a Borg ship, and we wanted some privacy, so we asked about putting up some removal decals.
Their revenue growth is accelerating and they're only losing money because they're investing it all on growth. The year they stop expanding/buying/renting new spaces, they'll bring in a huge net profit.
Their economic model can be clear and simple even if it isn't profitable. At it's core, the model is:
a) buy or rent commercial real estate
b) rent that same real estate out to people who want office space
As long as the money coming in from b is sufficiently greater than the money being spent on a, you should be good.
As far as profitability, the company is making investments now that will pay back over time. Since they are growing quickly, you'd expect them to take a loss since they have to make upfront investments in new offices (and on real estate, which they seem to be getting into the business of purchasing outright rather than taking out long term leases).
EDIT: I don't have an opinion one way or another on whether WeWork is a good business to invest in or not, but it's definitely a straightforward and easy to understand business, as opposed to say, a bank or a biotech company.
I think the model is rather:
a) buy long-term leases at low price
b) sell short-term leases at high price
The problem with this model is that when demand for real estate falls (e.g. because of economic cycles, trends/tastes, etc.) the revenues will evaporate and the costs will remain.
It's like the old joke: If you can't pay back a $1 million loan, you have a problem. If you can't pay back your $1 billion loan, the bank has a problem.
If WeWork can't pay the lease on 29,000 square feet of office space, WeWork has a problem. If they can't pay the lease on 2.9 million square feet of office space, the owners have a problem.
My understanding is that they spin up separate entities to sign leases, and have cancellation clauses. It seems nuts landlords would agree to that but it’s come up a few times in prior threads.
There's a bit of longer-term reputation damage which is significant in an industry dominated by companies who tend to think over the span of decades rather than quarters.
One fairly big serviced offices company pulled the "separate entities" trick in one of the previous recessions, and some of the major landlords in that country still to this day, more than a decade later, refuse to do business with them.
An HN submission 4 months ago¹ reported that WeWork forms a separate subsidiary for each lease agreement. So at least when they're not the owner, they've conveniently arranged to not be on the hook if a particular location or region doesn't work out.
I have a few clients who work at WeWorks and the nitro coffee and kambucha on tap is fine and well but I wouldn’t call it lavish. Having a few hot and cold drink options for visitors is just common curtesy and basic part of doing business.
> they lack the kind of competition that would trap them at this low price point as few places in the different jurisdictions that they operate in can offer similar services due to the large upfront investment involved
If these types of services become popular, couldn't any commercial landlord start offering these services in the buildings they already own?
I have used their WeWork, for what that's worth. There's a good amount of tech in managing badges, their website, allocating rooms and IT. (Though, TBH, it's not exactly stellar web design.) The team that manages the buildings does a good bit more than a typical landlord.
I think many landlords would make awful clones and lose a lot of money, at least at first.
There's a business right there, selling white label office management software direct to landlords.
Which in turn raises the question: Why do WeWork bother with renting the properties? Uber doesn't rent cars, they just provide software and a network to drivers and riders, and something similar might work for renters and property owners (AirBnB for offices, essentially).
UK serviced office provider Regus offers "franchise opportunities" [1] if you know any landlords who'd like to turn their offices into a wework-like-business.
They could, but WeWork has a nice network of spaces. We have seamlessly moved from one WeWork building to another in the same city, opened up satellite offices in other cities, etc. It's also nice to be able to reserve a workspace or conference room in other cities when I'm traveling.
Yeah, they have had competitors offering similar things longer than they have existed. Their main advantage is VC funding making them able to operate at a loss so they can undercut the competition.
My impression is that the We Company (holding company), will diversify into social spaces for social things, including short term hoteling: a la co-living, airbnb/Marriott, event spaces, popups, etc. You're right, the gym membership subscription model will quickly fall apart during the next downturn.
> Then there is the CEO that leased properties he owned to the We Company, making millions in the process - https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l.... (this bit of impropriety should raise eyebrows and raises questions about the company's ability to prevent such rolling conflict of interests going forward).
As an investor, why would I want to go go through the rigmarole of buying shares and calculating losses for my taxes when I could just send a wad of my money to Adam Neumann every month for much the same effect.
if the their CEO believed in WeWork he would have sold his properties and buy shares but no, he is milking money invested in WeWork to drum up profits of his personal properties. Just this fact says enough about that company and what kind of an investment it will turn out to be.
I don't think you have to have different industries or markets in order for it to be diversification. I think it's enough that the assets are not perfectly correlated.
Sorry but it just isn't diversification. If he wanted to diversify into property the reasonable course of action would be to buy properties that WeWork weren't renting in areas WeWork don't strongly impact the market. By investing into property rented by WeWork he's further concentrating his risk - not only is he invested in the company but now he's also invested in a property whose value is largely reliant on the rental income from WeWork. Technically his risk profile is slightly diversified - because part of his risk is now just in the property market it means his portfolio is more diverse than just being invested in WeWork, but it's significantly less diverse than what any reasonable person would have achieved by just investing in other properties. For that reason you can confidently say that he's not diversifying - but if his intention was diversifying this is almost THE least effective way of doing it.
How is it hard to replicate? Lots of people know how to add beer taps to office spaces. There might not be competition now, while they are operating at a gigantic loss, but at a break even price point I think it'll be a different story.
If they can't make money in this boom market cycle, what makes you think they'll make money in the next one?
Judging by all the NYC competitors that have cropped up, I would say it is not hard to replicate at all. The biggest benefit to co-working spaces is short lease terms and the ability to scale up(down) space. Foreseeable, this could apply to a new company or a company opening an office in another city. I doubt you would use WeWork once you are leasing 10,000+ square feet of space, but perhaps HQ by WeWork has merits. As a startup founder that has leased spaces from co-working spaces, the price, location and quality of the space mattered much more than the brand renting the space.
Same in Berlin. At a past company, we've happily switched from WeWork to Rent24 paying a fraction of the rent for a bit less involved offering, and can just highly recommend it.
It could rant all day long about WeWork Potsdamer Platz, but I think I've done so on every bigger WeWork thread here before...
> As a global company, not every market has strong renter's protections and it makes me wonder how they'll protect their assets when people realize that they could get more from them.
I was under the impression that residential leases had protections, but commercial leases did not (if you're a business you probably have money for a lawyer to look over the contracts and take the landlord to court if needed).
The WeWork model has proven very easy to copy and in competitive markets there are a lot of other popular “WeWorks” other than “WeWork” so I don’t buy the idea that it’s hard to replicate.
Not that different than Uber. It was a great idea but it’s an easy business to copy with little brand loyalty once new entrants appear in a market.
I think another factor in the next recession will be the actual usage. My local Wework hit 100% dedicated desk occupancy, but if you walked around M-F business hours it was nearly a ghost town. Huge numbers of these desks are paid by companies and rarely used, they’ll be the first to go in a downturn.
I see the looming edge of an economic recession as large swathes of hugely unprofitable companies with heavy debt offload their stock onto the public markets.
Not only have a large amount of IPOs in recent months been heavily downgraded in initial pricing like Lyft, Pinterest, etc. They continue to drop in value day by day as they’re traded openly. I place a substantial amount of blame on SoftBank and by association, the Saudi Arabians, for unnecessarily inflating this current bubble to disproportionate levels. It will only cause the resultant crash to be all that much more damaging.
That’s a lack of perspective playing tricks on you. You see, Pinterest heavily lowballed it’s IPO, setting initial pricing far below its previously held valuation.
Why this was done? Your guess is as good as mine. :)
I can’t give you an answer as to why the stock has moved the way it’s moved in the short term of this past week.
What I can tell you concretely though was that Pinterest made the willful decision to lower its initial pricing of its IPO to below its valuation (75 million shares priced between $15-17 for a total valuation of ~$11 billion compared to its original supposed pre-IPO valuation of ~$12 billion). This shows a clear lack of confidence in the company. This is a fact, not an opinion.
Pinterest was the first company to IPO after the debacle that was the Lyft IPO. At the time they were unsure if the problem was that investors were sour on IPOs in general or if they were just sour on Lyft, that's why they discounted their valuation.
It's only a recession if it affects macroeconomic indicators right? So a big drop in stocks doesn't really indicate a recession only. Kind of like how the dotcom crash tanked lots of overvalued junk tech companies, but didn't really cause a recession
Confidence is the fundamental currency that determines whether the economy trends towards growth or recession.
And recent events by these privately held companies show a keen lack of confidence in my opinion. That they’ve all chosen to IPO now at the same time gives you a strong indicator to look at. You might disagree with my final determination on what it means exactly, but the fact that it’s happening is undeniable.
As to macroeconomic indicators, I think the majority of them are largely useless as predictors and at best self-fulfilling in nature.
The dotcom crash absolutely had an impact on macro indicators. The loss of faith in the sector hurt new business creation. Nobody wants to start a business in a recession, and VCs don't want to spend money on "tech plays" when the IPO market is weak and they've been burned too many times on dud investments.
The economic impact can't be quantified by the drop is stock value, it occurs slowly over time, like lower payroll taxes, higher unemployment benefit costs, lower consumption etc.
I agree with you that the increase in late-stage rounds and consequent delayed IPOs is generally a bad thing, but not sure SoftBank is the primary culprit. And certainly during the dotcom days companies went public much sooner but that didn't prevent a bubble and subsequent crash requiring a decade+ of recovery. MSFT didn't get back to their 1999 high until 2016.
> It will only cause the resultant crash to be all that much more damaging.
But if Lyft and Pinterest are already trading below IPO prices, doesn't that indicate that the public markets are taking the pre-IPO private valuations with a grain of salt?
I'd be much more worried if those stocks skyrocketed, creating a tidal wave of other IPOs with weak fundamentals hoping to cash in because of good timing.
Since the tech IPOs so far this year are mostly fine outside of Lyft this doesn’t mean much since the grain of salt isn’t true yet. It’ll probably be true for Uber as well. But like Pinterest and Zoom doing well or exceedingly well so far, I’d expect Slack to do just as well too.
For skyrocketing, Zoom did skyrocket (close to doubling). As did Tradeweb (more than doubled). Tradeweb doesn’t have weak fundamentals though.
When I became a member at WeWork I thought most people occupying the buildings would be be in a similar situation as mine: freelancers hotdesking so that they could have a decent space to focus and mingle.
But after going through several buildings I realised that the hotdesk offer is only the frontend to their business. Most of the building occupants are sizeable companies that have decided to offload the problems that come with managing an office. Some entire floors can be corporate satellites to big enterprises.
That was my experience and the S-1 might say that the revenue distribution is different but I thought it's worth mentioning.
Also share concerns about the delayed bubble situation, but... also doesn't the current glut of IPOs drive down valuation for them on its own? There's only so much public demand for new tech company shares.
No - these companies generally don't have heavy debt.
1) IPO-ing companies represent a very very small chunk of the overall economy.
2) That 'there are IPO's' is a very good signal - it makes investors 'feel' bullish and confident.
3) These companies don't carry a lot of debt. If they were able to, they wouldn't be diluting by raising equity.
4) Uber, Lift, Pinterest, WeWork - they are all mostly viable businesses. Yes, their stock price may be too high in many cases, but they are mostly viable at some level.
5) Don't blame SoftBank. SoftBank is great! It's a ton of 'kind of dumb money' from places with way too much money (Saudis) and nowhere to put it. This means startups can expand far beyond where they normally would and they are handing surpluses to consumers like you and me!
Consider: how is it bad for you for companies to be giving you stuff below market value!? It's possibly bad for other investors, but we consumers win, so long as it doesn't happen broadly and cause a bubble.
All that money we send to Saudi for Oil is coming back in the form of 'cool offices below market value'.
Uber/Lyft have unit profitability problems at current price, but once the market settles down, they can increase prices a bit and it will be ok. (Again, massive stock price not withstanding)
WeWork will work out as long as there isn't a real-estate crash. They are basically leveraged hard on long-term contracts. We don't know the details of them, but if vacancies spike they could be in a world of cash-flow pain.
So yes, the hype is a little much, regular retail investors should probably we wary of holding the bag ...
But these things will only crash if there is a recession and most things look good right now.
FYI even 'bubble conditions' often need something to pop the bubble, like a sudden increase in interest rates, or 'the ground falling out' like in 2007. Right now, there are some signs of froth, and hints of maybe a recession (i.e. at the top of the cycle) but nothing really to say it's going to pop.
Canada could have a major real estate correction, but nobody would care.
China could have a flop, but they can fudge the numbers so well it'll probably be covered up and papered over as a long term slow down. In fact, I think that's what's happening: China has many big sectors which would be in recession, but the numbers are fudged to look like 5% growth.
> All that money we send to Saudi for Oil is coming back in the form of 'cool offices below market value'.
This money has strings attached, strings of political power, just as the Chinese Belt Road initiative. One wrong word or protest when another dozen people is executed by sword or crucified or Muslims sent to concentration camps and poof, there goes your funding, there goes your economy. If there is one foolish thing to do, it is accepting blood money from a potentially hostile foreign power.
Yield curve inverted in December, meaning you're right, these companies have been scrambling since then to get their IPO off before the next impending market recession.
Why do people like WeWork? Here in Singapore, a hot-desk at WeWork is $400+ USD a mont. Am I crazy, or is $400 a month a lot of money for a hot-desk with decent internet?
Or is it one of those things where all their money is in the big rentals, and the hot-desks are just for show?
FWIW, I've been using WeWork for the last six months to do both contract work and studying.
As someone who has worked remotely for the last five years, I like having the option of working away from home, as I can get a bit cabin feverish. The location I work at is quite lively and friendly.
Also, the fact that everyone around me is working has the psychological effect to encourage me not to slack off. I'll usually go to my WeWork location in the morning and work straight till the evening where I stop. Previously, when working exclusively at home, the work hours was particularly murky and inconsistent.
To add, in my city WeWork usually gets prime real estate locations, so they can be easy to commute to, especially if you live in the city. And they have enough security mechanisms set up (i.e. not located on the ground floor, numerous security cameras, people at the front) where I can go to the washroom or go for a lunch break without taking my stuff. In contrast, when I used to go to the library/Starbucks to take a break from working at home, I'd always stress about finding a table/outlet a have to take my stuff anytime I took a break.
No doubt $400/month isn't nothing, but for me, the efficiency and QOL gains has been well worth it.
$400 for a month is close to $20 per day or $2.25 an hour(4 weeks*5 weekdays). If the environment WeWork gives provides a boost in your productivity, helps you network with other like-minded individuals, increases your brand exposure, provided extra amenities, decreases the cost in comparison to your current environment, etc. Then it may be worth it.
For me it ended up not being worth it because I don't go in every day. In my case, the point of me WFH is so that I could get my commute time back, not just spend it going to a "different" office. With that said, I found myself only going in about 2x a week, which made it not worth it for me.
Here in Stockholm hot desks are €450 and fixed desks are €550. Their hot desk proposition is pretty bad but for fixed desks they are pretty close to the market rate for central Stockholm if you want to rent 1-4 spaces, either in an own office or just desks. Their list prices for offices are a bit high but I know they can be negotiated.
Sure, you can rent for much less in the suburbs, but for companies who want an office which is central and easy to commute to the price is pretty close to market rate.
Fair enough, but if you take IBM's best product it looks like a great biz. The same goes for GE and any other currently struggling old economy biz. Even for places as colossally messed up as Deutsche Bank, you can spin the same yarn.
Yes, that's true. The larger point, which I have not been able to successfully convey to you is that any venture can be made to look great when you get the pick the metrics of success.
Well the point is, let's say they have a core business that's profitable. The valuation is based on a market far larger than that profitable core business. As part of the story, the losses are coming from trying to grow the core business to a size to justify the valuation. And it's just not clear that the larger market will ever become profitable.
Nothing else except for all the steps that go between 0) and 1). There might be hundreds or even thousands of those steps, and 99% people will never get to learn even a fraction of them. You may cry foul now and list all the reasons why perhaps opportunities for learning are not equally distributed, but the fact remains that there is a lot to learn and that many people tried to build a WeWork but only one team succeeded.
You mean, no understanding of the profitability of one business's core model and how its earnings are being distorted by unrelated (and somewhat optional) expansion costs?
God forbid a comment be made that's even partially tongue-in-cheek. With all the coverage and discussion around Uber, its business model, its financial performance etc, combined with the equivalent buzz around WeWork, I think the comment was excusable and could have gone without the personal attack with regards to understanding the generic topics of business and finance.
Like others in this thread, I don't really get the point of WeWork.
I'm 100% remote and I prefer working at coffee shops, campuses (UCLA, SMCC), or libraries -- I prefer my environment to feel less like "work" and more "creative." I also get to interact with a largely diverse group of people (as opposed to mostly tech people that work at WeWork). Going to a coffee shop is also cheaper (I buy ~2 items a day), I get to meet neighbors, plug myself into my local community, and sometimes even make small talk with cute girls.
I think a good idea might be "reserving" seats at cool spots around town (coffee shops, bookstores, etc.) -- would be cheaper than a WeWork and (I think) more desireable. Think ClassPass for co-working.
I think WeWork's target audience is also new companies looking to get office space and not just solo workers. It would be hard for a group of 6-8 people, starting work on a new project, to congregate at a library/coffee-shop daily. That's probably why leasing an office would be helpful for such folks.
Yeah, this is a fair point, but aren't WeWork prices pretty exorbitant when compared to just renting some real estate through more traditional methods (i.e. an agent)?
They may be but corporate landlords want fairly long term leases. I recently tried to find an office for myself and had trouble finding 'official' office buildings that would do less than a 3 or 4 year lease. If I had a WeWork locally I believe I could do much shorter leases for a small office space.
I just rented a small unfurnished appartement and use it as my office. There really isn't much of a market for small offices, but there are plenty of small appartements.
Yeah, as soon as you start taking meetings or hiring employees you quickly start breaking insurance, HOA, and zoning. And quickly have to register your business with the city or risk serious fines.
If it's your second home that you have your morning coffee in and have a personal office that you do non physical tasks on, and occasionally have a friend or cofounder over for a beer you're looking pretty good.
In my experience, commercial agents are looking to close big 10+ year leases, not chase down sub-leases from firms with a little extra space for 6-8 guys.
they provide a lot of "value add" through economies of scale (happy hours, pizza parties, mini conferences, stocked kitchen, random little "perks", etc) which are factored into the cost, but require no talent or time overhead for the client companies.
Think of it as "sexy startup office as a service."
Not saying it's a worthy or necessary service this world needs, but I think that's the value they provide and what companies pay for.
Sexy startup office as a service is exactly what it is.
The prices are eye-watering, however, and don’t seem to come down much with scale. (A three-person office is about three times the price of a one-person office – at least when I last checked.)
WeWorks "scale" is 10-person company got their Series A and wants a (semi) custom build-out for 90 people + (private) conference rooms, or a well-funded startup wants to setup satellite offices.
Renting from a coworking space (We've never used WeWork but have multiple others) is generally month-to-month with a one-page contract and I can pay with a credit card.
Getting an office lease is a huge process with a stack of contracts, pushy agents, ridiculously long leases, misleading prices, hidden costs, furnishing, and establishing all the necessary services. And if you're a small company, the owners are expected to personally financially guarantee the lease.
The standard in (US) commercial real-estate is triple net [1] at 10+ years. Everything else is basically a sublet in someone else's office...e.g. WeWork.
I found a non-weWork type small office building, 250 private sqaure feet, one year minimum lease, cooler neighborhood and 75% the cost of any of the WeWork (et al) type places. We've got a 12 person conference room and three more counting the coffee places and restaurants that have private/reserved area that are all within two blocks. I just didn't want to be "downtown"
leases are really messy. In the US you have leases with lockin, and in places like Japan where you can't force someone to stay in a lease, they instead force you to put up something like half a year's rent(!) as a security deposit.
I like being able to return to the same desk every day, and having some predictability about what my work environment will look like (noise level etc.)
I'm sitting in a WeWork Lab's space right now (it is their startup focused program).
Super useful to level my focus, the people around me are in a wide mix of fields not just technology, and having a proper reserved space is a huge boon to productivity. I can have a real monitor, an ergonomic keyboard and mouse, and multiple machines setup.
I value my back, neck, and wrists far too much to work from a coffee shop every day.
WeWork Labs also offers some great benefits for startups, the mentors alone have been a great boon.
From my experience, 80%+ of WeWork people are in tech (but I've only been to the Santa Monica one and the DTLA one, so take my experience with a grain of salt).
I have a home office for when I need to be "in the zone" -- 3 monitors, ergonomic chair, etc. The benefit here is that you could even write off part of your rent (if you're a contractor/freelancer).
I'm in Seattle, the people behind me are in home construction, in front of me is a company working with boutique spirits, there is at least one healthcare company here, an IoT company, and a mix of some other fields.
With entire teams being here, it isn't all programmers. Sales, marketing, biz dev, and engineering are all sitting together and participating in the community.
As for @ home versus at an office, I am far more productive at an office. So much so that I have a nice home setup (I have one ultrawide instead of multiple monitors!) but it is worth it for me to commute 40 minutes to get here.
(I of course have friends who prefer their home versus an office environment!)
Its one reason I hate cafes in America, its full of people working on laptops, its a horrible atmosphere. As for campuses I'm surprised you're allowed to hang out there all day. Libraries in NYC are mostly for homeless people.
It is. Unfortunately, American society has finely tuned itself to money/business oriented thought processes. So much so that most people here think its awkward to just spend an afternoon at a coffee shop talking.
Agreed. Not sure where that comment came from, but I've lived in NYC for 9 years and never seen homeless people at the library whenever I've worked from there.
The comment was an exaggeration to be sure, but I've seen the occasional sleeping homeless person at a library in the West Village. They get asked to leave pretty quickly though.
I've come to avoid having dates or catching up with friends at certain coffee shop-style places after a couple experiences where we were literally surrounded by people silently on their laptops. I prefer to have conversations without an audience of strangers.
And this is probably me getting old but I don't know how people can spend hours hunched over a laptop in café seating, as opposed to an ergonomic office chair and monitor at eye level.
>And this is probably me getting old but I don't know how people can spend hours hunched over a laptop in café seating, as opposed to an ergonomic office chair and monitor at eye level.
Ask any orthopedist, it catches up to them. We can all buffer it for a certain amount of time, but anybody who does this for a long time will develop issues.
A good number of non-chain cafes in NYC have restrictions on laptops during work hours, weekends, or whenever it's really busy (common sense rule). Also anecdotal but I haven't had issues with homeless at the libraries. There's even a huge, policed library / research center in midtown that has dedicated quiet rooms, highly recommend.
For the last few months, I've used https://www.getcroissant.com/ which is ClassPass for co-working spaces. I like being able to bounce around different spaces, as well as use it in cities all over the world.
I saw their pricing and don't know if the hourly model makes sense for co-working. For comparison I've used Deskpass (and have been pretty happy with it so far). You book by the day - for $200/mo you get 20 visits (and unused visits rollover), which comes out cheaper than Croissant.
In addition, WeWork's locations (in Houston) are not out in the suburbs where many of us remote workers live. Instead they're deep in the city, where I have to fight traffic to get there. Traffic is precisely the reason people out here WFH. If I'm going to make the ~1hr drive I might as well work at one of the many funky coffee shops, cafes, or libraries the city has to offer. Hell, I could just camp out in one of my clients offices, they don't mind giving me a desk for the day.
Alternatively, if WeWork had a spot out here in the suburbs where I could escape the noise of my lovely four year old without having to fight traffic, I'd be game.
I'm not sure why this is apparently a statement worth downvoting. Personally, sans toddler, I'm fine with working out of a home office. But I have tons of colleagues who don't live in city cores who use companies like Regus for working space and conference rooms. There's probably more need in cities but at least some office space companies are in the suburbs as well. Don't know about WeWork.
What you describe really isn't very typical of the kind of people WeWork rents space to.
Choosing a different location each day based on whim and availability is all very well for a solo freelancer, but once you scale that up to as many as two people you're going to start having problems finding space and private places where you can talk, call clients, etc. etc. Once you start getting to 3 or 4 people, forget about it. And what about people who want dedicated hardware - a keyboard, monitor, etc?
WeWork has a valuable proposition for those groups. Rent out a small office while you're in the early stage, have everyone in a room with breakout meeting rooms and phone booths available just outside. A kitchen where you can get a coffee, prepare food, etc. etc.
I still think WeWork is an insane proposition because they cost a lot and they're not that great, but let's not pretend they offer nothing over a local coffee shop.
I think WeWork's current setup provides meeting rooms and some temporary dedicated space for companies of 4-10 people, but the environment is not very conducive for productivity. Typically, they're loud, too cramped, and with have lots of distractions.
What about the tax advantage? I'm not convinced that the co-working spaces are worth their cost, but I assume it's a lot easier to write off a co-working space over a coffee shop order.
You can write off absolutely anything. The problem comes if the irs decides to challenge it. But I think with good documentation you could make a good case for your coffee purchases being your office rent expense. You would need to exclude the portion that you would have bought anyway (for example if you have always bought two coffees a day, then you can't start claiming that 2 coffees a day is part of your office rent expense.)
All true, but my local coffeeshop has a meeting room you can rent out (or, if you buy $20/hour in drinks, it's free, just reserve it). I have no idea how often it's rented out, but it's certainly used at least occasionally. I think a lot of coffeeshops could do that, depending on their layout (this place has one room that's on the other side of the register from the rest of the shop, so it works well). No idea how that compares to WeWork in regards to price. I'm solo, so I just sit at a table.
My WeWork experience, at one of the WeWork's on Mission St., on a floor with office space rather than desk-sharers, is phone booths continuously taken up by tech-bros hogging the quiet space, lots of noise in the common spaces,and a building (not wework) security guard who took a dislike to me and made sure I knew it on a regular basis.
Meh, it was fine for what it was I guess, but I think the company I was working for left wework not long after I left the company.
Once you start getting to 3 or 4 people, forget about it
It can be done, remote teams much larger than that work all day every day without using their voices with each other, just Slack or git messages or whatever.
What if the money WW is burning through went to libraries to build more workspaces and conference rooms?
Not what I was saying at all. The Starbucks comment is questioning the value proposition of a service that a lot of companies clearly value, providing an alternative that isn't realistic for more than a single person. It's a typical HN middlebrow dismissal.
My classic "FTP" comment was some feedback on a Show HN post, that I was concerned that the technology may be easy to reproduce and thus had a low barrier to being reimplemented by OS vendors or competitors. Drew addressed all my points and I acknowledged the value of the service. Completely different from this thread.
I don't know about you, but I have to use the bathroom 1-3x during the day and I hate leaving my laptop to the public while I go, but I also hate packing my whole setup up and sleeping my laptop.
That's another problem. I've several cafes where I put some expensive Apple gear and disappear for a while. It depends on the cafe and the relation you have relatively to the owner/waitresses and the clientele.
As much as I love occasionally getting stuff done in a cafe, I find using laptops without an external monitor and keyboard at the right heights gives me posture-related problems if I do it for more than a couple of hours at a time.
If I were running my own company and employing remote staff I'd have to think about the workplace health and safety implications if they were regularly working in cafes.
> Like others in this thread, I don't really get the point of WeWork.
So you can only imagine people to think and act like you yourself? It's office space without the large setup cost and time waste, what's so hard to get?
This is exactly what we're building at Out Of Office. We've built a database of free and bookable spaces to work, meet, take calls, or take a break. We've collected all sorts of data you might find useful, like the number of seats, number of outlets, noise level, and other different amenities that we've rolled up into an 11-point score for each venue.
We've scouted thousands of coffee shops, hotel lobbies, parks, libraries, coworking, and other public spaces.
Right now we're only operating in San Francisco, but looking to expand to other cities in the future.
Are you planning on making your service available via your website? I'd be curious to look at it when you get down to the south bay, but there's a 0% chance I'm installing an app for something I have such a passing interest in.
We're focusing on mobile right now because finding a workspace is heavily dependent on where you are or where you need to be. We're a small scrappy team right now so we don't have the resources to build out a proper web experience that we'd be proud of. We'd love to build one in the future though!
WeWork is great for contractors operating on time and materials basis. 10% overhead + 10% profit at $1000/month is better than at $500/month. A lot of the work world operates on time and materials basis.
One less mentioned point might be that wework, among other things, sells "hippness to corporates". At least here in Berlin there are multiple extrapreneur gigs (startups composed of corporate employees funded by the corporate) rented into wework. I assume this breath-of-startuppyness is sold for more than the already usual high rates.
What I don't understand about these companies that are filing with massive losses is how they plan to survive a mild recession. They're losing tons of cash during great economic conditions. What happens during a recession, when suddenly it's cheaper for tenants to break their leases?
they break their leases, fire half their staff, and rent a small room from WeWork to put their remaining staff. I'm mostly joking, but I'm sure a lot of these companies believe that they can grow and exist in a recessionary economy. We'll see if that's true.
There is an argument the model they run is counter-cyclical -- some FDs would rather pay more monthly for a service they can quickly scale up/down against revenue in region vs 5 or 10yr commitments -- time may show revenues grow in a poor economy
> suddenly it's cheaper for tenants to break their leases?
Isn't that also maybe good for WeWork?
The following could happen:
1. WeWork will close down some sites
2. Threaten to close more and shake down their landlords for better lease conditions (since there's fewer people looking to rent corporate real estate)
3. Other companies will look to close down their own satellite offices and transfer workers to WeWork sites for cost savings.
That's the bullish case for WeWork in a recession, I don't think it's absurd.
This gets the dynamic wrong though - WeWork has long term contracts with their suppliers and short term contracts with their customers. So what actually happens in a recession:
1. Businesses cancel their WeWork spaces because they're laying people off with 0-6 months notice.
2. WeWork has to eat the cost of low-occupancy buildings until their leases are up for renewal - which could be 5, 10 years down the line.
3. As the market heats back up WeWork change charge a lot for the office leases they established cheaply during the recession giving them low cost, high value rental spaces.
Notice how at stage 2 you're going to have a few years where you've got a drop in revenue but high fixed costs? Normal office rental companies plan for this because of the cyclical nature of the market. The question you've got to answer is can WeWork weather that storm - and I would've though it obvious that it's in a bad position since right now they have $6.6Bn cash and lose $2Bn a year.
Also I've got to challenge you on this:
>3. Other companies will look to close down their own satellite offices and transfer workers to WeWork sites for cost savings.
I think this is just utterly implausible. Companies don't shut down their satellite offices to move workers into smaller more expensive per head offices. What is far more likely to happen is that they cut head count and use the spare office space in their head office to close down satellite offices and move them to headquarters and close down small offices and move them to regional offices. That effect will reduce demand for WeWork, not increase it.
Take Intel as an example of this: When they wanted to reduce head count the first step was to shut down failing projects and fire under performing employees. Their second step was then to use the spare space in their large offices to shut down small offices and consolidate into their big offices. All their big offices are offices they own or have extremely long term rents on, all the offices they didn't were much smaller and much more likely to be rental spaces - which is why it saved money to shut them down in the first place.
You're assuming they are? I mean, they are personally of course, but who says they care about the long term of their company? They may not plan to be around for it.
> While WeWork’s revenue is growing quickly — it doubled last year to $1.8 billion — so are its losses, which more than doubled to $1.9 billion. Those companies, like WeWork, Uber and Lyft, have argued that growing quickly is more important, and will eventually prove more lucrative, than breaking even right now.
I'd agree with this outlook if this wasn't a 10-year old company that's already burned through billions in VC money. When you account for that, the "losses-now-are-good" logic only makes sense if you're a VC who needs to make their money back.
It is not a fallacy to consider sunk costs when they can help you estimate the marginal return on a new investment. This is likely when you are investing in something which is hard to value, with diminishing returns, like growth marketing. Making another $1 billion loss next year might be rational, but if profitability keeps getting deferred year after year, eventually it will become irrational to continue throwing good money after bad.
I'd consider sunk costs on a project basis, as way to determine the profitability of an individual project, like the construction of an office building.
For an IPO for a commercial leasing company however, a growth stock should be demonstrating positive cash flow net of financing costs. I know WeWork has these absurd WeLearn, WeLive pipe dreams to explain their growth strategy, but that takes time, and can be reversed suddenly.
Uber's big pitch was "self-driving taxis" until the new CEO arrived, saw that it was a pipe dream, and focused the growth trajectory on to something more realistic like bike sharing and meal delivery.
Given all that, if WeWork are IPO'ing now, I'm interested in seeing how far away they are from positive cash flow on their core business as it stands.
I think your argument is a little flawed since all it says is (10 year old + billions spent = failure) when in fact, there have been companies that have survived for close to a decade under dismal conditions only to resurface as a giant, look at Apple for example.
Most IPOs don't have a chance in hell of being Apple, so I'm OK with a partially flawed approach to investing.
Also, Apple's problem periods all occurred when they were publicly traded, so there wasn't the same disconnect there will be between WeWork's private $47b valuation vs. the value the market puts on the publicly traded chunk of equities.
We've already seen this with Snap, Lyft and Pinterest. WeWork's losses dwarf them both at this stage and unlike them, only WeWork has billions of dollars in long-term lease liabilities.
WeWork is buying properties and signing long term lease agreements at the very peak of the market right now and for the past few years. We all know real estate goes up and down and these purchases/leases made at the peak aren't going to be easy to keep paying for when real estate cools off.
I think the dark horse feature of wework that may make it relatively recession proof is that recessions might increase demand for wework office space. More unemployed/underemployed white collar workers might turn to wework offices to work in startups or just to have some sort of office environment to get things done in
WeWork does for office space what companies like Just Works does for HR stuff.
We are a small company that works out of NYC and WeWork is great for New York. Most office leases have a 2-5 year minimum and you have you deal with getting office furniture, janitorial services, etc. It's a LOT of overhead for a small company. Also they let you go month to month or sign up for multiple years at a discount.
Also you don't have to worry about overpaying for office space as wework lets you grow from office to office without having to change your whole office setting slash commute. Its also not HORRIBLE pricing wise if you're okay with having a slightly smaller office space, because it does have a common area with free coffee, milk, beer, etc.
TLDR: WeWork is more than just a sexy startup office space. It also gives you flexibility until you get big enough to be able to need a massive office.
I think of WeWork as a haven for middle class yuppies who like to socialize with other "like minded" individuals who are trying to make the world a better place, with their sustainably produced dog outfits.
I feel like I'm the target market for WeWork, a 30 year old contractor who primarily works out of coworking spaces and I have never seen any appeal in WeWork. Yeah, they are nice, but at their price they are not a good value relative to competitors in any major city I've seen.
The two times I walked into one to try to get a tour in various cities I was told it was appointment only. The value proposition wasn't good enough to schedule time for a tour so that was the end of my interaction with WeWork.
Also they had tons of full time staff just sitting around. Why not just show me around like every other coworking space in the world? Just left a bad taste in my mouth.
There’s lots of reasons to hate WeWork, but not giving a tour isn’t one of them. If they did that for you and a few others then word would get around that you don’t really need appointments for tours and that would cause other problems. Nothing personal.
what are the problems with showing the place around? literally everyone else is doing that. besides, WeWork once responded to my appointment request a month after the date I requested it for, so they even can't get their brilliant appointment system straight.
> what are the problems with showing the place around?
You and others coming during an event or even focus hours.
Also, I imagine that their willingness to do a tour at random directly correlates with vacancy rate.
It could also be a form of decorum and filtering you out. If they're not hurting for business, they'd probably much prefer clients that responsibly schedule uses of limited resources.
All coworking spaces I have been to have wanted me to make an appointment, and one did not even let me into the office (which was ridiculous). Maybe this is something which varies by country. And personally I prefer appointments because it makes my life easier to know for sure that they will have someone there who has the time to talk to me.
Appointments are not unusual when arranging for commercial space. Norms are similar to any other professional/B2B environment. I suspect it's a filter. An appointment only process allows the property managers to notify current tenants beforehand; to schedule around shared facility use (e.g. conference rooms); and to research what's available when for how long.
That is a fair point. If they are not busy there is not really any reason to not offer a tour. But I can also understand why they heavily prefer appointments. Having random people show up and interrupt your work can be annoying.
well now it's another reason to hate the we company. I'm sure exceptions are always being made, just OP wasn't able to become one of them. As it stands, a business should have some capacity to take in some walk in prospective clients without scheduling.
In my mind it's a tell for how future interactions are going to work. Let's say I have a question or some issue with the space, am I going to get to have a normal human interaction or am I going to have to put in a formal request to some automated system and hope somebody responds?
I highly value the first kind of interaction over the second.
Take a look at Out Of Office next time you're looking for a place to work. We've built a database of free and bookable spaces to work, meet, take calls, or take a break. We've built it for ourselves and for people like you who work on the go and may work in multiple locations throughout the day.
Right now we're only operating in San Francisco, but looking to expand to other cities in the future.
I kind of think the more profitable use case for WeWork isn't individual contractors, but instead small teams who want a place where they can work together but it's still too early to lease their own space (or, in the case of existing companies, where they can temporarily expand to overflow space before committing to a longer term lease).
They're a ripoff, and I predict a decline in coworking as it currently exists, not growth. I'm saying this as someone who is currently working out of a coworking space, though not WeWork at the moment. No, WeWork is absurdly overpriced in LA, possibly in general.
Actually, most if not all coworking spaces are a ripoff unless you've got a small team working out of one. For individuals, it's borderline not worth it if they aren't making obscene amounts of money.
I work remotely and use a coworking space because cafes are dreadful environments for getting anything done. As has been mentioned on HN before, restaurants and cafes have been getting louder, meaning headphones must be used 99.9% of the time. Even nicer cafes have flimsy tables, bad Wifi, and lousy parking.
If space for individuals to work at is really in demand, all that cafes and chains like Coffee Bean & Tea Leaf need to do is wise-up and make relatively minor changes to their existing storefronts or possibly build secondary venues for people who want to get work done, and the idea of managing huge office buildings and paying for them with a nominal $300+ per month fee comes crashing down like a house of cards.
I would gladly work out of cafes and buy drinks and food every day if cafes would fix their existing issues. And I suspect I'm not the only one.
As soon as I get a home with a room I can set up an office in, I'll gladly cancel my membership.
Just want to point out that cafes and restaurants don’t have issues they can resolve by focusing on the remote worker demographic. Their rent per square foot means their whole business is predicated on turnover. They do not control their largest expense.
Your experience and price sensitivity probably means you're not the target market. Perhaps because it's harder to scale to the scale of WeWork tailoring operations to single occupant clients. Maybe analogous to a hard disk: fragmentation, minimum block size, etc.
It's not necessarily that I'm that price sensitive. In a vacuum I'd probably end up paying their price. The problem is that there are other places that are the same or better at a lower price.
I am confused about how they could be valued at $47 billion. (Unless they own $46.9 billion worth of real estate.)
Let's suppose this company can eventually turn a profit (which already seems to be in doubt). I see nothing to prevent competitors from renting out real estate, nor customers from switching. So what then is to stop WeAlsoWork, WeWorkToo, and WeWorkHarder from springing up like mushrooms?
The argument is network effects, you come to WeWork for the community. It's difficult and capital intensive to attract enough people to build a community so that's their moat. I don't belive it is anywhere near as valuable as they seem to think, but that's their argument.
I work at WeWork and I love it. The value comes from being able to network and have a place to meet and socialize while contracting. I don't really value WeWork for the space, but for the people. I find coworking spaces like WeWork to be quite an amazing place to socialize. As you age, it becomes more difficult to make friends and when working at 1 company, you usually surround yourself with the same people.
At WeWork you get to meet people from many different backgrounds and companies. I met a friend who owns an insurance company (on a Microsoft stack.), another that owns a tech company for efficient travel to work (on a React stack), a group of people who have monthly subscription box companies (Shopify + CMS) and then an individual who owns an investment firm (various advice on how startups are doing in the city.)
Each individual brings something to the table and I've learned a lot from them. We hang out on weekends and drink beer together. Socializing is critical for human happiness. That's the value add for WeWork for contractors in my opinion, the space is secondary.
There are competitors, I've tried a few, but I found the WeWork space to be more professional. It costs more, but you get more in my opinion (in terms of space.) The other coworking spaces are kind of ugly, or they don't have constant events like WeWork. I'm sure this point varies heavily depending on the city. I'm sure monthly rate helps with keeping the space fresh.
I am unsure about the valuation here, but I would consider WeWork and coworking spaces the best thing to ever happen to my social life. I went from a rather introverted person to being quite extroverted and growing emotionally. This had many other factors, but WeWork contributed.
You honestly value WeWork as a workspace, so I have a question: given the loss rates of WeWork, are you willing to pay 50% to 100% more money in the future for the space? What is your feeling about the willingness of others in the space to pay the increased rates?
Was talking about this with some other folks and the moat for co-working space so seems pretty small, just because they are designed for mobile workers. (And hence designed for transience.)
I very much see it as Crossfit. The WoDs[1] cost $0 and the equipment cost is relatively trivial - you can get this stuff almost anywhere and do it on your own. However, membership at a Crossfit box[2] commands a huge premium due in large part to the social aspect.
At Crossfit or fitness events, you also hear athletes[3] introduce themselves as X from Y Box. I can't help but be reminded of when I hear religious people introducing themselves as X from Y Parish/Mosque/Synagogue. It can become a central part of your identity and one of the first labels you apply to your self.
I get the idea though, that ex-googlers talk about leaving Google for the same reason Harvard grads/dropouts like to work that into their conversations.
Indeed. The more interesting question would be how many Googlers internally talk of people leaving Google as though they've left a religion vs those who meet it with a ¯\_(ツ)_/¯
I could understand this if you were busy working, and someone randomly approached you. But from what I understand these random conversations happen more in a break area. So are you the type of person to punch someone in the nose if they say hi to you and enquire into your general well being, while you are getting a drink at the water cooler?
The frat analogy is actually really good here (ignoring all the negative things associated rightly or wrongly with fraternities here to not cloud the issue).
With a frat, you are paying for housing plus a social network with events. With wework you are paying for office space plus a social network with events.
Much like frats the value of that network is highly dependent on the people and varies wildly from place to place or even the same place over time.
For some people frats are great. They have experiences and make connections they wouldn’t otherwise make. For some people they suck and provide no or even negative value
But much like a frat, don’t think the social network that WeWork provides is in anyway unique or incapable of being produced elsewhere. Also don’t think for a minute that you can scale that experience or make it repeatable across locations and cultures. Because like a frat this is ultimately built on people, not Carafes of Cucumber water with bullshit slogans about “hustle” carved into them
Wework is an office space company and right now it’s social network is not proprietary advantage. Making the IRL social network more digital may be a way to solve that, But so far they don’t seem to be doing that
They have not opened yet here, but I have signed up for them. As they charge slightly less than the market rate for office space here in my city so I see it as renting office space and getting a complimentary frat membership.
My experience at wework was also very positive. got to meet some attorneys at an adjacent office and grew quite friendly with a few startups down the hall. They also take care of all the events throughout the work week, and open it up to every company in your office. This results in a lot of interesting conversations that I otherwise would not have had.
WeWork has a lot of competitors that do the same. The last start-up I worked for used to get almost free space from a local college and it would have many companies working inside of it. Similar vibe, similar folks as far as I could tell.
That's great it worked for you but i'm skeptical of it being its own business. Seems more like a side "we have extra space" type of business to me. But time will tell.
Within 200yds of the Workspace we're currently in (London), there's at least 6 different coworking spaces, including a WeWork. If I expanded that to 400yds, it'd probably include 2 more WeWorks + others.
Good question, dunno. This is Shoreditch, Silicon Roundabout area. Almost every 3rd building has a co-working space now. I'm just waiting for Tesco et al to get in on the act.
I was in an accelerator space before. Most people are just acquaintances who would say hi to each other but didn't have time to have deep chat. Compared with that, I made friends with the colleagues and the relationship lasted longer.
So I'm not sure how many true friends you can actually make and maintain in a co-working space.
This is true. I remember more dog’s names than people’s names from my old WeWork. On the other hand, they do claim dogs are man’s best friend so maybe WeWork needs to double down on the dogs.
I've had an office/desk at WeWork in NYC since 2014 (although I almost never use it any more). It's been interesting to see WeWork's evolution through the years.
At the beginning, there was a lot of emphasis on community building, almost acting like a fake incubator with "WeWork Labs" (which has since shut down). The same pattern would repeat itself: new ambitious founder moves in (typically ex-Deloitte-type-person), would talk a strong game about how they're changing the world and reinventing and revolutionizing. Would have loud meetings in the conference rooms and loud fundraising calls in the phone booths that everyone would overhear and supposedly be envious of how much funding they are about to get. They would always be asking around about 'connecting' them to people who can build this app idea that they have, and how much it costs to build an app. Then, 6 months later, you would look at their desks. Empty. They were gone. We would never hear from them or see them again. I have seen this cycle repeat countless times. Starting around 2016, WeWork shifted its its efforts towards leasing to larger businesses instead of small startups or individuals. For example, last month my friend was given notice that they need to move because because a new company is renting the entire "dedicated desk" area (about 80 desks).
I found it to be a very bad environment for a coder to be in. The offices are all right next to each other and the only thing separating them is a single pane of glass. Typically, 80% of the offices are occupied by loud sales-type people, who are yelling on the phone to their "overseas developers". Even if you're wearing headphones, it's pretty annoying. Especially when their conversations reveal how terrible their products and businesses are. When everyone is working at the same company, open-office-style environments are easier, because there's a level of respect among coworkers. But when you're surrounded by other companies, it's very hard to enforce.
So, bottom line, if you're there to meet interesting people or be surrounded by quality companies, you will be disappointed. And if you're there to code in a quiet environment, better to stay at home.
It's easy to hate on WeWork. But WeWork offers a few things that are very hard to match. First, design. You get an office space and environment (furniture, rooms, common spaces, food, snacks, coffee) that feels like you're working at a large fun tech office, which would be impossible to replicate if you just leased a commercial space on your own. Second, consistency. I can go to any WeWork in the world and I know exactly what it's going to be like — what the conference rooms will look like, how to book a day desk, how to print, etc. I know that it's going to be a good environment to have a client meeting or to do work, and I won't be let down. Third, flexibility. Most leases are month to month, and so it's very easy to move to different neighborhoods and offices (I've switched buildings 3 times). Good design, consistency and flexibility should not be discounted. I know I can rely on WeWork wherever I go. And so that's why I've still kept an office there as a pied-a-terre even though I almost never use it anymore
I’ve worked in real estate private equity, specifically office acquisitions, my entire 15 year career and I can say I used to despise WeWork as much as everyone here.
After doing the work to understand the business, however, I now take a contrarian position:
WeWork is legit.
They may not be worth $47bn, and many of these non-office endeavors may prove silly, but the coworking side is here to stay. And it is transforming (dare I say, disrupting) the old line, conservative office real estate industry.
WeWork has collapsed the design-build value chain such that they can build workplaces in one-half the time as the rest of us, at a 40% discount. It’s staggering.
How can you say they're disrupting anyting? WeWork didn't invent coworking, they don't have a unique offering and I don't believe they have any competitive advantage beyond capital reserves.
I swapped coworking spaces purely because WeWork took it over - they're an incredibly obnoxious company, they're expensive and they've overexpanded. This is one IPO I wouldn't touch with a ten foot pole.
You don't understand the business. You think WeWork is for individuals like you. It's not. It's for enterprises.
In any case, I addressed their staggering competitive advantage in my original post. They can build space in one-half the time at 60% of the cost because they have a 2,000 person multidisciplinary product team made up of architects, engineers, interior designers, developers, and contractors. They've integrated the value chain like Amazon has in online retail.
They're disrupting the industrial complex of lawyers, lenders, brokers, and landlords who surround the Kafkaesque, traditional, 10-year office lease.
WeWork is not even close to overexpanding. Coworking is less than 2% of the 10 billion square foot US office market. It's going to 30% or beyond. They haven't even hit the vertical part of the S-curve.
Remember, coworking may have started with individuals like you, but now the much larger source of demand is enterprise. With actual companies WeWork and coworking are substitutes to a painful, limited-service, long-term lease.
> You don't understand the business. You think WeWork is for individuals like you. It's not. It's for enterprises.
What's your definition of "enterprise" leasing? 200+ sqm leases for 3 years?
Either way, I guess we'll have to wait for the WeWork S-1 to see whether or not your assessment is correct.
However, if my personal experience of 5 (admittedly international) WeWork offices is anything to go by, it's not. The tenants I saw were overwhelmingly 3-10 person teams (and when they exceeded that number, they moved out and traded up for a more traditional/permanent office lease).
Of course, that's just anecdotal, and hardly statistically significant. You might be right - if so, I'm guessing their S-1 will show 30%+ of revenue from longer-term enterprise leases.
But even if that's true, I still don't see it as an advantage. Serviced offices and independent coworking spaces offering "spillover" space for enterprises are a dime a dozen. I'll grant that WeWork might have an advantage in interior design & fitout - but again, so what? How many companies will pay a premium for a "WeWork designed office"? How many even care?
This is obviously a lot of speculation about what businesses want and what they're willing to pay for. Maybe you're right, maybe I'm right - who knows. We'll keep a close eye on the numbers and see which one is correct.
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[ 0.25 ms ] story [ 322 ms ] threadWe'll have to wait for the public S-1 to understand their financials.
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&C...
But everything rests on the edge of a knife. The underlying price sensitivity, the economics of providing the service and the rent of the space. Their model of cut-rate rents is subject to local trends and their investment in each property means that it is not easy for them to shift locations and it would be a significant loss if local landlords got out of hand. As a global company, not every market has strong renter's protections and it makes me wonder how they'll protect their assets when people realize that they could get more from them. Then there is the CEO that leased properties he owned to the We Company, making millions in the process - https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l... (this bit of impropriety should raise eyebrows and raises questions about the company's ability to prevent such rolling conflict of interests going forward).
It is unclear to me how they'll position themselves for the long-term given the variability in real-estate. We are in the run-up to a recession, but after that when it's boom times again and prices rise rapidly, again, how will WeWork survive? Do they plan on buying properties during the bust? What's the long-term plan over here that ensures that they keep on top of the food chain? What is the lock for their spaces?
Edit: The company might be losing money in the pursuit for growth but the model is clear in the sense that they provide services + benefits (swimming pools, beer, massage bars etc etc) on top of leasing out space for a fixed amount X. Unlike Uber, it is easy to imagine them minmaxing this to make money. It's not hard and they lack the kind of competition (Lyft) that would trap them at this low price point as few places in the different jurisdictions that they operate in can offer similar services due to the large upfront investment involved.
I used to work at company that rented from WeWork. And we were in their awful glass cubicles, like working in a Borg ship, and we wanted some privacy, so we asked about putting up some removal decals.
They said no, it violated their brand guidelines.
Clarity, always clarity.
a) buy or rent commercial real estate
b) rent that same real estate out to people who want office space
As long as the money coming in from b is sufficiently greater than the money being spent on a, you should be good.
As far as profitability, the company is making investments now that will pay back over time. Since they are growing quickly, you'd expect them to take a loss since they have to make upfront investments in new offices (and on real estate, which they seem to be getting into the business of purchasing outright rather than taking out long term leases).
EDIT: I don't have an opinion one way or another on whether WeWork is a good business to invest in or not, but it's definitely a straightforward and easy to understand business, as opposed to say, a bank or a biotech company.
The problem with this model is that when demand for real estate falls (e.g. because of economic cycles, trends/tastes, etc.) the revenues will evaporate and the costs will remain.
If WeWork can't pay the lease on 29,000 square feet of office space, WeWork has a problem. If they can't pay the lease on 2.9 million square feet of office space, the owners have a problem.
One fairly big serviced offices company pulled the "separate entities" trick in one of the previous recessions, and some of the major landlords in that country still to this day, more than a decade later, refuse to do business with them.
¹ https://news.ycombinator.com/item?id=18714962
I have a few clients who work at WeWorks and the nitro coffee and kambucha on tap is fine and well but I wouldn’t call it lavish. Having a few hot and cold drink options for visitors is just common curtesy and basic part of doing business.
Free coffee and beer doesn't begin to compare (not that I don't think what WeWork offers is useful)
If these types of services become popular, couldn't any commercial landlord start offering these services in the buildings they already own?
I think many landlords would make awful clones and lose a lot of money, at least at first.
Which in turn raises the question: Why do WeWork bother with renting the properties? Uber doesn't rent cars, they just provide software and a network to drivers and riders, and something similar might work for renters and property owners (AirBnB for offices, essentially).
(Of working in a panopticon, but that's popular, I guess.)
[1] https://news.ycombinator.com/reply?id=19783108&goto=item%3Fi...
As an investor, why would I want to go go through the rigmarole of buying shares and calculating losses for my taxes when I could just send a wad of my money to Adam Neumann every month for much the same effect.
If they can't make money in this boom market cycle, what makes you think they'll make money in the next one?
It could rant all day long about WeWork Potsdamer Platz, but I think I've done so on every bigger WeWork thread here before...
I was under the impression that residential leases had protections, but commercial leases did not (if you're a business you probably have money for a lawyer to look over the contracts and take the landlord to court if needed).
Not that different than Uber. It was a great idea but it’s an easy business to copy with little brand loyalty once new entrants appear in a market.
Not only have a large amount of IPOs in recent months been heavily downgraded in initial pricing like Lyft, Pinterest, etc. They continue to drop in value day by day as they’re traded openly. I place a substantial amount of blame on SoftBank and by association, the Saudi Arabians, for unnecessarily inflating this current bubble to disproportionate levels. It will only cause the resultant crash to be all that much more damaging.
Pinterest has been going up in value day by day.
Why this was done? Your guess is as good as mine. :)
What I can tell you concretely though was that Pinterest made the willful decision to lower its initial pricing of its IPO to below its valuation (75 million shares priced between $15-17 for a total valuation of ~$11 billion compared to its original supposed pre-IPO valuation of ~$12 billion). This shows a clear lack of confidence in the company. This is a fact, not an opinion.
75 million shares priced between $15-17 for a total valuation of ~$11 billion compared to its original supposed pre-IPO valuation of ~$12 billion
A company that 'low balled' it's IPO simply made a huge mistake and left a ton of money on the table.
IPO pricing is very difficult because it's hard to predict demand and market conditions.
Ideally, you want a flat, and steadily increasing price.
And recent events by these privately held companies show a keen lack of confidence in my opinion. That they’ve all chosen to IPO now at the same time gives you a strong indicator to look at. You might disagree with my final determination on what it means exactly, but the fact that it’s happening is undeniable.
As to macroeconomic indicators, I think the majority of them are largely useless as predictors and at best self-fulfilling in nature.
The recession was pretty minor though.
The economic impact can't be quantified by the drop is stock value, it occurs slowly over time, like lower payroll taxes, higher unemployment benefit costs, lower consumption etc.
Pinterest hasn't had a down day yet.
I agree with you that the increase in late-stage rounds and consequent delayed IPOs is generally a bad thing, but not sure SoftBank is the primary culprit. And certainly during the dotcom days companies went public much sooner but that didn't prevent a bubble and subsequent crash requiring a decade+ of recovery. MSFT didn't get back to their 1999 high until 2016.
But if Lyft and Pinterest are already trading below IPO prices, doesn't that indicate that the public markets are taking the pre-IPO private valuations with a grain of salt?
I'd be much more worried if those stocks skyrocketed, creating a tidal wave of other IPOs with weak fundamentals hoping to cash in because of good timing.
Investors are looking at the present and mostly the future, not past financial marketing.
For skyrocketing, Zoom did skyrocket (close to doubling). As did Tradeweb (more than doubled). Tradeweb doesn’t have weak fundamentals though.
But after going through several buildings I realised that the hotdesk offer is only the frontend to their business. Most of the building occupants are sizeable companies that have decided to offload the problems that come with managing an office. Some entire floors can be corporate satellites to big enterprises.
That was my experience and the S-1 might say that the revenue distribution is different but I thought it's worth mentioning.
1) IPO-ing companies represent a very very small chunk of the overall economy.
2) That 'there are IPO's' is a very good signal - it makes investors 'feel' bullish and confident.
3) These companies don't carry a lot of debt. If they were able to, they wouldn't be diluting by raising equity.
4) Uber, Lift, Pinterest, WeWork - they are all mostly viable businesses. Yes, their stock price may be too high in many cases, but they are mostly viable at some level.
5) Don't blame SoftBank. SoftBank is great! It's a ton of 'kind of dumb money' from places with way too much money (Saudis) and nowhere to put it. This means startups can expand far beyond where they normally would and they are handing surpluses to consumers like you and me!
Consider: how is it bad for you for companies to be giving you stuff below market value!? It's possibly bad for other investors, but we consumers win, so long as it doesn't happen broadly and cause a bubble.
All that money we send to Saudi for Oil is coming back in the form of 'cool offices below market value'.
Uber/Lyft have unit profitability problems at current price, but once the market settles down, they can increase prices a bit and it will be ok. (Again, massive stock price not withstanding)
WeWork will work out as long as there isn't a real-estate crash. They are basically leveraged hard on long-term contracts. We don't know the details of them, but if vacancies spike they could be in a world of cash-flow pain.
So yes, the hype is a little much, regular retail investors should probably we wary of holding the bag ...
But these things will only crash if there is a recession and most things look good right now.
FYI even 'bubble conditions' often need something to pop the bubble, like a sudden increase in interest rates, or 'the ground falling out' like in 2007. Right now, there are some signs of froth, and hints of maybe a recession (i.e. at the top of the cycle) but nothing really to say it's going to pop.
Canada could have a major real estate correction, but nobody would care.
China could have a flop, but they can fudge the numbers so well it'll probably be covered up and papered over as a long term slow down. In fact, I think that's what's happening: China has many big sectors which would be in recession, but the numbers are fudged to look like 5% growth.
This money has strings attached, strings of political power, just as the Chinese Belt Road initiative. One wrong word or protest when another dozen people is executed by sword or crucified or Muslims sent to concentration camps and poof, there goes your funding, there goes your economy. If there is one foolish thing to do, it is accepting blood money from a potentially hostile foreign power.
China's 'belt and road' are political, national investments part of a grand strategy.
Softbank is just money.
If you set out to attack MBS/Saudis while taking their money, you can expect trouble, but I significantly doubt you're going to be trouble otherwise.
Whereas Chinas national loans have an entirely different set of objectives.
Softbank/Saudis are just looking to make money, like most other VCs.
Or is it one of those things where all their money is in the big rentals, and the hot-desks are just for show?
As someone who has worked remotely for the last five years, I like having the option of working away from home, as I can get a bit cabin feverish. The location I work at is quite lively and friendly.
Also, the fact that everyone around me is working has the psychological effect to encourage me not to slack off. I'll usually go to my WeWork location in the morning and work straight till the evening where I stop. Previously, when working exclusively at home, the work hours was particularly murky and inconsistent.
To add, in my city WeWork usually gets prime real estate locations, so they can be easy to commute to, especially if you live in the city. And they have enough security mechanisms set up (i.e. not located on the ground floor, numerous security cameras, people at the front) where I can go to the washroom or go for a lunch break without taking my stuff. In contrast, when I used to go to the library/Starbucks to take a break from working at home, I'd always stress about finding a table/outlet a have to take my stuff anytime I took a break.
No doubt $400/month isn't nothing, but for me, the efficiency and QOL gains has been well worth it.
Sure, you can rent for much less in the suburbs, but for companies who want an office which is central and easy to commute to the price is pretty close to market rate.
There are other examples too.
I'm 100% remote and I prefer working at coffee shops, campuses (UCLA, SMCC), or libraries -- I prefer my environment to feel less like "work" and more "creative." I also get to interact with a largely diverse group of people (as opposed to mostly tech people that work at WeWork). Going to a coffee shop is also cheaper (I buy ~2 items a day), I get to meet neighbors, plug myself into my local community, and sometimes even make small talk with cute girls.
I think a good idea might be "reserving" seats at cool spots around town (coffee shops, bookstores, etc.) -- would be cheaper than a WeWork and (I think) more desireable. Think ClassPass for co-working.
That being said, I've seen newer, less "hip" flex spaces open to try and target that market.
If it's your second home that you have your morning coffee in and have a personal office that you do non physical tasks on, and occasionally have a friend or cofounder over for a beer you're looking pretty good.
Think of it as "sexy startup office as a service."
Not saying it's a worthy or necessary service this world needs, but I think that's the value they provide and what companies pay for.
The prices are eye-watering, however, and don’t seem to come down much with scale. (A three-person office is about three times the price of a one-person office – at least when I last checked.)
Getting an office lease is a huge process with a stack of contracts, pushy agents, ridiculously long leases, misleading prices, hidden costs, furnishing, and establishing all the necessary services. And if you're a small company, the owners are expected to personally financially guarantee the lease.
[1]: https://en.wikipedia.org/wiki/NNN_lease
Super useful to level my focus, the people around me are in a wide mix of fields not just technology, and having a proper reserved space is a huge boon to productivity. I can have a real monitor, an ergonomic keyboard and mouse, and multiple machines setup.
I value my back, neck, and wrists far too much to work from a coffee shop every day.
WeWork Labs also offers some great benefits for startups, the mentors alone have been a great boon.
https://news.ycombinator.com/newsguidelines.html
I have a home office for when I need to be "in the zone" -- 3 monitors, ergonomic chair, etc. The benefit here is that you could even write off part of your rent (if you're a contractor/freelancer).
With entire teams being here, it isn't all programmers. Sales, marketing, biz dev, and engineering are all sitting together and participating in the community.
As for @ home versus at an office, I am far more productive at an office. So much so that I have a nice home setup (I have one ultrawide instead of multiple monitors!) but it is worth it for me to commute 40 minutes to get here.
(I of course have friends who prefer their home versus an office environment!)
What, in your opinion, should people be doing in cafes on weekday afternoons?
Not that students don't meet friends on afternoons to go for coffee, but it is rare. Especially when meeting somewhere else for free is, well, free.
People don't pay for a coffee nowadays, they pay for a place to sit and use the wifi
No they aren’t that’s ridiculous.
And this is probably me getting old but I don't know how people can spend hours hunched over a laptop in café seating, as opposed to an ergonomic office chair and monitor at eye level.
Ask any orthopedist, it catches up to them. We can all buffer it for a certain amount of time, but anybody who does this for a long time will develop issues.
That doesn't even sound like coffee shop is the right description, that's an office that sells coffee.
I realised I was having posture issues with extended laptop use at approximately age 23 or so.
Alternatively, if WeWork had a spot out here in the suburbs where I could escape the noise of my lovely four year old without having to fight traffic, I'd be game.
Choosing a different location each day based on whim and availability is all very well for a solo freelancer, but once you scale that up to as many as two people you're going to start having problems finding space and private places where you can talk, call clients, etc. etc. Once you start getting to 3 or 4 people, forget about it. And what about people who want dedicated hardware - a keyboard, monitor, etc?
WeWork has a valuable proposition for those groups. Rent out a small office while you're in the early stage, have everyone in a room with breakout meeting rooms and phone booths available just outside. A kitchen where you can get a coffee, prepare food, etc. etc.
I still think WeWork is an insane proposition because they cost a lot and they're not that great, but let's not pretend they offer nothing over a local coffee shop.
Meh, it was fine for what it was I guess, but I think the company I was working for left wework not long after I left the company.
Truth
It can be done, remote teams much larger than that work all day every day without using their voices with each other, just Slack or git messages or whatever.
What if the money WW is burning through went to libraries to build more workspaces and conference rooms?
"I get to meet neighbors, plug myself into my local community, and sometimes even make small talk with cute girls." can all be done at a WeWork.
Have a look at spacious.com for your last idea.
Not affiliated with them in any way.
same location, so i don't have to have a daytime spot i prefer and a night time spot thats just open.
Also you get a say in the space cuz you pay. The coffee shop might just get rid of your favorite little corner at some point.
I don't use wework, so idk.
My classic "FTP" comment was some feedback on a Show HN post, that I was concerned that the technology may be easy to reproduce and thus had a low barrier to being reimplemented by OS vendors or competitors. Drew addressed all my points and I acknowledged the value of the service. Completely different from this thread.
I did a short video with them you might like - https://www.youtube.com/watch?v=JXA0q-VA2VE
It doesn't work for 100% of your time. 20-40% maybe but not more than that.
There are many issues with cafe work:
- Lots of cafes are bothered if you stay for extended periods of time.
- Unstable or No wifi. You have to rely on Data unless you have it unmetered.
- Not always you'll find a charging outlet for your computer. Granted, I don't have this issue with the mac.
- Sometimes, you don't find a free/available place. So... you go to search again.
I think cafes are good for breaking the mood. But not a workplace for remote workers.
It doesn't work for 100% of your time. Obviously it's going to be different for different people.
If I were running my own company and employing remote staff I'd have to think about the workplace health and safety implications if they were regularly working in cafes.
They have a few dedicated spaces, like Union Square in Manhattan, but mostly rent spaces from restaurants that are closed during the day I think.
That's We Work, it's just 'out of the box' for easy, shorter term rentals. Generally.
So you can only imagine people to think and act like you yourself? It's office space without the large setup cost and time waste, what's so hard to get?
We've scouted thousands of coffee shops, hotel lobbies, parks, libraries, coworking, and other public spaces.
Right now we're only operating in San Francisco, but looking to expand to other cities in the future.
https://outofoffice.app/
Disclaimer: I work for Out Of Office
https://liquidspace.com/
Isn't that also maybe good for WeWork?
The following could happen:
1. WeWork will close down some sites
2. Threaten to close more and shake down their landlords for better lease conditions (since there's fewer people looking to rent corporate real estate)
3. Other companies will look to close down their own satellite offices and transfer workers to WeWork sites for cost savings.
That's the bullish case for WeWork in a recession, I don't think it's absurd.
1. Businesses cancel their WeWork spaces because they're laying people off with 0-6 months notice.
2. WeWork has to eat the cost of low-occupancy buildings until their leases are up for renewal - which could be 5, 10 years down the line.
3. As the market heats back up WeWork change charge a lot for the office leases they established cheaply during the recession giving them low cost, high value rental spaces.
Notice how at stage 2 you're going to have a few years where you've got a drop in revenue but high fixed costs? Normal office rental companies plan for this because of the cyclical nature of the market. The question you've got to answer is can WeWork weather that storm - and I would've though it obvious that it's in a bad position since right now they have $6.6Bn cash and lose $2Bn a year.
Also I've got to challenge you on this:
>3. Other companies will look to close down their own satellite offices and transfer workers to WeWork sites for cost savings.
I think this is just utterly implausible. Companies don't shut down their satellite offices to move workers into smaller more expensive per head offices. What is far more likely to happen is that they cut head count and use the spare office space in their head office to close down satellite offices and move them to headquarters and close down small offices and move them to regional offices. That effect will reduce demand for WeWork, not increase it.
Take Intel as an example of this: When they wanted to reduce head count the first step was to shut down failing projects and fire under performing employees. Their second step was then to use the spare space in their large offices to shut down small offices and consolidate into their big offices. All their big offices are offices they own or have extremely long term rents on, all the offices they didn't were much smaller and much more likely to be rental spaces - which is why it saved money to shut them down in the first place.
You're assuming they are? I mean, they are personally of course, but who says they care about the long term of their company? They may not plan to be around for it.
I'd agree with this outlook if this wasn't a 10-year old company that's already burned through billions in VC money. When you account for that, the "losses-now-are-good" logic only makes sense if you're a VC who needs to make their money back.
[1] https://en.wikipedia.org/wiki/Sunk_cost
For an IPO for a commercial leasing company however, a growth stock should be demonstrating positive cash flow net of financing costs. I know WeWork has these absurd WeLearn, WeLive pipe dreams to explain their growth strategy, but that takes time, and can be reversed suddenly.
Uber's big pitch was "self-driving taxis" until the new CEO arrived, saw that it was a pipe dream, and focused the growth trajectory on to something more realistic like bike sharing and meal delivery.
Given all that, if WeWork are IPO'ing now, I'm interested in seeing how far away they are from positive cash flow on their core business as it stands.
Also, Apple's problem periods all occurred when they were publicly traded, so there wasn't the same disconnect there will be between WeWork's private $47b valuation vs. the value the market puts on the publicly traded chunk of equities.
We've already seen this with Snap, Lyft and Pinterest. WeWork's losses dwarf them both at this stage and unlike them, only WeWork has billions of dollars in long-term lease liabilities.
We are a small company that works out of NYC and WeWork is great for New York. Most office leases have a 2-5 year minimum and you have you deal with getting office furniture, janitorial services, etc. It's a LOT of overhead for a small company. Also they let you go month to month or sign up for multiple years at a discount.
Also you don't have to worry about overpaying for office space as wework lets you grow from office to office without having to change your whole office setting slash commute. Its also not HORRIBLE pricing wise if you're okay with having a slightly smaller office space, because it does have a common area with free coffee, milk, beer, etc.
TLDR: WeWork is more than just a sexy startup office space. It also gives you flexibility until you get big enough to be able to need a massive office.
The two times I walked into one to try to get a tour in various cities I was told it was appointment only. The value proposition wasn't good enough to schedule time for a tour so that was the end of my interaction with WeWork.
Also they had tons of full time staff just sitting around. Why not just show me around like every other coworking space in the world? Just left a bad taste in my mouth.
You and others coming during an event or even focus hours.
Also, I imagine that their willingness to do a tour at random directly correlates with vacancy rate.
It could also be a form of decorum and filtering you out. If they're not hurting for business, they'd probably much prefer clients that responsibly schedule uses of limited resources.
Maybe wework doesn't like making money.
What cost would those problems have to the business? Would those outweigh the lost sales from refusing tours?
It's not like I was requesting to see a meeting room that was in use.
I highly value the first kind of interaction over the second.
Right now we're only operating in San Francisco, but looking to expand to other cities in the future.
https://outofoffice.app/
Disclaimer: I work for Out Of Office
Actually, most if not all coworking spaces are a ripoff unless you've got a small team working out of one. For individuals, it's borderline not worth it if they aren't making obscene amounts of money.
I work remotely and use a coworking space because cafes are dreadful environments for getting anything done. As has been mentioned on HN before, restaurants and cafes have been getting louder, meaning headphones must be used 99.9% of the time. Even nicer cafes have flimsy tables, bad Wifi, and lousy parking.
If space for individuals to work at is really in demand, all that cafes and chains like Coffee Bean & Tea Leaf need to do is wise-up and make relatively minor changes to their existing storefronts or possibly build secondary venues for people who want to get work done, and the idea of managing huge office buildings and paying for them with a nominal $300+ per month fee comes crashing down like a house of cards.
I would gladly work out of cafes and buy drinks and food every day if cafes would fix their existing issues. And I suspect I'm not the only one.
As soon as I get a home with a room I can set up an office in, I'll gladly cancel my membership.
Let's suppose this company can eventually turn a profit (which already seems to be in doubt). I see nothing to prevent competitors from renting out real estate, nor customers from switching. So what then is to stop WeAlsoWork, WeWorkToo, and WeWorkHarder from springing up like mushrooms?
At WeWork you get to meet people from many different backgrounds and companies. I met a friend who owns an insurance company (on a Microsoft stack.), another that owns a tech company for efficient travel to work (on a React stack), a group of people who have monthly subscription box companies (Shopify + CMS) and then an individual who owns an investment firm (various advice on how startups are doing in the city.)
Each individual brings something to the table and I've learned a lot from them. We hang out on weekends and drink beer together. Socializing is critical for human happiness. That's the value add for WeWork for contractors in my opinion, the space is secondary.
There are competitors, I've tried a few, but I found the WeWork space to be more professional. It costs more, but you get more in my opinion (in terms of space.) The other coworking spaces are kind of ugly, or they don't have constant events like WeWork. I'm sure this point varies heavily depending on the city. I'm sure monthly rate helps with keeping the space fresh.
I am unsure about the valuation here, but I would consider WeWork and coworking spaces the best thing to ever happen to my social life. I went from a rather introverted person to being quite extroverted and growing emotionally. This had many other factors, but WeWork contributed.
At Crossfit or fitness events, you also hear athletes[3] introduce themselves as X from Y Box. I can't help but be reminded of when I hear religious people introducing themselves as X from Y Parish/Mosque/Synagogue. It can become a central part of your identity and one of the first labels you apply to your self.
---
[1] That's Crossfit for workout of the day
[2] That's Crossfit for "gym"
[3] That's Crossfit for someone who does Crossfit
On a sidenote, I'm reminded how many ex-Googlers blog about leaving Google akin to how someone talks about leaving a religion. Very cult-like, almost.
The frat analogy is actually really good here (ignoring all the negative things associated rightly or wrongly with fraternities here to not cloud the issue).
With a frat, you are paying for housing plus a social network with events. With wework you are paying for office space plus a social network with events.
Much like frats the value of that network is highly dependent on the people and varies wildly from place to place or even the same place over time.
For some people frats are great. They have experiences and make connections they wouldn’t otherwise make. For some people they suck and provide no or even negative value
But much like a frat, don’t think the social network that WeWork provides is in anyway unique or incapable of being produced elsewhere. Also don’t think for a minute that you can scale that experience or make it repeatable across locations and cultures. Because like a frat this is ultimately built on people, not Carafes of Cucumber water with bullshit slogans about “hustle” carved into them
Wework is an office space company and right now it’s social network is not proprietary advantage. Making the IRL social network more digital may be a way to solve that, But so far they don’t seem to be doing that
That's great it worked for you but i'm skeptical of it being its own business. Seems more like a side "we have extra space" type of business to me. But time will tell.
So I'm not sure how many true friends you can actually make and maintain in a co-working space.
Loss of $1.9 billion.
Thus, they are selling a dollar for 49 cents. [1]
How is this a sustainable business model?
[1] 1.8/(1.8+1.9)=0.49
At the beginning, there was a lot of emphasis on community building, almost acting like a fake incubator with "WeWork Labs" (which has since shut down). The same pattern would repeat itself: new ambitious founder moves in (typically ex-Deloitte-type-person), would talk a strong game about how they're changing the world and reinventing and revolutionizing. Would have loud meetings in the conference rooms and loud fundraising calls in the phone booths that everyone would overhear and supposedly be envious of how much funding they are about to get. They would always be asking around about 'connecting' them to people who can build this app idea that they have, and how much it costs to build an app. Then, 6 months later, you would look at their desks. Empty. They were gone. We would never hear from them or see them again. I have seen this cycle repeat countless times. Starting around 2016, WeWork shifted its its efforts towards leasing to larger businesses instead of small startups or individuals. For example, last month my friend was given notice that they need to move because because a new company is renting the entire "dedicated desk" area (about 80 desks).
I found it to be a very bad environment for a coder to be in. The offices are all right next to each other and the only thing separating them is a single pane of glass. Typically, 80% of the offices are occupied by loud sales-type people, who are yelling on the phone to their "overseas developers". Even if you're wearing headphones, it's pretty annoying. Especially when their conversations reveal how terrible their products and businesses are. When everyone is working at the same company, open-office-style environments are easier, because there's a level of respect among coworkers. But when you're surrounded by other companies, it's very hard to enforce.
So, bottom line, if you're there to meet interesting people or be surrounded by quality companies, you will be disappointed. And if you're there to code in a quiet environment, better to stay at home.
It's easy to hate on WeWork. But WeWork offers a few things that are very hard to match. First, design. You get an office space and environment (furniture, rooms, common spaces, food, snacks, coffee) that feels like you're working at a large fun tech office, which would be impossible to replicate if you just leased a commercial space on your own. Second, consistency. I can go to any WeWork in the world and I know exactly what it's going to be like — what the conference rooms will look like, how to book a day desk, how to print, etc. I know that it's going to be a good environment to have a client meeting or to do work, and I won't be let down. Third, flexibility. Most leases are month to month, and so it's very easy to move to different neighborhoods and offices (I've switched buildings 3 times). Good design, consistency and flexibility should not be discounted. I know I can rely on WeWork wherever I go. And so that's why I've still kept an office there as a pied-a-terre even though I almost never use it anymore
After doing the work to understand the business, however, I now take a contrarian position:
WeWork is legit.
They may not be worth $47bn, and many of these non-office endeavors may prove silly, but the coworking side is here to stay. And it is transforming (dare I say, disrupting) the old line, conservative office real estate industry.
WeWork has collapsed the design-build value chain such that they can build workplaces in one-half the time as the rest of us, at a 40% discount. It’s staggering.
I swapped coworking spaces purely because WeWork took it over - they're an incredibly obnoxious company, they're expensive and they've overexpanded. This is one IPO I wouldn't touch with a ten foot pole.
In any case, I addressed their staggering competitive advantage in my original post. They can build space in one-half the time at 60% of the cost because they have a 2,000 person multidisciplinary product team made up of architects, engineers, interior designers, developers, and contractors. They've integrated the value chain like Amazon has in online retail.
They're disrupting the industrial complex of lawyers, lenders, brokers, and landlords who surround the Kafkaesque, traditional, 10-year office lease.
WeWork is not even close to overexpanding. Coworking is less than 2% of the 10 billion square foot US office market. It's going to 30% or beyond. They haven't even hit the vertical part of the S-curve.
Remember, coworking may have started with individuals like you, but now the much larger source of demand is enterprise. With actual companies WeWork and coworking are substitutes to a painful, limited-service, long-term lease.
What's your definition of "enterprise" leasing? 200+ sqm leases for 3 years?
Either way, I guess we'll have to wait for the WeWork S-1 to see whether or not your assessment is correct.
However, if my personal experience of 5 (admittedly international) WeWork offices is anything to go by, it's not. The tenants I saw were overwhelmingly 3-10 person teams (and when they exceeded that number, they moved out and traded up for a more traditional/permanent office lease).
Of course, that's just anecdotal, and hardly statistically significant. You might be right - if so, I'm guessing their S-1 will show 30%+ of revenue from longer-term enterprise leases.
But even if that's true, I still don't see it as an advantage. Serviced offices and independent coworking spaces offering "spillover" space for enterprises are a dime a dozen. I'll grant that WeWork might have an advantage in interior design & fitout - but again, so what? How many companies will pay a premium for a "WeWork designed office"? How many even care?
This is obviously a lot of speculation about what businesses want and what they're willing to pay for. Maybe you're right, maybe I'm right - who knows. We'll keep a close eye on the numbers and see which one is correct.