> The story of WeWork’s rise and fall is the story of the past decade: a strange time when greed, technology worship, and low interest rates combined to produce throngs of supposedly billion-dollar startups, known as “unicorns.”
I think the use of past tense here is unwarranted. I'm sure there are many WeWorks and Theranoses still out there right now.
>I think the use of past tense here is unwarranted. I'm sure there are many WeWorks and Theranoses still out there right now.
Many of whom are SaaS companies and who receive hundreds of millions of dollars of investment on what merit? Good story? Sexy products? Expensive growth? Look at us we are next Oracle or Salesforce.
The most bizarre twist in this whole tale would be if the rise of flexible working post covid-19 did actually create a gap in the market for a company to come along and provide flexible office space with short notice and minimal commitment: A real Uber for office space.
I'm thinking post-covid, with the glut of vacant spaces in the coming quarters, there will be many commercial real estate companies offering "flexible office space with short notice and minimal commitment". It quite probably will become one of the standard contracts in the "new normal".
i want a place to go M, W, F from 11am to 2pm with great food, wifi, places to sit with my laptop, bathrooms... I want a tech conference (no speakers or agenda, just normal work-day) hosted and paid for by my company at various hotels around my city 3 times a week. Best of both worlds. Still get to see my co-workers and eat with them often, but never feel trapped in an office or commute.
The underlying problem hasn't gone away though. A company which gets into long-term corporate leases in the most expensive real estate markets in the world and rents out the space by the day (or with a monthly subscription) exposes itself to too much risk due to market fluctuations and economic downturns. Plus, the level of service people expect out of these spaces is just unrealistic for the price they are willing to pay.
A quiet working space in a fancy office building in the most upscale commercial area of the city with tech company amenities included is going to realistically cost a lot more than $200/month. There is a reason WeWork set billions of dollars on fire.
Yeah, for what it's worth I'm sure you are right. At the moment the company I work for is talking about reducing its office space by almost 2/3. If that is representative then the cost of office space is about to take a nose dive.
I'd be open to that... but the pricing on these things are sometimes absurd. Unless my employer were to pay for it, I'm not paying for it, I'll hack it out at home.
One company tried to open a space like that for individual office rentals out in suburbia where I am.
Monthly price was more than half my monthly mortgage payment, I'm not going to do that for a tiny bit of office space.
I suspect that unless employers are happy pay for it the price I'm willing to pay wouldn't float these companies...
My personal price would probably be a little less than I use to pay for a train ticket. Maybe £300 a month.
However, once this all settles down and I know what the conditions are it will probably be reinvested in a dedicated office space, either in a larger home or possibly a garden room.
You may be confusing systemic racism with simple population density.
Systemic racism is an existing system in place that acts on racial data. Simple population density is you noticing that the majority of people around you are one color.
You’re being purposely obtuse. 13.4% of Americans are black, in a just and equitable society I would expect somewhere around 13% of founders to be black.
A sample of thousands is huge. Imagine rolling a dice a few thousand times and getting no or very few sixes. You would be certain that the dice wasn't fair.
Imagine rolling a thousand dice thousands of time and then finding a random lot of a thousand that had lots of odd numbers and claiming the dice weren’t fair.
If you rolled a dice a few thousand times and found a very unlikely subsequence of length one thousand then the dice almost certainly would be unfair. You need to spend lifetimes rolling dice to find sequences of a thousand rolls where the numbers of ones, twos, etc. are very much different from 166.
330M people is 330k 1k samples. So there will be some in there with different clusters of race.
So it is a “lifetime” of rolling dice.
Given distribution of race in the US it’s like 1-4 is white, 5 is black, 6 is hispanic. And so there will be quite a few samples of a thousand that are higher than 66% 1-4.
The problem is assuming that founders would have the same distribution of the population.
> And so there will be quite a few samples of a thousand that are higher than 66% 1-4.
Yes, roughly half of them. But that's not the point. The point is that the vast majority of those will be only slightly more than 66%. You won't see huge discrepancies.
Taking your example, you would expect out of 1,000 samples for about 333 to be 5 or 6. Suppose you actually got 33 (or fewer). What would be the probability? It is 7 * 10^-125. That's 0.0000000[...]000007 with 124 zeroes before the seven. 330k samples is nothing compared to that improbability. You would expect to roll dice for longer than the lifetime of the universe to see such an unlikely event. Or you might conclude that the dice aren't fair.
The whole point is that it IS related. Country club settings are historically a bastion of racism, and there is a modern corollary here. I think the burden falls on you to prove its not related.
Btw, what do you call "ethnic prejudice" when it's not race-based :
like Muslim semites vs Jewish semites or Protestant whites vs Catholic whites (Irish, Latinos)... and I'm not sure that religion is particularly important for the last two ones where the US is concerned?
It’s very related. It’s hard to go and decide to start a company unless you’ve got the economics to do so, either in the form of available capital or a fall-back security blanket. Those things, in America, trend disproportionately White.
Don’t ever forget: for as much as they will try to make it seem like Silicon Valley is a true meritocracy, the #1 most common thing that successful entrepreneurs have is that they grew up rich.
> Those things, in America, trend disproportionately White.
It's funny how people never bring up how this effect is shockingly disproportionately mediated by Jews and not, like, Appalachian or midwestern whites.
Oh come on, you must have read the very next sentence in that paragraph and deliberately left it out so it looked like that phrase was tossed in there without making any kind of point. Shameful, incendiary posting on your part if you ask me. What did you hope to achieve by stirring up tired culture war drama on hackernews?
> These founders—mostly white men and women—wanted a place to work, but they also wanted membership in a club. Or was it a fraternity?
In the little box you check off to select your ethnicity, Jews are in fact expected to check off white.
edit - You can write in "Jewish" but there's no "Jewish" box. This is why I turned against affirmative action (or taking account of ethnicity in any way). Jews are disproportionately rich and successful but they are "white" for the purposes of admissions. Meanwhile Asians, also disproportionately rich and successful, are "Asian". Why? Who makes these rules? Should anyone be making rules like that?
You could improve the situation by only providing ethnicity options that help the application (i.e. remove "Asian" and "white" and just stick to "black," "latino," "pacific islander," etc). This is definitely better but it's still bad in my opinion.
There's no real consensus about it, though in the US it's fair to say that most Jews can be included under the "white" category.
I think it's evident that there is a genetic makeup that can be considered "Jewish", in that it ties back to the genetic make up of residents of Judea and Israel in 500bc, but 2500 years of exodus brings about a strong difference between the genetically Jewish, and the culturally/religiously Jewish. While we Jews were relatively good at keeping it in-the-tribe for those millenniums, a significant portion (maybe most) are mixed in with the genetics of their host nations. Even if they were always religiously and/or culturally Jewish, they might still appropriately identify as racially white, black, or other depending on their exodential* heritage.
*If there's already a word for this, please share with me.
Because the writers want to build support to expropriate that racial group. Just imagine if it was "mostly Jewish men and women" and it's easy to see. In this case the cofounders actually were both Jewish, so they are both racially white and ethnically Jewish. If they identified them by their ethnicity or religious identification in such a sentence, they'd get a call from the ADL. You can write or say anything you want about whites in the most incendiary Radio Rwanda type terms and keep your job while advancing your social standing in the United States.
It looks like race categories are unhelpful anyway. Ethnicity is helpful, and religion is the most important part of it. Just look at the ethnic conflicts between same-race ethnies like Muslim semites vs Jewish semites or Protestant whites vs Catholic whites (Irish, Latinos)...
Edit: it looks like your account has been using HN primarily for ideological battle. That's one line at which we ban accounts, because it destroys what this site is supposed to be for.
Thanks. What is it with the New Yorker page flashing up the whole article, then truncating it to two paragraphs, without any indication how one might continue reading?
As long as I keep hearing the BS line from VC's and similar communities that "we're investing in the TEAM, not the Product or idea," we will continue seeing WeWorks / Theranos(es) of the world, with little to learn.
Rather than doing the fundamental analysis, investing without emotions, etc. - the market will keep rewarding "charismatic" and well-connected individuals with shitty-ideas and/or no business sense.
It's easy to scapegoat Adam Neumann or Elizabeth Holmes, and say they were sociopathic liars or the like - but these cases read like a market inefficiency in venture capital, rather than one-offs.
There was outright fraud, however, all the warnings were there, and they were ignored partially because of her charisma and the gravitas of the board she assembled.
Walgreens straight up fired the investigator who was telling them it was hot air.
One of these days, people will realize that the only thing that you can do with gravitas that you can't do without it is sell a bad idea. When that happens, gravitas will cease to exist. Maybe in a couple millennia.
The VC and to some extent the Private Equity industry can subsidize money hemmoraging business models and fuel massive growth of bad unit economics until they dump them on the public. Uber and WeWork are just two high profile examples.
In fact, then openly admit they stay away from sustainable and profitable businesses in favor of massive subsidized “traction”.
That’s the loophole - same as colleges can jack up prices on liberal arts degrees and then student loans get bought by Freddie and Fannie.
> Uber and WeWork are just two high profile examples.
Uber does not have bad unit economics in its core rides business. It makes profit on rides, and it loses it on trying to expand into food delivery. You can easily see it if you just look at their financial reports.
Obligatory "Not an accountant but": My understanding is that Uber assigns significant costs related to ride share to R&D, etc., to make it look like their rides business is profitable.
Certainly some segment of their core business is profitable. But at the end of the day, if all they have is a glorified cab company that is profitable in a few big cities and loses money everywhere else, that's not a story that sounds good to investors.
It's easy to scapegoat Adam Neumann or Elizabeth Holmes, and say they were sociopathic liars or the like - but these cases read like a market inefficiency in venture capital, rather than one-offs.
You misunderstood the business model here. The plan was to dump it on retail investors, cashing out and leaving them holding the bag. It was just a longer “pump” phase than usual. The sociopaths here are SoftBank.
I hear this critique a lot and I used to believe it more but now I think it's just too facile. It's true that VCs have a lot of room for improvement in essentially doing fraud detection. They do a disservice to their LPs and probably to society at large as a result of this. In fact, that's probably where the misaligned incentive emerges -- VCs have a strong incentive to play the greater fool game and ostensibly were doing that with WeWork before they got their hands caught in the cookie jar.
Having said that, the idea that the solution is fundamental analysis, investing without emotions, or what have you -- that all strikes me as a bit naive and without much evidence. The market is a Keynesian beauty contest first which serves the needs of humans, hence the existence of Veblen goods et al. It also strikes me as a bit naive that there's anything wrong with "charismatic" and "well-connected individuals" being in positions of leadership. Recruiting is the most highly leveraged thing early stage company leaders can do and is the flip side of fundraising -- so it only makes sense to have firm's leader excel at that.
I think we can critique Neumann and Holmes for being unethical fraudsters who deliberately misled their stakeholders without making a categorical error about corporate executives. I won't say that they're the exception and not the rule, but I will say they're not really the goal to aspire to.
> these cases read like a market inefficiency in venture capital, rather than one-offs.
Considering that venture returns have historically out-performed public markets[1], they're probably just that: one-offs. I think there's an argument to be made that Fed QE policies and junk bond bailouts have perhaps over-incentivized risky investments, but in aggregate venture capital has been "efficient" in the economical sense. Consider that the total investment into Theranos and WeWork are a rounding error as far as the total pie is concerned.
> the market will keep rewarding "charismatic" and well-connected individuals with shitty-ideas and/or no business sense.
VCs need to make money first and foremost. I doubt they care about one Theranos out of every 1000 or even 100 companies they invest in (I refuse to compare Theranos and WeWork).
The idea that you invest in the team appears to be a winning strategy considering historical returns. So the question is, why would they change this?
You are right. Investors, including VCs should look for an intersection of team, product and timing. A world changing product will not change the world without a team that can execute (part of executing is marketing and selling). A great team will fail without a product. And even the best team, and the perfect product can fail if the timing is too early or late. Business is hard.
I know it's fun to laugh at how kooky Adam Neumann is and how comically grandiose The We Company's vision became over time as they raised more and more money. But one thing that still bothers me about this documentary (and now the newyorker's review of it) is that it doesn't make even the slightest attempt at telling both sides of the story.
The most glaring omission is that it doesn't stop to acknowledge at all the impressive growth that WeWork saw. Yes, there were all kinds of problems with the way they managed their growth, and some major challenges with the basic fundamentals of their model. But there were many (hundreds of thousands?) of real users in many cities paying them money for office space. To just write that off as "lol, you re-invented the office" is a little ridiculous. They made a product people loved, and that IMO genuinely was an order of magnitude better in user experience than most other short-term office space that existed at the time. It saved time on all kinds of things, from basic cleaning, coffee and tea, flexible meeting rooms and private phone booths, and a generally comfortable space to work in. Those are things that have real value to anyone who is busy working on their company and just wants a productive turnkey place to work. It's weird to write all that off as just shallow millenials being too vain to work out of a Regus (which is a company I had never even heard of before the documentary, despite having been in this position of needing a small short-term office space for my startup in the past).
Maybe I'm just a crazy, biased shill and a sucker for any startup story, but IMO it would have been a much better documentary if they delved into this side of the narrative - how did such an out of touch, seemingly crazy person manage to build an actually good product that found quick product market fit in the crowded real estate space?
> The most glaring omission is that it doesn't stop to acknowledge at all the impressive growth that WeWork saw.
WeWork would rent the office space, and then rent it out for less money than they were renting it. It's not hard to grow when you can raise billions to sell dollars for pennies.
I'm pretty sure I could sell millions of phones a year, just give me billions to buy those phones and then I'll sell them at a 90% discount and I'll dominate the phone market!
Assuming that they actually were routinely renting out office space at a loss, then you’re certainly correct. VCs could also use their money to throw big extravagant parties with free food and entertainment, and they’d also get lots of people to show up!
If they were truly selling their median office lease for pennies on the dollar, for a 90% discount, that would have made for a fascinating story as well. I haven't seen anything to indicate that was the case, by all accounts they did seem to generally be near break-even on at least a large number of their leases. But then they spent a ton of money on faster growth via setting up new space ahead of demand, marketing and acquisition spending, and bigger discounts/perks for big flagship deals.
But at the end of the day they still had many thousands of happy small businesses paying them basically market rate prices for office space. I worked out of a wework space for 6 months in 2015, it was actually not the cheapest option we found but the convenience/amenities were worth it for us and we were happy customers.
I haven't seen anything to indicate that was the case, by all accounts they did seem to generally be near break-even on at least a large number of their leases.
Looks like an interesting read but I'm not able to read it at the moment as I'm out of articles for the month.
But another way to say my criticism here, is that just pointing out that "____ fast-growing company was burning money and not profitable", is not necessarily the big scandalous indictment of the company that people like to pretend it is whenever some major flop like this happens.
You can find many headlines from 8-10 years ago about how Facebook, Tesla, Airbnb, Amazon, etc. (take your pick) are terrible businesses because they don't turn a profit, which obviously turned out to be very wrong.
>Neuner began hearing similar stories from other co-working entrepreneurs: WeWork came to town, opened near an existing co-working office, and undercut the competitor on price. Sometimes WeWork promised tenants a moving bonus if they terminated an existing lease; in other instances, the company obtained client directories from competitors’ Web sites and offered everyone on the lists three months of free rent. Jerome Chang, the owner of Blankspaces, in Los Angeles, told me, “My average rate was five hundred and fifty dollars per desk per month, and I was just scraping by. Then WeWork arrived, and I had to drop it to four hundred and fifty, and then three hundred and fifty. It eviscerated my business.” Rebecca Brian Pan, who founded a co-working company named Covo, said, “No one could make money at these prices. But they kept lowering them so that they were cheaper than everyone else. It was like they had a bottomless bank account that made it impossible for anyone else to survive.”
>Neuner began slashing NextSpace’s prices and adding amenities—free beer; lunchtime classes on accounting, coding, and chakra cleansing—but none of it mattered. WeWork’s prices were too low. By the end of 2014, WeWork had raised more than half a billion dollars from venture capitalists. Although it was now losing six million dollars a month, it was growing faster than ever before, with plans for sixty locations in more than a dozen cities.
>Meanwhile, one of Silicon Valley’s most prominent investors, Bruce Dunlevie, of the venture-capital firm Benchmark, had joined WeWork’s board of directors. Benchmark, founded in 1995 in Menlo Park, had funded such Silicon Valley startups as eBay, Twitter, and Instagram. Dunlevie admitted to a partner that he wasn’t certain how WeWork would ever become profitable, but he was taken with Neumann. Dunlevie said to the partner, “Let’s give him some money, and he’ll figure it out.” Around this time, Benchmark made its first investment in WeWork—seventeen million dollars.
> Dunlevie admitted to a partner that he wasn’t certain how WeWork would ever become profitable, but he was taken with Neumann. Dunlevie said to the partner, “Let’s give him some money, and he’ll figure it out.”
I am always amazed at how far you can go by just putting all your skill points into Charisma and nothing else. These are supposedly smart investors and all it takes is a smooth talker and boom! $17M just like that. More money than I’ll ever see in my entire life. This guy has generational wealth now, and normal working schmucks like me will need to work till we are 80.
Not sure why you're shilling for WeWork, but you're comparing mostly scalable software/ad companies to a real estate subletting company - that doesn't make any sense.
Also note that We's lessors could easily demand higher rent upon each renewal.
It wasnt a good product. It was constantly losing money. Maybe you mean communal workplaces were popular and people liked them, but the way adam implemented it drove them into the ground
I had someone tell me in the early 2010's that they expected Amazon to declare bankruptcy "any day now" since they supposedly hadn't had a single profitable quarter in their history.
I worked in this industry briefly - I'm pretty sure a wework successor or several will come out of it very successful, without the baggage that Adam Neumann brought, because the model is smart.
The basic model is to take distressed real estate, chop it up, sublease it and use some of the money to set up a mid high end space with plug and play offices, community events and a doorman. It works, but it is not easy to execute properly.
I'm not an expert but I think the 'higher than market rate' part is tough because you're offering services.
In non-commercial terms, it's a nicely appointed doorman building with utilities included and an indoor gym vs a no frills apartment.
So you can expect to pay more - the question is how much more.
For the wework tenant, the cost/benefit should include the price of outfitting an office as well as internet and the benefits the perks provide for employee satisfaction, recruitment and retention. So if you can put a value on that and push it over the time period of the lease, you can do the math on how much more you'd be willing to pay.
For the company running the offices, a lot depends on what deals you can cut with building ownership - for example, a lot of buildings will give you 6-12 months or more free while you remodel, so if you get that done quickly you end up with 3-6 months free; you can use that over the life of the lease to increase margins or have space where you can offer rebates to your customers as well; though that depends on how quickly you can fill the offices.
This was one of the things that I think is killing wework - they started signing deals with buildings without negotiating hard and they gave too much stuff away in contracts with their own customers.
It's a good point, but I think they touch on it a bit with the thread about user churn (which prompted WeWork to kick-out the company that published that analysis based upon some "happiness" clause violation...)
Is it "product-market fit" if the company is literally buying that growth? Or does it become true "fit" once you can monetize those users reliably?
Ex: I buy a butt-ton of Airpods, put them in glass cases, and give them out on a nice table outside my house - for free. If I go out of stock on my first day outside, does that indicate "product-market fit" for my glass cases? (Answer: not really)
I mean, if someone gives you a few hundred million dollars and you completely ignore costs and sustainability of the business, and I’m sure you could make it seem like you knew what you were doing for a few years too.
> Yes, there were [..] some major challenges with the basic fundamentals of their model . But there were many (hundreds of thousands?) of real users in many cities paying them money for office space.
Sorry to be somewhat off-message for HN, if there are "major challenges with the basic fundamentals" who actually cares how many users they have, and how happy they were with the product?
When startups are exploring new spaces, there are always challenged with basic fundamentals. There's just too many uncertainties and unknown unknowns to nail down even remotely concrete projections. So VCs resort to other metrics (partnerships, engagement, team makeup, and most importantly growth) as heuristics for future value.
If you look at Tesla, Facebook, Google, etc. none of them had great fundamentals at startup. Facebook and Tesla didn't even have great fundamentals when they went public.
With all due respect, marketing does matter. Do you personally know a single person under 35 years who leased a Regus office? Lawyers excluded. It's like Buick.
WeWork is fundamentally real-estate, shouldn't trade at the multiples of a tech company.
But it's interesting what they did with their real-estate by repackaging it as the "Cloud Computing" of office space. Fundamentally, they solved the issue of selling office space to folks who either needed to add capacity in a short time or who just had to go month to month because no landlord would talk to them (a startup with N months of runway might not be the best tenants. Prime real-estate is rented out with leases that are in the 5+ years durations).
Their network was also an interesting feature: For folks traveling for business it might be an interesting value proposition to be able to just go to any of their locations worldwide. That's a real differentiator from most coworking spaces around (I'm thinking Hanahaus and the likes) that only have in the single digits locations.
I dont understand all the fuzz about WeWork. I was renting Regus spaces here in Mexico when our startup started growing about 8 years ago. Here in my city there are at least 3 companies that offer ready-made spaces (Regus, iOS and a local one called Nevermind) that have been active for quite a while.
The film makes brings up Regus and seems to point to the difference largely being marketing, especially to a younger crowd. Regus was portrayed as your fathers stodgy old sublet and WeWork s was where you’d want to rent to be around fun, beautiful people
> It's weird to write all that off as just shallow millenials being too vain to work out of a Regus (which is a company I had never even heard of before the documentary, despite having been in this position of needing a small short-term office space for my startup in the past).
Regus is huge (wikipedia says over 3000 spaces as of 2019), but it is no surprise that most people - outside of traditional, multinationals corporations- have heard of it. Regus started as a serviced-office, which serves a very different market than coworking spaces - though now the two have blurred.
If you're a small business or start-up, Regus isn't the place. It's incredibly expensive and very conservative looking. My company's Regus space (for 4 people, as it was a new country office) in Malaysia costed us as much our eventual +20 person office space.
I've worked from numerous Regus spaces via multinational consultancy I used to work with. They were always in prime, high-end locations and incredibly stuffy. Regus offices (felt like, pre-WeWork) a place to impress bankers and and Fortune500 clients. Regus has remade themselves because of WeWork, which is an improvement.
If the financials worked out nobody would care about how delusional the story of "We" was. I'd wager that the vast majority of people using WeWork Spaces didn't care about the fluff or the community or social events.
They had a desirable product for a reasonable price, and I enjoyed working out of WeWork spaces.
It seems like the only truly delusional party was well-capitalized investors throwing money at an (poorly executed) old-school business model with a thin veneer of innovation.
Yeah, their valuation is down a lot from what they were going for with the initial IPO, but it is still providing a very valuable service. This isn’t like Enron or Theranos where the company is fraudulent, it’s a real, valuable business that was overvalued for a while.
Overall, WeWork is a success, not a failure. If it were in Europe, it would be one of the most successful European startups in years.
But it was OPM. That's the bargain of venture capital, they take a giant portion of your company, but it's their money on the line, not yours. Just getting meetings, and then funding in the billions, is a massive win. And really it was only at the end that valuation did not exceed funding... And yet, even when that was clear and obvious, the investors STILL wrote a $500 million check (or was it a $billion, I forget the details) to make him step aside. If that isn't success, what is?
Hilarious! Neumann turns $21 billion into $8 billion and gets paid $500 million to do it.
Definitely a success for him. Not so much his investors. But it was obviously money they could afford to lose, so I guess I don't feel too bad for them.
Definitely a success for him. Not so much his investors. But it was obviously money they could afford to lose, so I guess I don't feel too bad for them.
One of those investors was Prince Muhammed bin Sultan of Saudi Arabia, also known as “bonesaw”. What price a peaceful nights sleep?
They turned 20+ billion into < 8 billion. That's a success similar to the joke about how the easiest way to make a small fortune is to start with a a large one.
You're skipping a key detail. Neumann turned $20 billion of other people's money into a billion of his own. Don't tell me you actually believe all the garbage about Silicon Valley trying to make the world better ... it's all about lining your own pocket.
> This isn’t like Enron or Theranos where the company is fraudulent, it’s a real, valuable business that was overvalued for a while.
SPACs have a long and well-earned reputation of being associated with fraud so perhaps it's too soon to conclude that WeWork is unlike Enron and Theranos.
WeWork's "delusion", in my view, was the amount of value they perceived themselves to add to the equation. On the consumer facing side, they were billing their space as some mass facilitator, incubator, and inspiration for startups, freelancers, and what-not. On the business side, it was that WeWork would be beneficial to landlords, as they'd snatch up large swaths of space, drive businesses desire to "colocate", and offer flexibility to tenants that didn't have things in place to deal with the expanding real estate needs of their business.
Fundamentally though, WeWork was a middle man, and one that shifted as much liability towards the landlords as possible. While you can debate how much value they added, I don't think it's a stretch to say that their valuation far exceeded the actual value they brought to the table. Fundamentally though, space is far more of a commodity than WeWork would have you believe, and in an economy situation where people aren't co-working or that there's a lot of unleased space on the market, WeWork's proposition is certainly depleted.
Combine the inflated view of their value with feel-good marketing about changing the world, unrealistic valuations and shadiness from the founders and ownership, and you get a company that went far beyond where they should have and duped a number of investors along the way.
WeWork branded itself as a "tech company" but it doesn't mean if you have a website or a mobile app that you are tech company.
I think naive investors propelled the failure of WeWork in a way that throwing cash at the company made them think they are going to succeed. It is akin to a teacher telling a bad student "don't worry you are not that bad" or "don't worry you are good" just to make him or her feel better or to incentivize them to work harder.
Isn't 80% of startup world delusional, Empirically speaking ?
WeWork, Nikola, Theranos, Blue Apron, Grubhub (walking dead),Uber Autonomous, could go on and on. We have been told these companies have the best and brightest board members.
Actually, I think Blue Apron has been posting promising revenue numbers since covid hit. The post-IPO year-on-year revenue charts looked like a water slide, but they've been maintaining a consistent client base for the last year. That one, at least, isn't built on a lie.
What I saw in the documentary were a lot of hard-working, non-technical people that were offered the chance to work in a "tech" startup. Without knowing it explicitly, they were betting on WeWork having a moat like Facebook, Google, etc... Real estate has no such moat.
If you are a young founder or startup employee,I recommend learning every type of business moat there is and using that as a key criteria for evaluating opportunities. It won't guarantee success but it will filter out so much garbage.
Not to mention all the "founders" who got to spend their days in a cool exciting office, and feel like they themselves were working at the next Facebook or Google.
I don't know much about the WeWork demographics. I wonder how many of these companies were venture-funded, self-funded... and how many were just elaborate schemes for burning through trust funds.
I'm sure many of them were hardworking people with legit businesses, and just saw this as a convenient and cool way to solve the problem of where to get their work done.
Totally tangental, but I recalled while reading this a documentary I saw on some African tribe. It was years ago so this is a pretty loose description. The tribe was a late discovered tribe that until shortly before the documentaries filming had been hunting and gathering in some remote jungle. Recently some industry expansion into their territory had forced modern life onto them and the government had moved them to a new location. This new environment lacked pretty much everything they needed to maintain their old life, so they had become completely destitute and reliant on the government.
Their chief was a rain maker shaman kind of character. His job was to do a literal rain dance, which in their old lives would have been to water crops. This dance would involve the entire tribe when times were tough. When the chief was interviewed he was sober about their situation. The new life they were forced into lead to depression for many of the young men in the tribe. He felt that his responsibility was to keep the young men dancing. This was better than them sitting around taking handouts from the government. They interspersed snippets of the young men talking about their chief and they all were positive, giving him much praise. The chief never missed a day of dancing, always had a positive attitude and this seemed to give them some hope.
The chief mentioned that his father had been the rain man before him, and his grandfather before that. He said that the secret of the rain dance was that no matter how long it takes, it will rain again. And what can you do until it rains? You might as well dance.
I often think of some forms of entrepreneurs/founders in this context. They are just like tribal rain men. If they dance long enough, it rains. They aren't really responsible for the rain but they keep everyone hopeful and around long enough that when it finally does rain everyone is ready.
When Theranos was still a popular golden child company, I went to a party in SF thrown by a partner at a prominent local law firm. At the party a husband of one of the lawyers happened to be a lab worker at a biotech startup. He and I ended up chatting in a small group of spouses while the firm lawyers were clustered in another part of the house gossipping about work.
Over the next 30 minutes or so this guy explained to us non-scientists why he thought Theranos might very likely be a fraud. People nodded their heads and said "interesting" but I don't think anyone really took the guy very seriously. It's easy to dismiss such concerns from people in parallel startups as jealousy or misguided.
But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better?
It seems to me the more interesting story in regards to WeWork and Theranos is why are the incentives in these investment funds not aligned with the purpose of rooting out such fraudulent or overblown claims.
I honestly could care less about the flamboyant personalities involved. The system failures are more interesting to me.
> But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better?
Theranos didn't really have any major Silicon Valley investors backing it. The usual VC firms stayed a mile away from day 1. It raised money instead from The Walton Family, Rupert Murdoch, Betsy DeVos, Walgreens, the Cox family, Carlos Slim and other random well-connected and influential personalities.
Few people will say this, but Theranos was actually a massive success for the Silicon Valley venture ecosystem. It proved that outsiders can't simply throw money at new startups and replicate their results. There is institutional knowledge, in-house teams (including top engineers) doing due diligence, mountains of data, trade secrets, IP, network effects and a lot more needed to be able to compete in that world. There's a reason why a16z, Sequoia, Khosla, Accel, KP, Greylock, Google all passed on it, despite the fact that Theranos and Holmes checked all the boxes for a no-brainer investment (Stanford-educated female founder, bio/health tech space, "changing the world" ambition, immense preexisting buzz).
I wasn't aware of these facts. It seems VCs do have value-add.
I also found out today that Theranos' law firm was not a Silicon Valley law firm. They used a firm called Boies Schiller, which apparently is a firm famous for political connections and high stakes commercial litigation. They weren't really familiar with venture capital and startups it seems, and they facilitated a massive fraud ... either wittingly or unwittingly.
Yep. WeWork was always a non-tech real estate play with some very bad finance built into it; it was NEVER a tech company in any way shape or form simply because it had a web site!
But that was the lie told - "We will have double-digit tech growth rates and market domination!"
One thing I haven't seen mentioned in this thread that definitely played a part in WeWork's explosive growth is the cult-like religious aspect of it. Adam wasn't just selling office space. He was selling a philosophy of working together as inexperienced entrepreneurs to perhaps create better companies. Whether you believe in this model or not (I don't), it is appealing to young professionals without much traditional business experience. The summer camp, "let's help everyone and have fun" environment was more valuable (and played a bigger role in the strategy and market fit) than the office space itself.
Regus, as pointed out, sold co-working space before WeWork and still does. They don't, however, sell religion and it's likely that any future co-working brand will forego that aspect, too. Of course, cult-like attraction does work for some companies... if you can get enough believers.
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[ 1.8 ms ] story [ 233 ms ] threadI think the use of past tense here is unwarranted. I'm sure there are many WeWorks and Theranoses still out there right now.
If we don't have examples of WeWorks, it's not built into the process to sus them out.
Something built on sand will ultimately collapse - and smart money shouldn't build on that particular patch of sand again (it'll find other ones).
Many of whom are SaaS companies and who receive hundreds of millions of dollars of investment on what merit? Good story? Sexy products? Expensive growth? Look at us we are next Oracle or Salesforce.
A quiet working space in a fancy office building in the most upscale commercial area of the city with tech company amenities included is going to realistically cost a lot more than $200/month. There is a reason WeWork set billions of dollars on fire.
One company tried to open a space like that for individual office rentals out in suburbia where I am.
Monthly price was more than half my monthly mortgage payment, I'm not going to do that for a tiny bit of office space.
I suspect that unless employers are happy pay for it the price I'm willing to pay wouldn't float these companies...
However, once this all settles down and I know what the conditions are it will probably be reinvested in a dedicated office space, either in a larger home or possibly a garden room.
Systemic racism is an existing system in place that acts on racial data. Simple population density is you noticing that the majority of people around you are one color.
Assuming race is random, there are only a few thousand founders so it’s quite possible to have lots of variation in samples that small.
Imagine rolling a thousand dice thousands of time and then finding a random lot of a thousand that had lots of odd numbers and claiming the dice weren’t fair.
So it is a “lifetime” of rolling dice.
Given distribution of race in the US it’s like 1-4 is white, 5 is black, 6 is hispanic. And so there will be quite a few samples of a thousand that are higher than 66% 1-4.
The problem is assuming that founders would have the same distribution of the population.
Yes, roughly half of them. But that's not the point. The point is that the vast majority of those will be only slightly more than 66%. You won't see huge discrepancies.
Taking your example, you would expect out of 1,000 samples for about 333 to be 5 or 6. Suppose you actually got 33 (or fewer). What would be the probability? It is 7 * 10^-125. That's 0.0000000[...]000007 with 124 zeroes before the seven. 330k samples is nothing compared to that improbability. You would expect to roll dice for longer than the lifetime of the universe to see such an unlikely event. Or you might conclude that the dice aren't fair.
https://www.logicallyfallacious.com/logicalfallacies/Proving...
Racism is prejudging someone.
Don't prejudge.
Don’t ever forget: for as much as they will try to make it seem like Silicon Valley is a true meritocracy, the #1 most common thing that successful entrepreneurs have is that they grew up rich.
It's funny how people never bring up how this effect is shockingly disproportionately mediated by Jews and not, like, Appalachian or midwestern whites.
The wealth thing is unavoidable; what? people with no money and no connections are just magically going to start an enterprise?
> These founders—mostly white men and women—wanted a place to work, but they also wanted membership in a club. Or was it a fraternity?
edit - You can write in "Jewish" but there's no "Jewish" box. This is why I turned against affirmative action (or taking account of ethnicity in any way). Jews are disproportionately rich and successful but they are "white" for the purposes of admissions. Meanwhile Asians, also disproportionately rich and successful, are "Asian". Why? Who makes these rules? Should anyone be making rules like that?
You could improve the situation by only providing ethnicity options that help the application (i.e. remove "Asian" and "white" and just stick to "black," "latino," "pacific islander," etc). This is definitely better but it's still bad in my opinion.
My point was that it would be an improvement to only include ethnicity options that help the application, so Hispanic/Latino would be included.
There's no consensus over whether Jewishness is an ethnicity or a religion either.
These are all reasons to stop asking these kinds of questions of people.
There's no real consensus about it, though in the US it's fair to say that most Jews can be included under the "white" category.
I think it's evident that there is a genetic makeup that can be considered "Jewish", in that it ties back to the genetic make up of residents of Judea and Israel in 500bc, but 2500 years of exodus brings about a strong difference between the genetically Jewish, and the culturally/religiously Jewish. While we Jews were relatively good at keeping it in-the-tribe for those millenniums, a significant portion (maybe most) are mixed in with the genetics of their host nations. Even if they were always religiously and/or culturally Jewish, they might still appropriately identify as racially white, black, or other depending on their exodential* heritage.
*If there's already a word for this, please share with me.
This language is also on-brand for The New Yorker, which is known for opinionated authors writing opinionated language.
There are more important things to worry about, to be honest.
https://news.ycombinator.com/newsguidelines.html
Edit: it looks like your account has been using HN primarily for ideological battle. That's one line at which we ban accounts, because it destroys what this site is supposed to be for.
https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
If you'd please review the guidelines and stick to them, we'd appreciate it.
Rather than doing the fundamental analysis, investing without emotions, etc. - the market will keep rewarding "charismatic" and well-connected individuals with shitty-ideas and/or no business sense.
It's easy to scapegoat Adam Neumann or Elizabeth Holmes, and say they were sociopathic liars or the like - but these cases read like a market inefficiency in venture capital, rather than one-offs.
Walgreens straight up fired the investigator who was telling them it was hot air.
The VC and to some extent the Private Equity industry can subsidize money hemmoraging business models and fuel massive growth of bad unit economics until they dump them on the public. Uber and WeWork are just two high profile examples.
In fact, then openly admit they stay away from sustainable and profitable businesses in favor of massive subsidized “traction”.
That’s the loophole - same as colleges can jack up prices on liberal arts degrees and then student loans get bought by Freddie and Fannie.
Uber does not have bad unit economics in its core rides business. It makes profit on rides, and it loses it on trying to expand into food delivery. You can easily see it if you just look at their financial reports.
Certainly some segment of their core business is profitable. But at the end of the day, if all they have is a glorified cab company that is profitable in a few big cities and loses money everywhere else, that's not a story that sounds good to investors.
You misunderstood the business model here. The plan was to dump it on retail investors, cashing out and leaving them holding the bag. It was just a longer “pump” phase than usual. The sociopaths here are SoftBank.
https://news.crunchbase.com/news/report-adam-neumann-benchma...
Having said that, the idea that the solution is fundamental analysis, investing without emotions, or what have you -- that all strikes me as a bit naive and without much evidence. The market is a Keynesian beauty contest first which serves the needs of humans, hence the existence of Veblen goods et al. It also strikes me as a bit naive that there's anything wrong with "charismatic" and "well-connected individuals" being in positions of leadership. Recruiting is the most highly leveraged thing early stage company leaders can do and is the flip side of fundraising -- so it only makes sense to have firm's leader excel at that.
I think we can critique Neumann and Holmes for being unethical fraudsters who deliberately misled their stakeholders without making a categorical error about corporate executives. I won't say that they're the exception and not the rule, but I will say they're not really the goal to aspire to.
Considering that venture returns have historically out-performed public markets[1], they're probably just that: one-offs. I think there's an argument to be made that Fed QE policies and junk bond bailouts have perhaps over-incentivized risky investments, but in aggregate venture capital has been "efficient" in the economical sense. Consider that the total investment into Theranos and WeWork are a rounding error as far as the total pie is concerned.
[1] https://cdn2.hubspot.net/hubfs/3925488/_Source%20of%20Truth%...
VCs need to make money first and foremost. I doubt they care about one Theranos out of every 1000 or even 100 companies they invest in (I refuse to compare Theranos and WeWork).
The idea that you invest in the team appears to be a winning strategy considering historical returns. So the question is, why would they change this?
Winning strategies can be an illusion, the smart money knows when to recognize luck.
The most glaring omission is that it doesn't stop to acknowledge at all the impressive growth that WeWork saw. Yes, there were all kinds of problems with the way they managed their growth, and some major challenges with the basic fundamentals of their model. But there were many (hundreds of thousands?) of real users in many cities paying them money for office space. To just write that off as "lol, you re-invented the office" is a little ridiculous. They made a product people loved, and that IMO genuinely was an order of magnitude better in user experience than most other short-term office space that existed at the time. It saved time on all kinds of things, from basic cleaning, coffee and tea, flexible meeting rooms and private phone booths, and a generally comfortable space to work in. Those are things that have real value to anyone who is busy working on their company and just wants a productive turnkey place to work. It's weird to write all that off as just shallow millenials being too vain to work out of a Regus (which is a company I had never even heard of before the documentary, despite having been in this position of needing a small short-term office space for my startup in the past).
Maybe I'm just a crazy, biased shill and a sucker for any startup story, but IMO it would have been a much better documentary if they delved into this side of the narrative - how did such an out of touch, seemingly crazy person manage to build an actually good product that found quick product market fit in the crowded real estate space?
WeWork would rent the office space, and then rent it out for less money than they were renting it. It's not hard to grow when you can raise billions to sell dollars for pennies.
I'm pretty sure I could sell millions of phones a year, just give me billions to buy those phones and then I'll sell them at a 90% discount and I'll dominate the phone market!
Their cost renting a space was fixed. Their revenue renting it out was variable.
If they simply couldn't rent out enough of the space to be profitable, that's not scandalous. That's just the risk you take in any business.
But if they were renting out the space at rates that could never become profitable, then it is scandalous, because they're burning money by design.
But at the end of the day they still had many thousands of happy small businesses paying them basically market rate prices for office space. I worked out of a wework space for 6 months in 2015, it was actually not the cheapest option we found but the convenience/amenities were worth it for us and we were happy customers.
That story was also in the New Yorker.
https://www.newyorker.com/magazine/2020/11/30/how-venture-ca...
But another way to say my criticism here, is that just pointing out that "____ fast-growing company was burning money and not profitable", is not necessarily the big scandalous indictment of the company that people like to pretend it is whenever some major flop like this happens.
You can find many headlines from 8-10 years ago about how Facebook, Tesla, Airbnb, Amazon, etc. (take your pick) are terrible businesses because they don't turn a profit, which obviously turned out to be very wrong.
>Neuner began hearing similar stories from other co-working entrepreneurs: WeWork came to town, opened near an existing co-working office, and undercut the competitor on price. Sometimes WeWork promised tenants a moving bonus if they terminated an existing lease; in other instances, the company obtained client directories from competitors’ Web sites and offered everyone on the lists three months of free rent. Jerome Chang, the owner of Blankspaces, in Los Angeles, told me, “My average rate was five hundred and fifty dollars per desk per month, and I was just scraping by. Then WeWork arrived, and I had to drop it to four hundred and fifty, and then three hundred and fifty. It eviscerated my business.” Rebecca Brian Pan, who founded a co-working company named Covo, said, “No one could make money at these prices. But they kept lowering them so that they were cheaper than everyone else. It was like they had a bottomless bank account that made it impossible for anyone else to survive.”
>Neuner began slashing NextSpace’s prices and adding amenities—free beer; lunchtime classes on accounting, coding, and chakra cleansing—but none of it mattered. WeWork’s prices were too low. By the end of 2014, WeWork had raised more than half a billion dollars from venture capitalists. Although it was now losing six million dollars a month, it was growing faster than ever before, with plans for sixty locations in more than a dozen cities.
>Meanwhile, one of Silicon Valley’s most prominent investors, Bruce Dunlevie, of the venture-capital firm Benchmark, had joined WeWork’s board of directors. Benchmark, founded in 1995 in Menlo Park, had funded such Silicon Valley startups as eBay, Twitter, and Instagram. Dunlevie admitted to a partner that he wasn’t certain how WeWork would ever become profitable, but he was taken with Neumann. Dunlevie said to the partner, “Let’s give him some money, and he’ll figure it out.” Around this time, Benchmark made its first investment in WeWork—seventeen million dollars.
I am always amazed at how far you can go by just putting all your skill points into Charisma and nothing else. These are supposedly smart investors and all it takes is a smooth talker and boom! $17M just like that. More money than I’ll ever see in my entire life. This guy has generational wealth now, and normal working schmucks like me will need to work till we are 80.
Also note that We's lessors could easily demand higher rent upon each renewal.
The basic model is to take distressed real estate, chop it up, sublease it and use some of the money to set up a mid high end space with plug and play offices, community events and a doorman. It works, but it is not easy to execute properly.
In non-commercial terms, it's a nicely appointed doorman building with utilities included and an indoor gym vs a no frills apartment.
So you can expect to pay more - the question is how much more.
For the wework tenant, the cost/benefit should include the price of outfitting an office as well as internet and the benefits the perks provide for employee satisfaction, recruitment and retention. So if you can put a value on that and push it over the time period of the lease, you can do the math on how much more you'd be willing to pay.
For the company running the offices, a lot depends on what deals you can cut with building ownership - for example, a lot of buildings will give you 6-12 months or more free while you remodel, so if you get that done quickly you end up with 3-6 months free; you can use that over the life of the lease to increase margins or have space where you can offer rebates to your customers as well; though that depends on how quickly you can fill the offices.
This was one of the things that I think is killing wework - they started signing deals with buildings without negotiating hard and they gave too much stuff away in contracts with their own customers.
Is it "product-market fit" if the company is literally buying that growth? Or does it become true "fit" once you can monetize those users reliably?
Ex: I buy a butt-ton of Airpods, put them in glass cases, and give them out on a nice table outside my house - for free. If I go out of stock on my first day outside, does that indicate "product-market fit" for my glass cases? (Answer: not really)
Sorry to be somewhat off-message for HN, if there are "major challenges with the basic fundamentals" who actually cares how many users they have, and how happy they were with the product?
If you look at Tesla, Facebook, Google, etc. none of them had great fundamentals at startup. Facebook and Tesla didn't even have great fundamentals when they went public.
Sorry, but who (with a straight face) can claim WeWork was genuinely "exploring a new space"?
Regus has been offering temporary office space since 1989 (when Adam Neumann was aged 10?).
Oh, there was never a DJ nor free beer at Regus. I'm sure that makes all the difference, though.
But it's interesting what they did with their real-estate by repackaging it as the "Cloud Computing" of office space. Fundamentally, they solved the issue of selling office space to folks who either needed to add capacity in a short time or who just had to go month to month because no landlord would talk to them (a startup with N months of runway might not be the best tenants. Prime real-estate is rented out with leases that are in the 5+ years durations).
Their network was also an interesting feature: For folks traveling for business it might be an interesting value proposition to be able to just go to any of their locations worldwide. That's a real differentiator from most coworking spaces around (I'm thinking Hanahaus and the likes) that only have in the single digits locations.
WeWork managed to get itself in the media. That's the only difference I can see.
As an aside, iOS and Nevermind are both horrible for getting any visibility on a search engine...
Regus is huge (wikipedia says over 3000 spaces as of 2019), but it is no surprise that most people - outside of traditional, multinationals corporations- have heard of it. Regus started as a serviced-office, which serves a very different market than coworking spaces - though now the two have blurred.
If you're a small business or start-up, Regus isn't the place. It's incredibly expensive and very conservative looking. My company's Regus space (for 4 people, as it was a new country office) in Malaysia costed us as much our eventual +20 person office space.
I've worked from numerous Regus spaces via multinational consultancy I used to work with. They were always in prime, high-end locations and incredibly stuffy. Regus offices (felt like, pre-WeWork) a place to impress bankers and and Fortune500 clients. Regus has remade themselves because of WeWork, which is an improvement.
Its impressive if you can do that in a way that creates long term value but just spending it isn't hard.
They had a desirable product for a reasonable price, and I enjoyed working out of WeWork spaces.
It seems like the only truly delusional party was well-capitalized investors throwing money at an (poorly executed) old-school business model with a thin veneer of innovation.
https://www.nytimes.com/2021/03/26/business/WeWork-Spac-ipo....
Yeah, their valuation is down a lot from what they were going for with the initial IPO, but it is still providing a very valuable service. This isn’t like Enron or Theranos where the company is fraudulent, it’s a real, valuable business that was overvalued for a while.
Overall, WeWork is a success, not a failure. If it were in Europe, it would be one of the most successful European startups in years.
[1] https://www.crunchbase.com/organization/wework
Source: https://www.crunchbase.com/organization/wework/investor_fina...
Definitely a success for him. Not so much his investors. But it was obviously money they could afford to lose, so I guess I don't feel too bad for them.
One of those investors was Prince Muhammed bin Sultan of Saudi Arabia, also known as “bonesaw”. What price a peaceful nights sleep?
They turned 20+ billion into < 8 billion. That's a success similar to the joke about how the easiest way to make a small fortune is to start with a a large one.
SPACs have a long and well-earned reputation of being associated with fraud so perhaps it's too soon to conclude that WeWork is unlike Enron and Theranos.
Fundamentally though, WeWork was a middle man, and one that shifted as much liability towards the landlords as possible. While you can debate how much value they added, I don't think it's a stretch to say that their valuation far exceeded the actual value they brought to the table. Fundamentally though, space is far more of a commodity than WeWork would have you believe, and in an economy situation where people aren't co-working or that there's a lot of unleased space on the market, WeWork's proposition is certainly depleted.
Combine the inflated view of their value with feel-good marketing about changing the world, unrealistic valuations and shadiness from the founders and ownership, and you get a company that went far beyond where they should have and duped a number of investors along the way.
I think naive investors propelled the failure of WeWork in a way that throwing cash at the company made them think they are going to succeed. It is akin to a teacher telling a bad student "don't worry you are not that bad" or "don't worry you are good" just to make him or her feel better or to incentivize them to work harder.
If you are a young founder or startup employee,I recommend learning every type of business moat there is and using that as a key criteria for evaluating opportunities. It won't guarantee success but it will filter out so much garbage.
I don't know much about the WeWork demographics. I wonder how many of these companies were venture-funded, self-funded... and how many were just elaborate schemes for burning through trust funds.
I'm sure many of them were hardworking people with legit businesses, and just saw this as a convenient and cool way to solve the problem of where to get their work done.
Their chief was a rain maker shaman kind of character. His job was to do a literal rain dance, which in their old lives would have been to water crops. This dance would involve the entire tribe when times were tough. When the chief was interviewed he was sober about their situation. The new life they were forced into lead to depression for many of the young men in the tribe. He felt that his responsibility was to keep the young men dancing. This was better than them sitting around taking handouts from the government. They interspersed snippets of the young men talking about their chief and they all were positive, giving him much praise. The chief never missed a day of dancing, always had a positive attitude and this seemed to give them some hope.
The chief mentioned that his father had been the rain man before him, and his grandfather before that. He said that the secret of the rain dance was that no matter how long it takes, it will rain again. And what can you do until it rains? You might as well dance.
I often think of some forms of entrepreneurs/founders in this context. They are just like tribal rain men. If they dance long enough, it rains. They aren't really responsible for the rain but they keep everyone hopeful and around long enough that when it finally does rain everyone is ready.
Over the next 30 minutes or so this guy explained to us non-scientists why he thought Theranos might very likely be a fraud. People nodded their heads and said "interesting" but I don't think anyone really took the guy very seriously. It's easy to dismiss such concerns from people in parallel startups as jealousy or misguided.
But the thing that has stuck with me since is that if a relatively junior guy working as in a startup lab had this insight about Theranos, why didn't all these major investors with world class experts know any better?
It seems to me the more interesting story in regards to WeWork and Theranos is why are the incentives in these investment funds not aligned with the purpose of rooting out such fraudulent or overblown claims.
I honestly could care less about the flamboyant personalities involved. The system failures are more interesting to me.
Theranos didn't really have any major Silicon Valley investors backing it. The usual VC firms stayed a mile away from day 1. It raised money instead from The Walton Family, Rupert Murdoch, Betsy DeVos, Walgreens, the Cox family, Carlos Slim and other random well-connected and influential personalities.
Few people will say this, but Theranos was actually a massive success for the Silicon Valley venture ecosystem. It proved that outsiders can't simply throw money at new startups and replicate their results. There is institutional knowledge, in-house teams (including top engineers) doing due diligence, mountains of data, trade secrets, IP, network effects and a lot more needed to be able to compete in that world. There's a reason why a16z, Sequoia, Khosla, Accel, KP, Greylock, Google all passed on it, despite the fact that Theranos and Holmes checked all the boxes for a no-brainer investment (Stanford-educated female founder, bio/health tech space, "changing the world" ambition, immense preexisting buzz).
I also found out today that Theranos' law firm was not a Silicon Valley law firm. They used a firm called Boies Schiller, which apparently is a firm famous for political connections and high stakes commercial litigation. They weren't really familiar with venture capital and startups it seems, and they facilitated a massive fraud ... either wittingly or unwittingly.
Meetup
Flatiron School
Wavegarden (Surfing Wave Pools)
But that was the lie told - "We will have double-digit tech growth rates and market domination!"
Nope!
Regus, as pointed out, sold co-working space before WeWork and still does. They don't, however, sell religion and it's likely that any future co-working brand will forego that aspect, too. Of course, cult-like attraction does work for some companies... if you can get enough believers.