61–70 of 212 posts
"WeWork’s $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate"
https://www.cbinsights.com/research/report/wework-strategy-t...
Cynical answer: he convinced VCs that his particular brand of shared office space was better than everyone else's, actual revenue be damned, and they believed him . That's it. Straight from the article: "Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"
Their valuation is based on spirituality ? Are they a business, or a church? I mean, they can actually be more valuable than other such companies if they get the ambience right. Maybe that's what he meant. But if they're referring to the ambience as "spirituality", I cannot take them seriously. [Edit: And if by "spirituality" they mean something besides ambience, I still cannot take them seriously.] If I had more fai…
Total tangent, but how much of the stock market do you think is fair? By fair I mean abiding by SEC regulations (and other obvious laws, such as regular fraud), versus unfair where people are using insider trading, trying to influence a short, or even have some ulterior motive perhaps related to politics?
Now I hope someone more knowledgeable than me chimes in with links to articles or papers, because I'd really love to learn more.
Earlier quoted context omitted.
The question is, why would a F500 company rent space from WeWork at a double-digit markup when they can do it themselves? This is not super hard or special stuff, and F500 companies need to do it enough that they can maintain the expertise. If the answer is "wework allows us to be elastic with real estate as our needs shift", then WeWork will be in for a lot of hurt at the next recession. If the answer is "we are usi…
Facilities management as a service?
By taking an old stodgy business (commercial real estate) and bringing it in conformance with modern expectations of design, ease of transactions, lease length, and vibe. The real estate owners couldn’t be bothered to do this because they make too much money by doing nothing to bother with doing something for an extra $47b (a rounding error on the value of global commercial real estate) The huge fundraising rounds ar…
Finally, some clear thinking.
Earlier quoted context omitted.
This gets tricky. Yes, some loss-making businesses never turn profitable. But others do (i.e. Amazon). And when it comes to real-estate companies, the rather goofy U.S. tax rules mean that even quite robust companies will engineer huge depreciation losses when they actually are doing fine. WeWork might still be way overvalued in the private markets. But it could also be a lot healthier than its reported losses.
Amazon reinvested in itself to grow, it was losing money while building into a company worth more.
Earlier quoted context omitted.
The"real business" of WeWork et al seems to be selling an entrepreneurial vibe to big companies. Lots of folks in my distributed company work at WeWorks around the country, and most of their neighbors work for big companies. One of my colleagues is almost fully surrounded by a Dish Network call center. WeWork will even custom build for big customers — in fact, their Enterprise landing page is a good an index to their…
The question is, why would a F500 company rent space from WeWork at a double-digit markup when they can do it themselves? This is not super hard or special stuff, and F500 companies need to do it enough that they can maintain the expertise. If the answer is "wework allows us to be elastic with real estate as our needs shift", then WeWork will be in for a lot of hurt at the next recession. If the answer is "we are usi…
It's very rational -- if you are an "intrapreneur" and wanting to break out your team from the mothership, it's probably easier and faster to get your office space at a WeWork. Plus, you get a recruiting / lifestyle / hipness benefit from getting to be downtown with exposed brick, instead of out at the suburban office park with the sea of landscaped parking lots.
But my sense is that it's a high-beta customer base. When times are good and there's lots of corporate cash for high-urgency, high-concept stuff like innovation teams and new product skunkworks, a $25k/month WeWork bill is peanuts. When times get tight, that's going to dry up fast.
Similarly high beta on VC-backed startups. That cohort is pretty cyclical, though it won't disappear completely. I predict a similar % of Series Seed/A startups would still opt for a WeWork in a venture downturn as do today (but there will be many fewer of them).
Much lower beta on satellite offices and smaller professional services type groups -- they'll still show up to work, as it's a primary office for their primary business.
Wild card on the bootstrap / solo / freelancer stuff.
Also (IMO) sort of a wild card on the larger corporate buyouts of an entire floor or location. In crowded cities it really can be worthwhile to pay for the branded facilities management as the locations WeWork acquires are quite good.
However, and here's the big however. My understanding is that We's leases are LONG term and tend to have escalator clauses (they owe more rent to the landlord in the later years, faster than inflation). Which generally means their supply / cost structure is as good today as it's ever going to get. If the topline gets hit, which in a recession it surely will, the bottom line will take a double whammy as the escalators kick in.
Earlier quoted context omitted.
This suggestion is made every time there's a thread about WeWork and it's just not viable. There are startups in this space already and the reality is always borne out: it's simply not worthwhile to rent out space in your home to an individual. You can get a monthly membership to WeWork for Every one of the startups in this space either disappears, or pivots their focus to larger spaces designed for meetings, events…
To be fair the number of people who are able and willing to pay even $200/mo for co-working space is MUCH smaller than the number of people who are able and willing to pay $10/mo. Plenty of people would prefer to pay $10 to sit in someone's apartment for 7 hours, just like every day millions of people pay $5 to sit in a cafe for a couple hours. This becomes more obvious when you leave the rich tech bubble of SF.
As the existing startups have proven, there’s no market for individuals renting houses to work from, the economics don’t work. A day pass at WeWork is cheaper than every listing on Vrumi.
Valuation inflation / delusion only really matters if you’re the last one left holding the bag. So long as there’s someone else willing to buy the game continues for another round. When the music stops though things get real ugly real quick.
Not if you're positioned as too-big-to-fail [1] and can force a government bailout.
[1] https://www.cbinsights.com/research/report/wework-strategy-t...
Cynical answer: he convinced VCs that his particular brand of shared office space was better than everyone else's, actual revenue be damned, and they believed him . That's it. Straight from the article: "Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"
Their valuation is based on spirituality ? Are they a business, or a church? I mean, they can actually be more valuable than other such companies if they get the ambience right. Maybe that's what he meant. But if they're referring to the ambience as "spirituality", I cannot take them seriously. [Edit: And if by "spirituality" they mean something besides ambience, I still cannot take them seriously.] If I had more fai…