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WeWork chases new financing as cash crunch looms

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Re: WeWork chases new financing as cash crunch looms

#101

Post by jermaustin1 »

codesushi42 wrote: post #73
EpicEng wrote: post #64

Earlier quoted context omitted.

>What did they do? My guess would be 'very little', though I have no facts to back that up. It's just a staggering number given what the company does. I've worked at a place like this. The job was as easy as it was cushy. Two week sprint plans could be completed in literally 3-4 days... but they just kept on hiring. I often heard the word "growth", but I have no idea as to why their interpretation of the word was des…

People like easy money. Anyone with ambition, opportunity, talent and foresight would likely have left We after a month and never looked back.

Or they used their cushy job, high salary, and low expected work output as a nice way to fund and work their side projects. If you leave work energized from not doing much, you have plenty of energy to burn off building something.

I know plenty of ambitious and talented developers who work at menial jobs to cash a paycheck and pay for their side projects.

Re: WeWork chases new financing as cash crunch looms

#102

Post by paulsutter »

unaxk38 wrote: post #99
sieabahlpark wrote: post #93

Earlier quoted context omitted.

When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)

See the axios article. The $400M was a loan to exercise stock options. You can acquire more options after founding a company as part of a bonus or additional comp...

Per the article, “part” of the loan was to exercise stock options, but seriously as founder most of his stock he would already own outright

> Neumann used some of the $400 million in loans to exercise stock options in WeWork, per the source.

Re: WeWork chases new financing as cash crunch looms

#103

Post by ertemplin »

dan_quixote wrote: post #51
vraivroo wrote: post #36

Earlier quoted context omitted.

The comical thing is how often their systems are down. When I was in a WeWork we used to get free coffee all the time because they couldn't accept payments at the moment.

When I was at a WeWork last year, kombucha and cold brew on tap was out of service at least 50% of the time. I took this as mismanagement then, now I wonder if it was simply cost-cutting.

I'm currently at a WeWork. They run out of sparkling water in the morning and fail to replenish it until around 2:00pm. I'm under the impression that they wait until then so people don't drink all the sparkling water when they eat lunch.

Re: WeWork chases new financing as cash crunch looms

#104

Post by repolfx »

thenightcrawler wrote: post #98
fjp wrote: post #71

Earlier quoted context omitted.

Even when I interned it proto-dinosaur Allstate they called themselves "a tech company that happens to sell insurance". It does sound absurd and annoying, but for businesses like that it's good reminder that they'll probably get their market share eaten away if they don't stay on top of things by someone that can move faster or cheaper with their underlying technology stack.

Or they are hoping for a higher stock price by calling themselves tech companies?

Stock markets don't listen to glib slogans like that.

I've been to a lot of conferences over the past few years where CEOs/CTOs stood up and said "we're planning to become a tech company", or words to that effect. It's become a totally standard announcement, no more meaningful than "innovation is in our core values" or "we value diversity".

The motivation is a mix of fear and ambition. Almost all industries are stagnating or declining:

https://www.wsj.com/articles/why-do-the-biggest-companies-ke...

The graph of the gap in productivity growth is the important thing here. The top 5% most productive firms captured nearly all economic growth (that wasn't merely due to population growth). And there's a lot of evidence that the top 5% of firms are essentially tech companies or at least have very high IT spending.

I think there was some other story I read lately that claimed almost all wage growth up until recently came from wage growth at tech firms.

Every industry has seen how tech startups or bigger tech firms can enter an industry and "disrupt" it, rapidly capturing huge control of the market through superior execution. So they all want to be like that. I know of one company where the senior management apparently goes and sits with Facebook employees once a month, to "learn how to be a tech firm"!

My experience has been none of them really understand what tech firms are or why they're different, and wouldn't be willing to do what it takes to be one, even if they did.

Re: WeWork chases new financing as cash crunch looms

#107

Post by the_watcher »

sieabahlpark wrote: post #93
unaxk38 wrote: post #92

Earlier quoted context omitted.

No, that isn't how options work. Everyone needs to pay...it's just usually when you found a company you're buying options for fractions of a penny. See https://www.axios.com/behind-wework-founders-700m-cash-out-3... for more info on the $400M loan - it's not clear if it's to purchase his stock options or to pay for AMT...it's likely additional options he was granted through the years at a higher strike price.

When you found the company you own the shares. You divy out options when you, the founder, hire or make deals. You could alternatively also give actual shares (usually VCs get a share %)

That's not usually how it works (WeWork doesn't follow the usual pattern, so they might not have done this). Generally, companies that plan to raise money incorporate, and founders are given options at the strike price at time of founding (generally so small to be effectively free), which vest over time. You also create an option pool that's already reserved for hiring. Founders don't generally hire someone and give away equity they already control, it's almost always from a pool specifically reserved for this.

There are startup school lectures on how this works in practice at YC if you want to learn more.

Re: WeWork chases new financing as cash crunch looms

#108

Post by mlthoughts2018 »

raiyu wrote: post #97
mlthoughts2018 wrote: post #85

Earlier quoted context omitted.

I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally, but I don’t see why that would be useful instead of just founding a different company to do that small kernel of an idea at much lower scale. It’s actually a big if to me whether there even is a kernel of a business idea. Even if there is, can it (assuming m…

There is a real business there if they can control the costs and get the revenue right and make sure there was no financial fraud. Also, they can't shelve it easily because it's one of their largest investments so it would really destroy any chance of raising a second fund if they can't get this large investment to work. From a customer perspective, while a lot of people on Hackernews do rag on WeWork as a product, p…

I don’t dispute at all that there is a solid product, but it’s exactly the same as for Lyft & Uber.

The value proposition to the end user is only worthwhile if prices are held at artificially low levels due to VC subsidy that makes the business inherently not profitable.

Once you remove the subsidy and let costs elevate to the required level and/or cut back on amenities, locations, etc., to keep prices down, then the question is whether customers still want the remaining value proposition.

In other words, of course consumers like upscale stuff at VC subsidized prices. That tells you nothing about whether there’s a core business idea or not.

Re: WeWork chases new financing as cash crunch looms

#109

Post by the_watcher »

mlthoughts2018 wrote: post #85
raiyu wrote: post #54

This could be the best situation for Softbank. WeWork is obviously in desparate need of cash, no one is going to touch it with a ten foot pole. Softbank is too invested for it to fail. They can buy up 50% of the equity remaining for any sort of investment since they will have a gun to their head the company will have to accept or go bankrupt. Adam Neumann's shares will become worthless in the process and new shares w…

I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally, but I don’t see why that would be useful instead of just founding a different company to do that small kernel of an idea at much lower scale. It’s actually a big if to me whether there even is a kernel of a business idea. Even if there is, can it (assuming m…

There is a business. Long-term real estate leases that then sublease the space short term is an established business model. It just doesn't trade at the same multiples.

Re: WeWork chases new financing as cash crunch looms

#110

Post by the_watcher »

raiyu wrote: post #97
mlthoughts2018 wrote: post #85

Earlier quoted context omitted.

I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally, but I don’t see why that would be useful instead of just founding a different company to do that small kernel of an idea at much lower scale. It’s actually a big if to me whether there even is a kernel of a business idea. Even if there is, can it (assuming m…

There is a real business there if they can control the costs and get the revenue right and make sure there was no financial fraud. Also, they can't shelve it easily because it's one of their largest investments so it would really destroy any chance of raising a second fund if they can't get this large investment to work. From a customer perspective, while a lot of people on Hackernews do rag on WeWork as a product, p…

Yea, a coworking space with tech company polish, marketed to tech companies seems like it could easily win the market. It's a much smaller market and the valuation math is different, but I don't see why the business couldn't work.
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