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Critics say WeWork is an overvalued real-estate play

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Re: Critics say WeWork is an overvalued real-estate play

#81

Post by potatolicious »

sillysaurus3 wrote: post #66
j4p3 wrote: post #17

Many people, including the author, skip the more interesting point in favor of the lazy critique: WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterpr…

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

I don't think it's a case of people being negative about the idea of WeWork - the issue is is that WeWork's product is/will be commoditized, and as such will be subject to intense price competition.

This is good for people who enjoy WeWork's product, since there are (and will be more) competitors that offer a similar experience for less money.

But it's bad for WeWork's valuation - and that's the core thing being brought up. WeWork's valuation is based on the idea that they can charge a premium for their product (relative to more traditional office rentals or other coworking providers), and/or that they can sell significant ancillary services on top of the base rental fees.

I don't think either of those expectations have played out, and IMO there are lots of reasons to believe that they won't play out at all.

WeWork isn't the only one - SV is full of startups that expected to exist in a premium marketplace that isn't as sensitive to price competition, but found themselves instead running a well-executed, but extremely commoditized product.

Re: Critics say WeWork is an overvalued real-estate play

#82

Post by iamben »

madaxe_again wrote: post #18
eddieplan9 wrote: post #10

Earlier quoted context omitted.

Comparing WeWork to traditional office landlord is like comparing Starbucks to Dunkin' Donut. Please don't go to Starbucks because its coffee is better or cheaper (it's neither), but as a lifestyle choice. Similarly, people don't go to WeWork because they need a desk.

Indeed, they go there for the foosball, table tennis, coffee and self-congratulation. Sure, sure, physical proximity to other startups, mentorship, etc. - but frankly the impression I've got from each wework location I've been to has been of people wanting the "startup lifestyle" rather than wanting to build a business. The actual startup lifestyle is sweating in a cheap grotty office, rice, and sleeping under your d…

Annecdotaly many of the people I meet in WeWork aren't running startups. Just small businesses that don't want to work from home, or are a few people in size and don't want to have the hassle of renting office space, renting broadband, cleaning, fridges, coffee machines, etc.

Yeah, of course there is table tennis and coffee and whatever else. But it's a bit like buying a mattress. If you have to spend half your life on something, it's nice to be comfortable. If you're not building the next AirBnB and you can afford your rent and bills, having a place you actually like to go to every morning is quite nice.

Re: Critics say WeWork is an overvalued real-estate play

#83

Post by sillysaurus3 »

tptacek wrote: post #79
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

In a lot of markets, WeWork is a great deal. We just moved from Chicago West Loop WeWork to our first real office; we got what I think is a pretty amazing deal on our new office and it is still very difficult to beat the package WeWork puts together. But that's not the critique being leveled at WeWork here; the critique is, WeWork can't in the long run be profitable at these rates. In a lot of their spaces --- maybe…

Do you think they can figure out a way to still be around in ten years?

It's so much better than traditional offices that it'd be a shame to lose it. Hopefully there's a sustainable business model.

What would you say are the pros/cons of moving to your new office?

The West Loop WeWork is nice because it's about a 3 minute walk from the redline subway to the front door. That matters during winter -- Chicago winters blow. So I was wondering if you managed to get a spot close to public transit too. (And if so, how'd it end up ~cheaper than WeWork? Prime locations tend to come at a premium.)

Re: Critics say WeWork is an overvalued real-estate play

#84

Post by sillysaurus3 »

cratermoon wrote: post #74
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

It's a reasonable office services model -- every company would like to have (at least) fresh coffee, internet, print/copy services, meetings rooms, janitorial service, etc. All the unsexy things that make a workspace into a place to get stuff done. Depending on the size, the companies may do it themselves, or may contract with one of the many vendors for that. With WeWork, though, the sweet spot is for companies that…

FWIW, the WeWork I'm at has been trying to lease a massive 40+ person office for the last 6 months or so. That monster of a room occupies ~1/5th of the whole floor. In that situation you'd be able to set up a roundtable in a corner for meetings like that.

(Sounds kind of miserable, being an open office and such. But again, almost nobody uses the phone booths, so you're always free to peace out and shut yourself in for ~2h to power through a task.)

No idea how much it costs though, so you're probably right that the numbers might not make sense.

Re: Critics say WeWork is an overvalued real-estate play

#85

Post by pentae »

cratermoon wrote: post #74
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

It's a reasonable office services model -- every company would like to have (at least) fresh coffee, internet, print/copy services, meetings rooms, janitorial service, etc. All the unsexy things that make a workspace into a place to get stuff done. Depending on the size, the companies may do it themselves, or may contract with one of the many vendors for that. With WeWork, though, the sweet spot is for companies that…

I find printing/scanning to be one of those things that I almost never do, and desperately try to avoid - but when I need to do it it's usually super important paperwork that has to be done right away. And having to go hunt down a print and scan place is a lot of friction. So reluctantly, we have an all in one at my office.

Re: Critics say WeWork is an overvalued real-estate play

#86

Post by linkregister »

madaxe_again wrote: post #61
lloyd-christmas wrote: post #32

Earlier quoted context omitted.

Half my business comes from other companies in the wework network. I also regularly contract out work to people in the network.

So you're saying you've built a business 50% dependent on someone else's business. That's fragile.

You think the entire B2B business model is fragile?

Only consumer-facing companies are resilient enough for you?

Re: Critics say WeWork is an overvalued real-estate play

#87

Post by linkregister »

srmatto wrote: post #54
gonehome wrote: post #52

A little off topic, but I think it'd be cool if you could pay someone (a hotel chain? Airbnb?) a monthly 'rent' to live in any of their locations. The locations are guaranteed to have highspeed internet and some easy standardized way to move between them. This would be really cool for remote work since you could live everywhere and nowhere without having the overhead of having to do all the planning yourself.

Airbnb does have monthly rates. But no guaranteed internet afaik.

You can add WiFi in your filters when searching.

Re: Critics say WeWork is an overvalued real-estate play

#88

Post by CPLX »

627467 wrote: post #56
zaidf wrote: post #47

Earlier quoted context omitted.

It wants to own the app store for enterprise services. If this is what WeWork is all about, then buying / leasing real estate worth hundreds of millions is a rather convoluted way of going about it.

Sounds as convoluted as McDonalds Corp business model...

Yeah except McDonalds owns the valuable real estate and pushes off the occupational and downturn risk to the franchisees. The WeWork business model is literally the exact opposite of this. If things go well their landlord makes a windfall on the appreciation. If there's a sharp downturn they're stuck with the lease and no members.

The business model has the potential to be obviously and severely problematic, which is the topic of this post.

Re: Critics say WeWork is an overvalued real-estate play

#89

Post by feelin_googley »

erikb wrote: post #55
feelin_googley wrote: post #41

Earlier quoted context omitted.

s,com,&/amp, https://www.wsj.com/amp/articles/wework-a-20-billion-startup... Then view in "Reader" mode. Most of the major browsers have it. Alternatively, extract the text from the page and leave the Javascript behind. The Javascript is not needed to read the text.

all of your links are walling again, AND deactivating reader mode in my browser.

Retrieve the page with a small http client instead of a large browser. e.g., wget, curl, fetch, etc. Save it.

   wget -o savedpage.htm https://www.wsj.com/amp/articles/wework-a-20-billion-startup-fueled-by-silicon-valley-pixie-dust-1508424483
Delete the Javascript.

   sed -i '/
/,//!d' savedpage.htm
Open savedpage.htm in a browser.

Re: Critics say WeWork is an overvalued real-estate play

#90

Post by lloyd-christmas »

potatolicious wrote: post #81
sillysaurus3 wrote: post #66

Earlier quoted context omitted.

Not sure why people are negative about the core idea of WeWork. You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat…

I don't think it's a case of people being negative about the idea of WeWork - the issue is is that WeWork's product is/will be commoditized, and as such will be subject to intense price competition. This is good for people who enjoy WeWork's product, since there are (and will be more) competitors that offer a similar experience for less money. But it's bad for WeWork's valuation - and that's the core thing being brou…

General Assembly's bootcamp program probably isn't the best out there, but the company is worth a hell of a lot more than the rest of the bootcamp industry. Just because a business is easy to imitate doesn't mean it's easy to compete at scale. There are plenty of similar set ups to wework in NYC, but they don't have offices in countless other countries and cities. They simply don't have the scale that the wework network already has. Why would I join one of the other NYC ones for a discount on office space when I can gain business from all around the world just by signing into the member network and checking my messages?
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