Same here, and only by reading the headlines. A WeWork recruiter reached out to me. I laughed out loud and added it to the list of companies I would never work for. Not only do they do nothing interesting, but they are apparently unethical as well.
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.
Definitely just another failed tech bro pump 'n dump scheme headed to the dustbin of history.
I seriously doubt that. I think they're overvalued too, but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide.
> but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide
There's also a TON of rent-a-desk places.
The big questions are:
- What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
- What's WeWork's secret sauce or first mover advantage?
>What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
WeWork is also very similar to Uber in the sense that you also need a very effective "on the ground" team managing operations of each individual location, doing tours for prospective renters, managing upkeep + maintenance for the space, etc.
> What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces?
Advantage to customers? Likely minimal.
Advantage to the company itself: economies of scale and, likely more importantly, lack of competition allowing them to increase prices.
The very clear trend across all sectors is that companies trend towards giant monopolistic behemoths unless some very strong regulatory force prevents it. People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
The advantage to me with Spaces (which I believe is owned by Regus) is that I can do guest co-working in any city they happen to be present - and since I travel extensively, the bigger the network the better, as far as I'm concerned.
Sadly WeWork do not appear to offer this option (or didn't last time I looked).
WeWork offers this if you sign up for an American Express Platinum Business card and take advantage of the free year of WeWork benefit. I can (and do!) book any WeWork in the world any day - all for $0.
Yes, that's right, the free AMEX WeWork plan is significantly better than any WeWork plan you can buy. That's start-up logic for you. I stopped paying WeWork after 1-2 years as a paying customer because their free plan was better.
I live in London and I can choose from any of 36 WeWork London locations for tomorrow along with anywhere else in the world. It's nice living off of VC money.
Interesting - does this mean you have a _UK issued_ Amex Platinum Business? If so, I've not spotted this, despite having had one for years - and I need to rectify this!
Many of the benefits only apply to US-issued cards.
I may be misunderstanding, but one of our offices is at a WeWork. I’m listed on the team and we have a ton of monthly credits that I’ll use while traveling in random cities, it’s convenient to have a place to work from.
Every business-traveller orientated hotel like Marriott or Hilton has a “business centre” in which you can rent anything from a small meeting room by the hour to a space for a 500-person conference for a few days, all fully serviced and catered by the hotel too.
I usually stay at Marriotts, and the 'business centres' are often woeful - if not 'closed for renovation'. Not only that, but renting a meeting room for a couple of hours costs the same as a Spaces membership for a month.
I wanted to sign up for this as an individual, but you need to be at least a 10 person company, so I couldn’t. No idea why they’d have that restriction
I was looking for that option too as I plan to travel for some time while working remotely and all I found is https://copass.org/plans but didn't tried it yet.
Is someone can write more about it it would be nice.
> People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
Thanks for this insightful comment. I never fully considered it, but yes - all healthy, competitive markets exist as a result of a government that fosters them.
To the other response I can’t reply to - WeWork is also benefitting tremendously from all of the new build outs. Like hotels, condos, and apartments even the cheaper ones are nice when they are shiny and new. 10 years out, they aren’t going to look very good. The front loaded growth could be very damaging to their brand in the long term because of this.
I’m not sure exactly how all of those contracts look with landlords, but someone is going to need money to spend to maintain them. If not, the person with brand new build outs is going to look more attractive.
Now, maybe I’m wrong and run down office spaces don’t matter. Uber drivers all used to wear suits and their cars were pristine. Even UberBlack cars have holes in the seats and transmissions in poor condition. Uber is vastly largely today than it used to be. So that could be the trick, WeWork at scale but more as a necessity than anything else. If that is the case, then it is more a question of how much extra space other sorts of businesses, like coffee shops, want to keep free for customers.
Rabois has suggested multiple times that one bull case for them is that the company becomes almost too big to fail. They'd be so large that even in an economic downturn they'd have the power to renegotiate lower rents with the commercial property owners.
Why is it that you believe these companies can suddenly raise prices and make money? We've been hearing about "economies of scale" in companies like Uber and Tesla for years, yet no sign of it yet. Price cuts and investor subsidization abound.
And no competition in the real estate market? Please.
If they raise prices, someone else could locally open up a new coworking space with lower prices. The lack of advantage to costumers, which is your first point, means that customers go to the cheaper place.
So the economics of scale (supposed that is a relevant factor) could provide WeWork with a higher profit margin, but to become dominant, they have to take a cut to this margin.
Clearly false as there is no regulation to prevent the formation of very large companies (anti-trust laws don't apply). In fact companies tend toward giant behemoths in part BECAUSE of government regulation. Small companies can't afford the enormous fixed cost of compliance the way large ones can. Regulations are a huge incentive for market consolidation and large corporations love writing new barriers to entry regulations.
This is a good point. My wife's company has a team consisting of a lawyer and 3 paralegals whose sole job is to review their marketing offers just to ensure they are in compliance.Every state has different rules.
Smaller company would need a smaller team but even a single salary on the books just to comply is a large expense for a small business. Multiply this by other areas now such as licensing, insurance, etc. Just ensuring your every day work is not breaking the law becomes financially prohibitive.
I don't understand why you are getting downvoted. What you are saying is basic economics and I guess people in here are too ideologically invested to accept it. The claim that governments foster healthy competition when their effect is the exact opposite is ridiculous.
Say you're a pretty large company and suddenly decide you want to open a dozen 'offices' in a dozen different countries. You just have to deal with one provider, one set of infrastructure etc. Plus if you decide you then want to consolidate to half-a dozen offices, it's easier to scale some up and some down.
However companies like Regus have existed for ages - so not quite sure what WeWork brings, aside from being able spaff away profits to get you in the door.
Weird hypothesis, but is what WeWork brings to the table that Regus doesn't is Silicon Valley brand recognition? Not that I'm in the market for office space, but I haven't heard about Regus until this comment.
AIUI, Regus won't talk to you if you're not willing to commit to a 12 or 24 month lease. If I had a stock position, it would be very short WeWork, but assuming you can make the month-to-month economics work, that's a pretty big benefit regardless of customer size.
I can assure you my regional office manager doesn't give a toss about "silicon valley brand recognition".
I think it's down to the customer. There's a post below about somebody being reassured "it's a We Work" office they'll be in.
When I've looked for a job, it's never entered by head to ask who manages the office (my assumption is that it's my employer and if I'm not happy, I'll take it up with my employer).
I can see if you've often worked in offices not run by your employer, you might have learnt to ask - but would think that's a small pool of people working frequently in shared spaces, having worked their frequently enough to have a preference.
Back to the OP - it's not a "hypothesis", this stuff's been going on for decades.
e.g. ~2000 I was working in Paris and visited our local guy in his local office on the prestigious "Champs Elysee" no less.
I went down the "Champs Elysee", then through a small door behind two shops, then walked back a couple of hundred meters, then through a warren of rooms, then in a room off a room, there was a desk... and that was our office. Hundreds of people all working at this prestigious address - we must have been silver-class as we had our own physical desk.
If you went right back to the entrance door, there was a receptionist you could specifically pay to 'represent you for the hour' and a set of very swish/generic meeting rooms you could pretend were yours to visitors.
Honestly as a programmer they have a name and reputation for providing nice offices that I can rely on. I recently agreed to take a job halfway around the world (interviewing via video chat), and when they asked if I had any questions about the office I was able to say "no, it's a WeWork and that's good enough for me". Surely that's got to be valuable to that tenant company.
> I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
An advantage I see as a customer is that I can go to any WeWork across the country and get a desk/coffee/etc for the day. I can get that from a few other coworking places, but I don't think any have the number of locations that WeWork does.
I don't really see that use case. If you're in a different city, presumably, you're there to visit something physically located in that city. If not, why travel there? So during the day there's no need for an office. You'll be visiting the factory, client site, etc. that brought you there. For the rest of the time your hotel room comes with a desk and you can work there.
Sure, there's probably some need for temporary surge office space like a insurance company setting up after a disaster. But that seems a pretty small niche to build a billion dollar business on.
Yea - is "brand consistency" actually a good thing for coworking spaces? Different tenants require different aesthetics, and can targeted marketing from coworking spaces that match that aesthetic out-market the name recognition of WeWork?
And on-the-ground ops just require intuitive software to enforce standard operating procedures. The last two coworking spaces I've worked at both used different SaaS solutions for coworking-space management, with customer portals and all. I'm almost certain WeWork's edge has been commoditized.
WeWork already serves a big number of multi-location tenants (we are one) which I think will continue to grow and be the vast majority of of its businesses. Huge advantage.
The advantage is similar to that of a large gym chain - you can pay more to get a membership that's valid at all the WeWorks in the entire world. This is great for people who regularly travel between many large cities.
I suspect the majority of WeWork's revenue comes from people working in the same location day in, day out. Same with gym chains. People sign up for Planet Fitness because the nearest location is the most convenient, not because they plan to visit multiple locations over the course of a year (not to say there aren't people taking advantage of the multi-city aspect, just that they aren't the typical customer).
Ya, I can't imagine that is really a draw at all. If you travel a lot, you will have an office in your hotel room or can use the business center in the hotel.
WeWork may soon be headed the way of Gym's business model which is to oversubscribe like crazy assuming not everyone will show up at the same time and many will not show up at all. When that happens, I wonder what happens to NPS. How many people will be a WeWork member (like their gym membership) but don't really need/want to use it?
The answer to that question is already answered by looking at existing coworking spaces. WeWork isn't doing anything different.
Existing coworking spaces already make lots of money off of people who don't fully utilize their membership (which isn't necessarily a bad thing). WeWork is no different.
I get your point and agree but I think gyms make money from people not being there at all. If every gym member showed up multiple times a week it would be like going to the gym the week after New Year's.
Another value of their large network, WeWork has relationships with large companies (like Amazon) to manage satellite offices across the country. Some of those are just a corner of a WeWork carved out, and some of those are entire floors of office buildings that WeWork handles administrative, custodial, and break room for.
I don’t know how much that impacts their profitability or value as a company, but it feels like a very cloud computing model of work space where you get what you need where you need it, so that you can have local employees in cities across the country to serve customers there.
> What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
Same answer in case of gyms. Your advertising overhead does not scale linearly as you grow. Once you build a brand. Customer acquisition costs go down. For moving workforces - entrepreneurs, sales, executives - it becomes more affordable to use one brand rather than plenty of smaller brands.
In addition to the advantages others listed, I think a big advantage of a large corporation is risk management. If you're a "small" company managing a handful of buildings, and something catastrophic happens to one of those buildings, that could threaten the company's existence. More so if those handful of buildings are in the same city, and all suffer from the same event (flood, hurricane, earthquake, etc.). A large company managing hundreds of buildings spread across the entire country would more likely be able to handle a one-building catastrophe.
I agree with your general point, but in the specific case of WeWork the benefit has to be tempered to a large degree by the fact that they are losing obscene amounts of money. They are definitely not running as a sustainable business right now and, while they might make it work long term, but I doubt many people will be shocked if WeWork doesn't exist in 5 years.
But that doesn’t prevent small companies to just take the risk. And by doing so, they are as efficient as WeWork and compete on the same level. What counts is the product and that is the same from the small and big company.
In fact small firms may be more efficient. If they make a bad bet on some real estate they fold while WeWork has to spread that cost to all of its users and keep on moving.
> What's the benefit to a large corporation doing this instead of lots of small companies?
From what I understand, WeWork is structured as many small companies, so they can negotiate favorable terms with long-term leases on office space and the smaller company can fail without leaving WeWork on the hook for the rest of the lease.
> There's clearly a ton of demand for what they provide.
There has always been, and will always be, demand for the ability to buy one dollar for 80 cents. This is not some newfangled business model. Amazingly, it keeps cropping up again and again.
Agreed. The Saudi's via Softbank will install an experienced CEO and they will start operating effectively. I was skeptical about the whole thing, as somebody who worked out of a Regus office about 10 years ago the idea was not novel at all. That said, I see the notion of on-demand capacity in the physical world very similar to what makes cloud computing work: pay for what you need when you need it. With an increasingly remote work world, on-demand space can be purchased or reserved by big companies and well-funded startups, allowing for project-based teams to collaborate in-person. I'm not super optimistic about their prospects, but their backers have the resources to ensure a return on their investment, and they are most likely to do so.
Corporate governance problems aside, they have major cash flow problems relative to debt obligations and are also losing money. One could argue the demand is there because the price is artificially low.
I mean, Groupon's still around too, but at ~10% of their IPO valuation. Is it possible WeWork will struggle along? Sure, although I have questions about what will happen with the $6bn of debt they declare in their S1.
But supposing they do, I see little reason to think they'll be a major player. I don't see anything stopping other rental companies from matching any innovations they've made. The same goes for major property owners. Some will stick with big chunks of space. But if there's a 30% premium for being flexible, providing desks, etc, the some of them will happily cut out the middleman.
If you don't include the economics of the business model in the evaluation, you could say exactly the same of Juiceroo. There's clearly significant demand for juice presses.
Sure, but that's because the economics of the specific way that the business model doesn't make sense is different for the two - with Juicero, they attempted to screw over the end user, while with WeWork they were trying to screw over (public) investors.
Edit: or to borrow a popular saying - with WeWork, it's not the furnished rental office stuff that is the product, it's the IPO.
Right now, based on their own data, We is selling a dollar for 60 cents to their customers. With very flexible contracts. Of course many people and companies rent from them. Just see how long that lasts when We starts needing to get actual profit from them.
There is ton of demand for what they provide, but what they provide can easily be copied, and the copycats will not have a mountain of debt/investment caused by irrational drive for growth at any price that they need to pay back.
Right now, no-one is competing against We because they are selling a dollar at 60 cents to their customers. The second they stop doing that, there will be a dozen clones. We is worthless.
This is my thought. It's about real estate. If starbucks decided to go full throttle into this concept they would kill it. They've essentially been the unwritten king of co-workspace since they showed up.
Does putting assets onto Adam's balance sheet look like a bad idea for Adam, or for We? As with Enron, the way to understand the company's decision making is that in many particulars it was not trying to optimize its outcomes, it was trying to optimize the CEO's (and in Enron's case, the CFO's and maybe a couple others).
Hijacking this spot to highlight newrelic as a company I used to evangelize and now will go out of my way to recommend against (I consult startups as a virtual CTO). They used to have a brilliant offering (Application level monitoring with all associated hosts included) then they deprecated the host monitoring and jacked the price up on every one of my clients while simultaneously threatening them to collect based on the new plans. Every month was a new account rep reaching out to introduce themselves. My love affair ended when a message to the CMO resulted in them forcing the account into free tier without so much as a reply - basically what I'd expect from someone who designed such an org. Moved all the remaining clients off of it (5 digit MRR) to datadog and didn't look back. Later worked with a former engineer and he attested it was a shit show after they set their sights on an IPO. They had really really strong tech and product culture up until then.
Was kind of a death rattle for me and sure enough after they IPOd they really did nothing.
Still makes me angry when I think of it cause it was such a kick-ass product.
Seems they're trading at 2x their IPO, and they were at 3x a few months ago... Did something happen in 2018 that made them huge for a bit? or was it just the rest of the world discovering cloud?
Facebook is one, and a week doesn't go by without me being contacted by one of their recruiters touting their advancements in poker playing AI. Whoopee.
The funniest part is when they reach out almost immediately after eliminating a candidate, for the same job. Like their recruiters aren't even coordinated. I'm sure they farm some of that out.
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.