Critics say WeWork is an overvalued real-estate play | Hacker News Reader

Critics say WeWork is an overvalued real-estate play

wsj.com

214 pointspetethomas178 comments

I worked in a wework Office for about a year. At first I thought the environment was great, I loved the free beer and the community. However, once we moved out, I realized how much more productive we were in our own office. We had

- more space

- less noise, in terms of sound and visually (you see everybody passing by through the glass and have to force yourself not to look at them. For a while we had some posters up, but we had to remove them since wework’s company policy doesn’t like that)

- less distractions: in the end, the community was nice, but it didn’t help us that much, since it was quite random, there were a lot events, almost every day, the place was always busy

- climate service: we had so many issues with heating/cooling, either it was too hot or too cold, it never got really fixed

- cost: their meeting room system is a total rip-off, even though basic rents are okish, the meeting rooms were a real cost sucker, in many months we’d pay almost as much for meeting rooms as the basic rent

We liked the culture and the spirit, but we’re much happier in our own space now, we don’t pay for meeting rooms and we can meet our relevant community whenever we want, distractions went down, productivity up.

Same exact experience for me (in NL). I have to say that compared to all other co-working spaces I used (6 so far), WeWork is the only one that really nailed it in terms of operations. (WiFi/Internet, delivery, key-cards, ...)

less noise, in terms of sound and visually (you see everybody passing by through the glass and have to force yourself not to look at them. For a while we had some posters up, but we had to remove them since wework’s company policy doesn’t like that)

This has been by number one issue with WeWork and I've always been surprised that more devs who work at WeWork aren't bothered by this.

That's what the free beer is for - to anesthetize yourself from the negative working conditions, at the end of the day.

Addendum: WeWork's general office conditions and amenities do compare favorably to those of early-stage companies (not to mention most random BigCorps), overall. (Again, it's the average of the great unwashed mass of companies I'm talking about, here -- not the Big 4, and certainly not whatever hot startup you've worked for recently where everything was way nicer, and the people way cooler than anywhere else).

But at the same time - if anyone's giving you free beer (as opposed to some other non-mind-altering amenity), there's always a reason for it.

I have been to one in Sydney and one on London. I gotta tellya, Sydney was unworkable (too many people talking and wanting to talk to you) but London was a dream. The English don't chat, and there is zero eye contact.

From this, I theorise that it only really works in countries that are not outgoing.

Of course self-leased speace is generally (way) better - if you can find it (at the capacity you need right now) and hire people to run it for you. WeWork's entire model relies on the fact that, while not it's not the swankest, most productivity-enhancing working spaces you've ever been in (far from it) -- it is available pretty much on tap, in at least some capacity, in key cities.

Remember all those outright shitholes many companies used to work in (in their bootstrap phases) at least? Or this whole "borrowing office space from a friend, until..." thing? Or, until not too long ago, literally using coffeeshops or restaurants as meeting rooms? WeWork seems to have succeeded in making that culture pretty much go away, at least.

exactly. Finding less than a 5 year lease in Manhattan is extremely challenging in my experience.

They will almost always allow you to sublease though, which is its own horrible time sink to find a replacement tenant.

sure, I've subleased a bunch. my experience with that is that two kinds of companies generally sublease: places that are growing and will eventually want the space you're occupying for themselves, or places that aren't doing well and will eventually fold. I've subleased from both :).

it's for sure a good option if you want a very short term thing, but it's a tough spot when you probably want > 1 year but 5 is a stretch.

In cities like Bangalore, getting self-leased office space for an early stage startup is a nightmare. Either you have to take up individual houses converted as offices (borderline illegal) or you have to settle for crappy office spaces in god forsaken locations. Even for established companies, managing office real estate is a nightmare. For instance, Microsoft had leased some office space in the heart of the city and even they had difficulty expanding and finding appropriate offices in the vicinity. (They have now taken up space at WeWork as a makeshift arrangement). So yeah, while WeWork seems like an expensive real estate play, they do fill a market need.

Same experience here in SF.

Exactly the same from Shanghai

Something I often see overlooked in critiques of the wework buildings:

Their offices are vastly different in renter demographics, I have found after working from different offices on an ongoing basis. Even within the same city you will find a vastly different feel from building to building. Boston, New York, and San Francisco have multiple buildings that are quieter and noisier, some with mostly mature companies and some with all single person co-working renters.

It's not perfect, but as a company with up to 10 people or a need to have distributed office space... I'm a huge fan over the last couple years.

WeWork was way too expensive at any size. We cancelled it quickly. I can't imagine it being a functional solution for any company. Churn will kill that business.

While agree that the pricing is not beneficial to startups themselves, churn is exactly what WeWork wants because it's what their business model is founded on.

All predatory leasing systems are designed this way. In WeWork's case, as a landlord it does not care about the success or failure of any individual company; it cares only about running as many renters as it can through its overpriced bar / coffeehouse. In the process its goal is to extract as much of the founders' equity as possible through "addons" in fees and such to the rents.

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 enterprise services.

It hasn't fulfilled that promise yet, not even close, but it's not an unreasonable proposition. Is it possible to capture a big, fragmented market with kitschy decor? Will the services marketplace be as fruitful as it thinks? These would be interesting questions to explore.

Honestly, as someone dealing with small businesses, selling insurance and HR services to tiny startups is not a $20B business. Selling those to large companies is, but that market is already saturated.

The WeWork claim is that some of their startups will become huge and they'll already have their foot in the door, so to speak, for selling those huge companies more real estate and services. Having a 5 person startup as a renter is not a big win, but if that startup becomes Twitter size...

Do they seriously claim this? It sounds like a pretty far-fetched thing for them to say. I've opened several offices and moved my company around a fair bit, and I don't know how WeWork or anyone else would have their "foot in the door".

Any company approaching the size of twitter is going to contract those services out and either beat them down to very thin margins or manage the services themselves. very little upside in that.

haha. seeing that most start ups will fail - good luck with waiting for that unicorn! it might never come in their space.

https://www.forbes.com/forbes/welcome/?toURL=https://www.for...

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.

If I'm not mistaken, WeWork owns a number of the buildings in which they have offices. Not sure what the percentage is.

It may have changed very recently I suppose, but with that caveat aside I believe you are, in fact, mistaken. The business model for the company has always been lease arbitrage. There was discussion at one point[0] of them having a related entity to purchase real estate, but I'm not sure what came from that, and even in that plan it was to be a separate investment vehicle, not the VC backed company being discussed here.

[0]https://therealdeal.com/2016/10/14/wework-wants-to-become-a-...

I heard, from someone who works for WeWork, that they do own at least some of the WeWork buildings in Manhattan. Admittedly it was a low level employee, so he could have been mistaken.

As someone who works in a WeWork, the "business services marketplace" aspect actually just feels like "oh also we bother you with advertisements all the time"

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 up your neighbors and meet some interesting people. Chance encounters like that are rare at a traditional office. People also throw events on the upper floors all the time, which gets you free lunch at a minimum.

The above experience costs $2,200/mo to get you an office with plenty of room for four people.

I don't know. I hope they never go out of business. It's the best environment I've ever been in.

Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!

When you have the option to go work someplace with a door that shuts, it removes all the stress of not having it, even if you never actually use it.

It's not free beer and free coffee, it's X% of $2,200 a month beer and Y% of $2,200 a month coffee.

Sure, but your corporate overlord^W^Wfounder pays for that. From your POV, it's all you can drink coffee.

Also $2200 is on the high end for four people. You can probably talk them down to $2k or less.

You'd be surprised how valuable it is to have a pot of coffee ready to go all the time, next to a mini fridge that's always stocked with half and half. Sweetner's on the counter. It ends up taking like 30 seconds to grab coffee.

The janitors are surprisingly cool people, and they're fastidious about making sure the trash is taken out, doing the dishes (yes, you get a kitchen + fridge!), and making sure everything is stocked.

It's so effective to pool resources like that. Everyone gets those benefits just by being in the same place. And it's remarkable how un-cramped it all feels. Your office even has beautiful floor to ceiling windows that gives you a nice view of downtown and sunsets.

> Your office even has beautiful floor to ceiling windows that gives you a nice view of downtown and sunsets.

s/Your office/some offices

My company currently has an office in the middle of the floor of a WeWork building, it's cramped for 4 people, and the only "views" I have are of the walls of neighboring buildings in the windows that I can see through ~4 other offices and are ~80-100ft away (but, times are a bit tough right now and I think we're getting a pretty good deal for an NYC WeWork office).

In general though, WeWork is pretty solid; their coffee is acceptable, and the beer is usually pretty good.

Are you in the Dumbo office? I found that one to be pretty cramped - I liked Montague St a lot more. And better subway access, IMO.

No, and we had a much less cramped office in this same building before we were forced to downsize for financial reasons - most of the WeWorks I've been to have the whole spectrum of office sizes, from cramped to spacious - it's just about what you can afford.

> It ends up taking like 30 seconds to grab coffee

Try this stuff: http://www.nestle.co.uk/brands/coffee/superpremium/azera

Just mix with hot water, it's surprisingly good.

Why does that need a startup, though? Sounds like the perfect opportunity for a small-companies' cooperative.

Let's do some conservative costing here. 4 people, consume 10 cups (total) of coffee each day, 20 work days in a month. At $3 a cup, that's $600. Now I'm not even going to guesstimate the beer but let's just say the team consume $100 of beer in a month. That leaves $1.5k for rent. Find a better deal.

Speaking for myself I'm not negative about the core idea. I just think sometimes someone comes out with a good idea and investors act like it is the greatest deal of all time!!!!

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 are in between the solo entrepreneur (or the 2-3 friends) and about say 20-25 people. There is a good value for the hot desk or reserved desk for individuals.

At least in the locations I'm familiar with, once the number of people in a company gets too big then costs per square foot soar above regular office real estate in the same area. We found that having a meeting for 3-4 people couldn't happen on a whim, you had to book a room and if none were available you had to delay the meeting. Also, our meetings could never run long because inevitably someone else had booked the room afterwards and needed us out.

A lot of small things that might matter for some sorts of companies never really gave us much value like printer and copier services. While there's no true paperless office, the amount of printed stuff we generated (not counting marketing materials, which went to a graphic print service anyway) was negligible.

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.

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.

> We found that having a meeting for 3-4 people couldn't happen on a whim, you had to book a room and if none were available you had to delay the meeting. Also, our meetings could never run long because inevitably someone else had booked the room afterwards and needed us out.

Every company I've worked for (none of which were WeWerk) has had this issue.

Yeah, this is the state of affairs at Google, for example.

All of those things are either what you'd expect when you rent a normal office space or aren't the amazing extra perk you make them out to be. The meeting rooms you had to pay to use. The coffee and beer are included in the total price and aren't really that valuable anyway. And the beer and toilet paper frequently ran out. And the phone booths didn't even have doors, they had curtains.

It was nice, especially since I was an employee, not the company renting the space, but the only real benefit was there would be occasional free meals and not having to leave the building to go to the occasional meetup.com style meetup that happened there.

I'm guessing the price per square foot isn't that amazing compared to what you could get at other places, though.

And the phone booths didn't even have doors, they had curtains.

Yikes. The doors on our booths are a killer feature. The booth becomes mostly soundproof when it's closed.

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 all of them? --- they're overstaffed. They're premium-everything (I wanted the couches from the first floor at WeWork West Loop and asked where they got them; they were custom-designed!). Free beer on every floor (this turns out not to be a win, but it's still part of their cost basis). Most importantly: they site these things in marquee locations that they have to be paying a mint to lease.

I'm happy to take full advantage of the largesse of Investor Storytime Economics, but unless you're Amazon, the music has to stop playing at some point. WeWork is not Amazon.

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.)

We're still in Fulton Market, on May and Hubbard, a short walk from the Blue Line on Grand. I'm not entirely sure how we got this office in this specific location, but I think it had to do with the building itself being on the market.

I should be clear: it's hard to compete with WeWork for the 4 people we have in this office (I think we pay slightly less here than we'd pay for 4x WeWork berths) --- but having our own office is a phenomenally better deal as we hire more people, since we'll be paying the same amount of money in rent but can easily park another 10 people in this space comfortably.

So I should clarify that I think WeWork is an amazing deal for very small companies and, in particular, for solo worker locations. Part of the problem with WeWork is that it's precipitously less of a good deal as your company grows.

>they were custom-designed!).

I used to work at a VC funded company that had a $10,000 custom couch (which sucked, totally uncomfortable, the custom dollars went into the shape/making it fit) and prolly 10x that spent on custom lighting fixtures (also terrible, ridiculously dim for a work space, but looked nice). In a super high rent urban area. I assume they make up the difference with glass walls and giant open spaces. This is (unfortunately) how offices are built these days.

Beer aside, every WeWork I've ever been in seems to have dozens of fridges stocked to the brim with rancid milk. It's weird that they have custom furniture but can't even get their shit together on the most basic issues.

I don't think they provide the milk, just a place for people to store their own. Despite the fact that all the WeWorks I have personal knowledge of appear to be horribly overstaffed, the staffing at WeWork is not very effective.

Ahh the NYC ones all stock milk from local dairies, I assumed the others would be the same.

THANK YOU. At first I was very confused as to why there were so many half-full milk jars in the fridge but it soon made sense. I don't think this is WeWork's "fault" in that Ronnybrook milk only seems to last about two hours after opening, but they should really buy another brand.

Wait, he didn't fix the milk. He just pointed it out. The rancid milk is still there. Why are we thanking him? :)

It's not just the opened ones. Every time I go into a WeWork I usually end up opening several things of milk to see if there are any that haven't gone bad, and there almost never are. It's like they're turning off the refrigerators at night or something.

It's literally been a problem for several years. The company even acknowledged the problem on Twitter at one point, but didn't bother fixing it.[1] It shouldn't be that complicated to provide non-rancid milk for the coffee. Even in my home fridge milk lasts two weeks after being opened, and that's several degrees warmer than it would be if milk were the only thing being stored in it.

[1] https://twitter.com/i/web/status/840264145467518978

A bit of deflection on part of the company too. "it sounds like this is an ongoing issue for you"

Just as with many highly valued startups, you can think of WeWork as valued for the possible future business model rather than it's current one. If WeWork is able to transition to a business services company with essentially a captive market (its tenants), it'll be a very profitable company. Other such companies have a high customer acquisition cost. WeWork is betting it's more efficient to rent office space and have a mailing list than to pay Google for those same eyeballs.

That makes sense but if people are trying to level set it's worth knowing that WeWork is 0% of the way towards monetizing its subsidized tenant base this way. There's a "WeWork Services Store", sure, but there's nothing remotely interesting in it.

> custom-designed

So are the plastic chairs you get at Walmart. This is a fixed cost. Custom design them once, order a million of them and leverage economies of scale.

> Free beer

Beer by the pallet is $2.30 a can, rent is around $2200. Even if you drink 2 cans a day, its still only about $350 a month in costs. Even if it's a loss, it's a good loss leader and the economies of scale will eventually work out. Their potential for profit is when people start saying, WeWork, feed us! and they charge such and such to manage the whole food delivery and make a nice premium on that, and whatever other services you guys would want.

We priced out comparables from similar vendors (I really liked those couches) and suffice it to say the unit costs you were getting were not competitive with Wayfair. They're high-end leather modular sectionals. It's not cheap.

2.30 a can? I bet they can get a better deal than that.

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.

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?

The main difference is that General Assembly has product differentiation, and where you studied has signalling value. Where you rent your office space, much less so. Hence, WeWork produces a highly commoditized product, which will continually be subject to competitive pressure.

> Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!

That doesn't scale though. If everyone who worked in a WeWork space wanted to occupy an empty room with a door that closes you'd discover pretty quickly what a hot commodity the are. And that can change entirely out of your control - I've worked at a relatively empty WeWork, only for a large company to come in and take over a lot of space on my floor. Suddenly all the fantastic facilities aren't available any more.

All in all, WeWork is fine, but not in any way worth the money.

> Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!

Not sure if this is the case for all of their locations, but the doors (and walls) were made of glass at the WeWork we rented from in Seattle, which meant there was zero soundproofing and I was constantly hearing conversations from the people in adjacent offices. It was incredibly distracting and we only lasted a month before returning back to our home office.

This seems to be the case at all of the "rent a small workspace"-type places I've tried in Seattle, with or without regular doors. Ballard Studioworks has virtually no insulation and has a lot of noisy businesses or just people who like to blast music at concert levels. Activspace in Lake City was a little better but the floors shook every time someone moved a piece of furniture. Wework Holyoke was like working in a fishbowl with really nice furniture.

I dunno, maybe I'm just too picky. I don't want a community or all of that. I just want a place that isn't where I live that's quiet, has Internet access and bathrooms, and the rent doesn't have a comma in the dollar amount.

A door to your office that closes.

Not exactly a $19B moat IMO.

The meeting rooms are not all you can eat for your monthly spend. They give credits based upon spend. Once you burn them up (and you will cause it's a pittance in credits) you gouged after that.

Just a note - while you can be at the offices 24 hours a day, they officially shut off all climate features starting at 6PM. This means any sun-facing office get HOT.

6PM for ending a work day is silly IMO and I emailed our office managers who took the issue to the city manager. Still no change (they asked us to pay $120/hr to keep climate management on outside of 6PM).

This business model has existed before WeWork, and I've used it. Here's an example: https://www.regus.com

Similar idea: free coffee, shared printer, power/internet access/etc.

It made sense for two people in one room. When it got to three or four in a bigger space, it made more sense to lease a dedicated two room office and setup our own internet connection, etc.

True - but my god the experiences aren't even in the same league and for me that matters. WeWork is worlds apart.

I guess it depends what you're looking for, everything from price point to frequency of use.

I have a Businessworld Gold membership, and for its price (which is significantly lower than a similar WeWork membership), I can visit any "business lounge" location in the world. I don't use it every day, nor even every week, but when I'm on travel, I have relied on knowing they will have solid internet and a relatively-quiet place to focus.

For the price and my use case of infrequent visits, Regus is fantastic.

I work in a Regus office in CA, and they are constantly having issues. The washers/dryers are always broken, the AC has to be fixed every other week, yesterday they had a plumbing issue and the water was out so no one could get the 'free' coffee let alone use the bathrooms. There's almost always something not working, however most the times it's something relatively minor and overall it's been a decent experience. I imagine WeWork would probably have those things ironed out for a lot more $$. The other thing is you have to pay extra to turn on AC if you want to work at night or on the weekends, which thankfully I haven't had to do with my current company.

I don't think the specific services you can find are as valuable as the networking itself.

In 3 months in a WeWork I connected with a number of people. Some of them have moved on as the services they were offering didn't work out financially for them.

But we're still connected and most of the folks that moved on are onto more interesting endeavors. One knew I was in machine learning for healthcare and dinged me on a gig. I have one I love, but it would have been a nice option if I was looking.

> It wants to own the app store for enterprise services.

For this to work the way an app store works they would have to be able to control access by service providers to their tenants. Like, if you're a lawyer and you want to meet with a WeWork tenant you have to pay them 30%. I highly doubt that they could pull that off without getting stopped either by the market or by the law.

In some ways that sounds like the Zenefits model. Compete with one service on lower/break-even margins, and use it as lead-gen for selling in other higher-margin services.

If they can sufficiently grow and diversify their recurring revenue streams across services offered and industries of clients served, that could give them solid staying power, even in a down market.

"Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion." This seems to me to be a pretty big warning sign that the company is overvalued.

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.

Your metaphor is ridiculous. Plenty of people prefer Starbucks coffee to DD, claiming that going to Starbucks is a "lifestyle choice" in 2017 is absurd. People go to Starbucks because it has products they like, primarily a variety of coffee drinks that include milk, cream, sugar, or other flavorings. Comparing Starbucks to DD is a perfectly appropriate thing to do, as is comparing WeWork to Boston Properties is a reasonable thing to do.

Coffee in general is a lifestyle choice. Not disagreeing with you just saying that in my opinion everything about coffee is lifestyle.

To a point I agree. Nespresso machines are about 100x better than Keurigs. They just are and no amount of lifestyle marketing is going to change that.

Afternoon coffee is lifestyle; morning coffee is survival.

survival is lifestyle ;)

Dunkin Donuts has those same sugary milky drinks. Starbucks vs Dunkin is white collar vs blue collar.

> Please don't go to Starbucks because its coffee is better or cheaper (it's neither), but as a lifestyle choice

Try telling a Bostonian that Dunks isn't a lifestyle choice...

I went to WeWork just because I needed a few month-to-month desks quickly. WeWork has excellent execution but I don't think of them as a lifestyle or luxury brand. If someone else can provide me the same ballpark product for 20% less then I would likely switch. There's a lot of room for competitors to move into the market.

It's called working from home, and it's a lot more than 20% less.

Not if you regularly have clients come around for meetings or colleagues for a chat. WeWork provides a good enough atmosphere to work and socialise with work related people (it's not just the desk you're paying for).

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.

That's some piss poor logic. Half my current business comes from a network I belong to. That doesn't mean that it's DEPENDENT on that network. If I go to the same restaurant everyday but that restaurant goes out of business, do I starve? I just go to the place next door.

You think the entire B2B business model is fragile?

Only consumer-facing companies are resilient enough for you?

Relying on a single client/company for 50% of your revenue puts you in an extremely fragile position. Very common reason for failure in B2B companies - relying on a single big fish which will make or break the company.

But that isn't what I said. I said I get 50% of my clients from the network, not that I need the network to get 50% of my clients. They are drastically different things. It's client acquisition cost. Why pay to go apple picking when I have an orchard in my back yard?

No, it's the "I feel special" you're paying for.

Meetings, you can go to the client, you can rent a meeting space by the hour. Hell, I've made a multi million pound deal in a train station waiting room.

Colleagues, one can communicate without meatspace.

Socialising - that's not work. That's for the pub.

Perhaps you are assuming your particular experience is normative. I think it is not. To attribute the demand to nothing more than “I feel special” needs more justification than what you've provided.

I have started several companies from my home (for the first two, "home" was an apartment) and had no problem with employees working from the "office" nor with customer meetings (customers included Sun, NASA, Cisco).

These have all been in Palo Alto, so perhaps its acceptability is location-specific. Each year I have some MBA students from Switzerland visit and last year it was in my home -- apparently some of them were weirded out by that. (By this year's visit we'd grown and so they came to a boring office).

If you pay someone to keep your home clean and tidy, have ample space, free beer, good coffee, and very comfortable furniture, then by all means. Not everyone has that luxury! WeWork (and similar co-working spaces) is a workspace where all the little details are taken care of for you. The location is also important - I don't live that close to a main train station or hotels so having a relatively centric workspace is handy for visitors. They also create an atmosphere that I wouldn't be able to create at home, with nice break out areas. The only thing I miss is not having a proper kitchen to myself, like I do when I work from home.

Oh and yes, I do work from home, sometimes the entire week.

Completely disagree. As someone that worked from home for 5 years, moving to shared workspace (coincidentally WeWork) provided the needed separation of church and state. I'm far more productive and I'm more than covered the costs of the space from work I've got as a result of being here.

I had the same experience, although I didn't end up using wework because they gave me a runaround on location (I wanted manhattan space and they were clearly trying to get ppl to lease in dumbo, this was a while ago).

I 100% agree that the switching costs are very low in this kind of market.

It's good to hear their execution has improved. when I asked them if they had space in a manhattan location, they essentially couldn't (or wouldn't) tell me.

You might not think of them as a lifestyle brand but it certainly looks like that is the case they are making.

I only knew WeWork by name and didn't know much about it, after this thread, I googled a bit and their Twitter page is full of meme-level motivational images(Always be hustlin' signs, dogs at work), they are definitely trying to appeal to a specific audience here.

I share the sentiment of others in this thread, it looks to me like they are leveraging real estate to capture the trendy piece of the market.

Their latest offering(as it seems from their Twitter feed) is a wellness/fitness center called "Rise by We", as described on their feed: "a holistic wellness community crafted to enliven your spirit". Judging from that I wouldn't be surprised if their next bet is the next 'W hotels' of conferences/events where they can obtain a share in bigger companies events budget.

> I wouldn't be surprised if their next bet is the next 'W hotels'

They already are doing that targeting the very small business audience:

https://www.welive.com/

Okay, so I am now surprised they are already doing that.

However, I was thinking more along the lines of conference/events which the hotel business is a complement of, since so many people go to conferences to party at the company's expense, this is just one step further.

Actually stock analysts do compare Starbucks to Dunkin' Donuts, as well as other fast food chains.

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 desk - but I suppose that's not a palatable option for most.

Yeah, I'm contemptuous - but I'd sooner invest in a frugal scrappy business than one that thinks it needs mahogany desks for its team.

And yes, of course, I write this as one who did it the scrappy way, and had a reasonably successful exit.

People want to feel trendy. They are not running "Startups" because they want to build stuff that scales. They are running mostly failed businesses that look trendy/cool, so that they can "fit in".

Selling emotions is a big business. Lots of brands are relying on it.

Yep - hell, most businesses sell on emotion - it's a much more secure attachment than ration, and even when it comes to b2b, more often than not the decision comes down to who they like more/who gives a better vibe. That said when things go south, they really go south, as an emotional buy allows for betrayal and an emotional fall-out.

Which is why I think wework is grossly overvalued and likely to follow a parabolic trajectory.

> Which is why I think wework is grossly overvalued and likely to follow a parabolic trajectory.

I still think the same way about dropbox but thankfully for YCombinator as well as Drew, Arash et al reality does not follow my train of thought. (I am ashamed of the way I reacted to the original news about Dropbox and I bring it up not to shame dropbox but to caution myself from saying something like that again. The world is... weird. I mean the top story at the moment is mongo db valuation https://news.ycombinator.com/item?id=15508507 https://archive.fo/hxHW4 )

Edit: name

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.

Softbank has an office there.

Indeed. Plenty of architects, solicitors, whatever else. It just makes life easy.

Raggedy couch and a suit on the back of your office door.

You didn't mean to stay there until 02:00, but you're going to have to be back at 06:00 so you might as well stay there.

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN.

At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord.

The only real difference is that WeWork can improve their revenue/sqft by adding desks without tearing down walls or remodeling the building; and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. But on the downside, they have shorter lease terms, which makes their earnings less stable and more responsive to market conditions (ie: it's easier to stop paying WeWork during a market downturn that it is for a traditional landlord).

The question is, are WeWork properties similar to Boston's properties, and does WeWork generate 5x the revenue/sqft as Boston on similar properties.

> and they can increase prices at a faster rate than a traditional landlord who has a longer lease term.

They can also lose clients much quicker than a landlord that has longer lease terms.

The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

> The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

The way they go about doing that looks like an ad-ish model. "Here's a bunch of vendors that were willing to pay our vigorish to be shoved in front of you." That's tough to build a premium around if you don't scale the ads, or have a compelling story for the advertisers on how much more effectively WeWork converts their co-working renters than, say, Google AdWords. An A-B test WeWork might carry out is put in an AdWords campaign side-by-side with a WeWork-based campaign for as many vendor types they can think of, and measure the results between the two on an ( ad-spend : sales_expenses - revenue ) ratio basis, and tweak their strategy model from there. If I'm one of the vendors WeWork is trying to pitch to their co-working renters, then I'd immediately be thinking, "they reach a smaller audience than my AdWords purchases (or whatever other marketing channel I'm comparing to), but supposedly more targeted, so if I put some spend there does it really perform?"

If you are a new startup, then there is a lot of bullshit in the business world that wastes a lot of your time because you simply don't know better on what to spend your limited time upon. Having a SCORES-like concierge/advisor service on tap (for a fee after an initial time of trying it out, perhaps) might be another way for WeWork to build premium value. But not scalable.

If the premium on-site staff is highly attuned into their renters' concerns, etc., that might be a way to add value by using that information as a development input. But that's very non-scalable.

Their core value proposition seems to run right into competing against Google on an efficiency basis, so I must be missing something the investors didn't.

If Boston Properties wanted to add WeWork style services to their current buildings, they could do that. And if it didn't turn out to be profitable, they could stop doing it and still own all their buildings.

Or they could contract with some well-known service corporation to provide those services in their buildings. Sodexho?

If WeWork wanted to own all their buildings, they would need to convince a lot of landlords to take stock instead of cash. Though I don't know that they could afford to do that.

actually, i beg to differ. my wife has a 90% remote job and has a desk @ wework in berkeley. i've met a ton of her weworkmates and while a large percentage are entrepreneurs, many are remote workers or self-employed.

even the small amount of infrastructure that wework provides to it's members is incredibly useful: wifi that always works, coffee, lounge area, meeting/phone rooms and generally a quiet place to focus and get work done.

I agree. I wonder if most people in this thread saying that renting your own space is cheaper has ever really done this. I have, a bunch, and keeping the lights on is not free in terms of time/money. At a small company, this means either you hire someone to handle all this stuff, or make the employees do it. Either way, running an office yourself ends up being expensive.

I pay $400/month for an office for four. Probably another 100-200/month for random services like Internet access via an ISP, general commercial liability insurance I'm required to carry by my landlord, and other random stuff like, idk, paper.

You absolutely can get a much cheaper office than WeWork. Maybe not if you focus is MEGA GROWTH and you're going to hire 100 people in the 5 days it takes to get a basic network setup going (calendar time, not wall clock - ISPs take time). But that's not the game I'm playing, been there done that, and the place I worked just got bought for about 1/5th of the capital it raised, so I'm kinda over it.

yeah, I guess my point is that maintaining internet and general office stuff is not "free", in that it's costing you your time or money. I don't spend much time on office stuff, but if the office is just software engineers, it's actually pretty expensive for anyone to spend any time on office stuff.

I am not saying it's more expensive than wework, but it is damn sure more expensive than just looking at rent + monthly bills.

> Similarly, people don't go to WeWork because they need a desk.

Err, yes they do. I don't doubt that WeWork has an above average number of startup entrepreneurs in their office spaces, but every WeWork I've been in also has a lot of self-employed people who just want a small office space to work in.

starbucks and dunkin donuts are similarly priced in pretty much all areas. They both have regular coffee at similar price points. They both have fancy sugary drinks at similar price points. They both have food at similar price points.

I mean those aren't the only two variables that determine the value of a real estate company. I feel like that signal, absent context, tells nothing. It's the same way that you can infer little about a line from only one point on it.

I agree that they aren't the only two variables, but I disagree that it tells nothing.

Are their growth rates comparable?

Boston Properties Inc as far as I can tell hasn't much to do with blockchain. WeWork, on the other hand, may have 5 times less properties but they track them via blockchain or something like that.

Why? Blockchains are about distributed consensus. What part of WeWork (a single entity)'s ownership of properties needs distributed consensus?

Hyatt and Hilton own a lot more real estate than Airbnb. Perhaps a lot of the value is not in the actual building itself?

hmmm

WeWork needs to go prove itself by surviving the next downturn. I believe most of WeWork's customers are other startups who valuations are fueled by large rounds of VC investment. This capital tends to dry out during a downturn, however WeWork will still be saddled with long term leases during this period. I wonder what their strategy is to ride out a period of low capital raise for startups.

This will indeed be very interesting to watch out for. Speaking from experience, WeWork has a high turnover rate — VC-money-hungry startups line the hallways, coming and going accordingly. I don't think the established, boutique firms and agencies constitute a large enough chunk of their business to support them in a recession.

Their rent is just too high to capture the frugal companies who'll be the survivors of a poor market; lowering prices might save them, but I don't know how well their model accounts for this.

Yep. Webvan was awesome at stocking our fridge during the last tech bubble, but ran out of customers and money really fast when it burst. According to Wikipedia,

> Webvan was an online grocery business that went bankrupt in 2001 after 3 years of operation and was later folded into Amazon.com.

Hmmm... Maybe Amazon will buy WeWork for cheap, then use it to push their other services?

The main difference is not amenities or marketing but the fact that a large percentage of WeWork's customers (my company included) are paying rent with VC money. Up to 90% of their customers will go out of business. Not a super stable customer base.

The companies will keep coming and going. As long as there is a steady stream of startups being funded in SV, WeWork should do fine. In fact, they make it much easier for the startups to bootstrap and focus on their business problem, rather than worrying about the logistics.

Ready to have your mind blown? SV is not the only place where businesses exist. WeWork has 14 locations in the SF area and 44 locations in NYC. I work in one in NYC, and I bet only a handful of the businesses in the building are VC funded. They'll do just fine because tech isn't their only source of income.

Everyone wants to strike startup gold, so selling shovels seems like a decent idea to me.

True, the customer base isn’t stable... but there’s a founder born every second, if you know what I mean.

No asset valuation bubble driven by years of cheap money and privately held closed books, folks! This time it's different...

If you've lived in the area or industry more than 10 years, you know how this story ends, especially regionally where real estate commercial and otherwise is in a cojoined overvaluation.

EDIT: next in my browse list, today...

https://techcrunch.com/2017/10/18/blue-apron-is-laying-off-6...

https://www.theatlantic.com/technology/archive/2017/10/stock...

etc...

When tech crashes, the soft recovery is going to a lot uglier to a lot more people...

WeWork's achilles heel IMO is that they disincentivize non-VC funded companies from staying for more than a year due to their 70% first-year rent discount. We at Habitat are moving out of the WeWork Philly office after just a year because of this. It's just too expensive to stay.

What are people looking for in a coworking space? What does your space provide you beyond a desk, Wi-Fi, and coffee?

Whenever I've researched spaces nearby, I've treated proximity, price, and hours as the three biggest selling points for a small business, work-from-home type like myself. But I guess that's only a small segment of the overall market.

I guess if you're a bigger business maybe you'd get comfortable with a brand name - WeWork in SF should be roughly similar to WeWork in NYC, and they already have your credit card on file.

Another thing is lease flexibility as well as multiple locations. Our company has different teams at multiple WeWork locations. We have to travel to different locations sometime, and be able to just walk 24/7 into WeWork space which mostly located in the city with good public transport is very convenient. Conference room, mail handling, coffee, beer and other things help too.

Networking? Social interaction with other entrepreneurs? A separation of home/work?

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.

To clarify - not just rent one place for a month, but pay the organization a monthly rate and then move to any of the places whenever you want.

Putting up work crews in cheap motels is not uncommon.

You generally have to do it a lot before the hotel will be willing to consider the kind of bulk discounts that make it profitable.

WeWork actually has this, believe it or not.

https://www.welive.com/

For some reason, this strikes me as creepy. Like joining some sort of corporate cult, where you get to live inside an office 24/7.

It's alive!!!

https://www.youtube.com/watch?v=QuoKNZjr8_U

  Studios starting at $3050 p/m.

Seems like a lot.

outsite.co, Common.com both do this

This is kind of it. Still on my bucket list.. https://www.we-roam.com/

Selling $100M of shares sums up the entire story. No matter how WeWork will end, the founder has done his exit + salary in all the years. The last investor will be the one to pay the bills - probably the public via an IPO.

The advantage of the WeWork system is the convenience of quickly getting office space on a monthly-basis without dealing with internet for as well for example. What I have noticed that they do not cater to remote workers small start ups any longer, instead they are renting out whole floors to fortune 500 companies. I agree with others, the meeting room system is a rip-off, which is why no one is using it and people are simply squatting in those rooms.

Overall it works for me after 2 years in three different locations, there are certainly a few issues: - cooling (Miami) is either way too cold or not working at all and often comes with deafening noise - their employees are often not trained well enough, presumably due to rapid expansion - coffee is absolutely awful (maybe acceptable for American standards) - annoying tech bros sponsored by their parents - events that are geared towards the above (beer pong, really?) - getting spammed by people who think networking means sending everyone unsolicited messages offering their services - noise from people who apparently don't have to work and aggregate in the hallways instead

I think WeWork is great. But I think commutes are a time suck. How about the new trend of Officeless (TM) companies, connecting entirely online, working asynchronously and taking breaks to go to the beach and socialize with friends instead of random people.

Your talent pool can suddenly come from all over the world, and costs cheaper while making employees happier.

Only really works if all of your friends work in the same environment though right

They can work in other fields.

This article lays out a company thats a parody of every stereotype known to man.

Jesus.

>A decade ago, Mr. Neumann was a small-time entrepreneur in his 20s living with his sister, a model, in her Tribeca apartment. Mr. Neumann, who was raised on a kibbutz in Israel, was struggling with his first startup idea—women’s shoes with collapsible heels—which failed to take off. His next venture was baby clothes with knee pads called Krawlers.

Who didn't see this coming?

Trump’s recent attempt to torpedo obamacare by allowing multi-company group plans seems like an opportunity here.

WeWork should offer a group plan to tenants. It creates lockin, and most tenants are young+healthy, so this would be a great deal all around (cheap premiums, low barrier to entry for older workers).

Paywall:

http://archive.is/Fb1D4

Paywall . . .

Can access via social media (just do a search on twitter for the article) or via the Read Across The Aisle app/Chrome extension, which is free and includes a free pass to the WSJ (disclosure: I am the founder).

I did that and am trying to access via Twitter but just hit the same paywall.

Could be a browser cache thing. Try accessing from Twitter in incognito.

Archived copy:

http://archive.is/Fb1D4

Thank you.

I forget where I got it from, but I have this JS snippet saved as a bookmark--it gets around the WSJ paywall by 'redirecting' from Facebook.

  javascript:window.location.href='https://m.facebook.com/l.php?u='+encodeURIComponent(window.location.href);

Put article title into Facebook search. Facebook and the WSJ apparently have a deal on the paywall.

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 '/<p>/,/<\/p>/!d' savedpage.htm

Open savedpage.htm in a browser.

Loving your sed skills!

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