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.
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 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.
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.
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.
They already are doing that targeting the very small business audience:
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.
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.
Only consumer-facing companies are resilient enough for you?
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.
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).
Oh and yes, I do work from home, sometimes the entire week.
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.
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.
Selling emotions is a big business. Lots of brands are relying on it.
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
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.
Try telling a Bostonian that Dunks isn't a lifestyle choice...
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.
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.
I am not saying it's more expensive than wework, but it is damn sure more expensive than just looking at rent + monthly bills.
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.