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Comment by j4p3 | Hacker News Reader

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.

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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).

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"

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.

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.

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.

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.

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.

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