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Comment by mdorazio | Hacker News Reader

Cynical answer: he convinced VCs that his particular brand of shared office space was better than everyone else's, actual revenue be damned, and they believed him. That's it. Straight from the article: "Neumann declared that WeWork’s “valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”"

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A more cynical (and arguably more accurate) answer would be "he didn't".

Came here to literally type "he didn't" thank you for doing it first!

There are 3 ways to gain Karma in this place: be first, be smarter or cheat.

I'd also add "be pedantic, but use enough words to not be trite" but that would be a bit pedantic without being trite

Now, I don't cheat. And although I like to think we have some pretty smart people in this message board, it sure is a hell of a lot easier to just be first.

Also "swing for low-hanging fruit, like vague I-told-you-so warnings whenever a security breach is disclosed".

Not that I plan to try, but what do you mean by "cheating"?

Login with multiple usernames to upvote yourself. Pathetic? Perhaps. Effective? Also perhaps. Worth it? You be the judge [1].

[1] - https://en.wikipedia.org/wiki/Unidan

It’s a reference to a scene in the film _Margin Call_.

Do people actually care about karma?

Their valuation is based on spirituality? Are they a business, or a church?

I mean, they can actually be more valuable than other such companies if they get the ambience right. Maybe that's what he meant. But if they're referring to the ambience as "spirituality", I cannot take them seriously. [Edit: And if by "spirituality" they mean something besides ambience, I still cannot take them seriously.]

If I had more faith in the market's rationality, I would short them as soon as they IPO...

> If I had more faith in the market's rationality, I would short them as soon as they IPO...

Total tangent, but how much of the stock market do you think is fair? By fair I mean abiding by SEC regulations (and other obvious laws, such as regular fraud), versus unfair where people are using insider trading, trying to influence a short, or even have some ulterior motive perhaps related to politics?

Now I hope someone more knowledgeable than me chimes in with links to articles or papers, because I'd really love to learn more.

I said that the market might be irrational, not that it might be unfair.

"Irrational" is values that are not based on a reasonable interpretation of the company's financial state and reasonably forseeable future. This is what I think is meant by the saying "The market can stay irrational longer than you can stay solvent."

"Unfair" means corrupt, rigged, or otherwise dishonest. I wasn't suggesting that. But like you, I'd love to see the results if someone can measure it...

Presumably he meant 'spirit', but thought 'spirituality' sounded more elegant or whatever (despite not being synonymous).

>But if they're referring to the ambience as "spirituality", I cannot take them seriously.

I dunno, the Catholic church is doing just fine in terms of revenues and real estate assets, and that's just one example. Then again, religious organizations get preferable tax treatment...maybe WeWork will eventually pivot to religion down the road.

Unlike WeWork, the Catholic Church (and the mormons and scientologists) have realized that the best tax shelters come from actually owning the property that is used, not leasing it.

He owns the properties that we work leases!

Yeah, but it took them like 300 years to get to cash flow positive. Today’s religious investors aren’t willing to wait that long.

> Their valuation is based on spirituality? Are they a business, or a church?

Maybe their investors saw value in their company culture?

"The Best Startups Work a Lot Like Cults" -- Peter Thiel

Some of the most successful cults did effectively operate as "startups" bootstrapped by a counterpart religious service community, i.e. the Oneida Community and the Amana Colonies

Church can be a lucrative business too. A well run church can generate nice profit.

what's the liquidation preference on their energy and spirituality?

Anyone know what revenue for the next largest coworking space is?

You mean "largest" :-)

https://en.wikipedia.org/wiki/IWG_plc

About $3 Billion in revenue, been around since 1989. Not considered hip, no glass partitions, but actually profitable.

Yeah. I still don’t see why wework is meaningfully different to regus.

So IWG plc, which has a British stock-market listing and does business mostly as Regus, had 2018 revenue of £2.5 billion and a current market cap of about £3 billion.

It thus trades at about 1.2x annual revenue. WeWork's multiple is way higher.

WeWorks multiple is irrelevant when it is losing money every quarter. This current era is redolent of the dying embers of the dot com boom - over leveraged loss makers trying to go public to pay back vast sums of borrowing from investors

This gets tricky. Yes, some loss-making businesses never turn profitable. But others do (i.e. Amazon). And when it comes to real-estate companies, the rather goofy U.S. tax rules mean that even quite robust companies will engineer huge depreciation losses when they actually are doing fine.

WeWork might still be way overvalued in the private markets. But it could also be a lot healthier than its reported losses.

AFAIK, we work does not own the offices, they rent from another company owned by the CEO probably

Amazon reinvested in itself to grow, it was losing money while building into a company worth more.

AND it was relatively easy to see that that was what was really happening, i.e. that they had the the choice to be profitable much earlier.

I'm curious what Regus' take is on WeWork (i.e. strategy).

In other words, did they start a hip new WeWork-killer? Attempt to compete on price? Have special retention marketing campaigns to stave off clients from going to WeWork.

See https://www.spacesworks.com/ which is basically Regus with a different brand name.

I am using their co-working in Copenhagen since a few months and quite happy so far.

Interesting, I did not know Spaces was under IWG! They are here in DC as well. Materially the office space is the same offering as WeWork, but there is a noticeably different vibe/sheen that is hard to pin down. Neither appeals to me as I find it hard to focus / get work done in coworking places like this, but WeWork just feels better executed / 'cooler' at first blush.

I've only been to WeWork in London, yes I agree the vibe is a little different. You could argue they're both faking it being hip but WeWork does a slightly more convincing job while Spaces feels bit more corporate.

That said, I found the WeWork in London extremely noisy and tight compared to my current space. It might be just a side effect of real estate prices in respective cities, though.

I've been to that Spaces Noma in DC many times, and I immediately said to my coworker that it was a "cheap imitation of WeWork". The same entrepreneurs in glass cages concept, the same barista upfront, but without any real originality. I don't like the WeWork vibe but at least there's some original thought going into it. Spaces is just an imitation, but you know what, does it matter? From a business perspective, immitation is the sincerest form of flattery, even if it feels like a cheap imitation.

In my lifetime we will learn if 'tech' companies are overvalued.

The fact that my friend, a total casual, is investing in Tesla and Apple via Robin Hood has me concerned the market is inflated with dumb money.

The fact your friend is using a no-fee platform to invest in the second-most profitable company in the world paying out a reasonable dividend is problematic? I mean, I guess they could invest in SPY but Apple's been a solid 5-year outperform. Tesla's worth half what it was 6 months ago, so seems like a balance of risky and less-risky assets.

Now Beyond Meat, well, that's a different story haha.

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