The WeWork IPO
stratechery.com
stratechery.com
But when it does turn its attention to that, it is as unflinching in its criticism as it was optimistic in its appraisal of the business opportunity:
Everything taken together hints at a completely unaccountable executive looting a company that is running as quickly as it can from massive losses that may very well be fatal whenever the next recession hits.
At first glance, maybe a recession can enable WeWork to acquire lot's of real estate under really favorable conditions and make it's premium when the recession is over. Don't you think so?
Also I'm under impression that the WeWork ysers are not the well funded companies but smaller companies and contractors and those people usually make money on their services, instead of relying on funding keeps flowing intil they exit.
EDIT: Grammar.
Like if WeWork had a great business model after a massive recession, so would a competitor that didn't have an awful legacy portfolio to deal with.
You know what they say? If you owe your landlord 1 month of rent for one room, you have a problem but if you owe your landlord 10 years of rent for 1000 buildings, your landlord has a problem.
I also suspect WeWork doing deals with larger companies is not going to help them much in a downturn, because they are likely to be savvy players as well. If WeWork is threatening to default on a space, I'm sure there will be corporate office teams from stable industries saying, "Oh, we'll take that nicely built out space, thanks."
https://www.nreionline.com/finance-investment/struggling-vac...
I don't feel bad about my loans either. I think banks are going to get screwed with a low value USD.
You’re right that it might reduce the cost of growth ...
If you entrench yourself deeply enough and people are looking at eviction and foreclosure and cancelling construction projects they could fight for this. Call it capitalism by hostage negotiation.
This actually seems to be what some larger companies like GE are planning on, (and Foxconn has already executed successfully) but it's bizarre to see this plan launched at the IPO stage.
The implied source of such bailouts are the landlords, who may prefer to cut lease terms versus see e.g. 40% of their portfolio blow out simultaneously. (My personal view is yes, landlords will renegotiate terms. But they'll also demand an arm and a leg, likely in the form of senior debt and aggressive warrant coverage.)
Landlords aren't going to renegotiate unless WeWork manages to hold back the corporate veil-piercing lawsuits. Given everything we know about their internal corporate governance, I'm not sure why any landlord would accept a haircut right away. There's probably a mile-long line of lawyers waiting for the chance to go after them; most would probably do it on contingency.
Marriott for the most part has transitioned mostly to an all digital company over the past two decades. The Marriott of today is primarily about hotel operations (i.e. branding, bookings/pricing/revpar/SEO, front desk, housekeeping, wifi, remodeling) and its loyalty rewards program and mobile phone app (BonVoy).
Much of its assets have been moved to a standalone REIT that trades under a different ticker. In a way similar to WeWork, Marriott effectively leases hotels from the REIT.
So in that sense, if WeWork can be considered analogous to Marriott, then in a hand wavy way the $47 Billion market cap valuation could somewhat make sense.
The bear case is that its not a well implemented corporate structure full of accounting traps and is actually a fraction of Marriott's valuation...
Apart from the fact that Marriott has 11.5X as much annual revenue?
The analogy would be: Marriott is to Host Hotels as WeWork is to multiple office property owners
Um.. that's one bull case, but the article presents a much stronger case (namely, the one that WeWork itself is making). That is, that WeWork will do to offices what AWS did to servers - make it so the average company never buys physical servers, but rather outsources all of those operations to Amazon.
Analogously, WeWork is imagining a world in which companies never build offices - it's not their core competency, after all. Rather, most companies just get an office at a WeWork instead.
So their potential market is huge - they've only tapped a tiny tiny percentage of "all people who work at a desk".
With the rise of serverless computing and similar technologies, there's also the question of utilization. Setting up your own server for an occasional request is expensive because you end up using some small percentage. of the capacity. AWS can make a lot of margin by pooling and smoothing demand for those occasional services. I don't think there's a good analogy in the office space category: maybe shared kitchens? Your average small business is much better at managing it utilization percentage for office space than for compute.
Sure a company doesn’t need to offer beer or kombucha or be in central working districts, but not having to figure out all this info on their own when they just need a few rooms in a remote city is what companies are paying for. Like scalable sever infrastructure, the benefit isn’t the cost savings, so much as not having to hirer experts for things outside your business domain.
I'm certainly not convinced WeWork will ultimately be a beneficiary of that--especially in a downturn that will lead to companies cutting back on expenses they don't really need to incur. But the basic idea makes sense (and of course there is a long record of companies like Regus in the space, albeit with a more traditional take).
But the situation may be different if they see it as a way to attract better and/or cheaper employees and to reduce the facilities costs associated with those employees.
That said, when things go south, companies (and managers within companies) do lots of haphazard things in an effort to be seen as doing something whether or not it makes long-term sense.
Don't run a janitorial service? Use contractors and hirer/fire at will [1]. Don't run a CRM service? Use Salesforce and pay per user. Don't run a server company? Use AWS and turn on/off servers. Don't run a payments company? Use Square/Stripe and never think about payment types.
Modern business is becoming (for better or worse) about owning 0 assets and only focusing on your core product. Yes, with all these things you can do it yourself, but having a company that is an expert in that service saves your business time (and often already employees the best resources in that industry).
[1] https://www.nytimes.com/2017/09/03/upshot/to-understand-risi...
That said, there may be reasons that WeWork could entice companies to join, but there still need to be reasons. Extrapolating with a hand wave just doesn't cut it.
Again Netflix is equipped to have office managers, find people/firms to scout nice neighborhoods to remote cities, and stock kombucha, but all of this requires hiring people to do a job that Netflix fundamentally doesn't care about. WeWork will save money for companies not ready to commit to long term leases, and it will certainly save time for companies that don't want to have to think about this
A better analogy may be legal work. Law firms offer a way to use lawyers as companies need them, and to share these resources among multiple companies. But all corporations still hire in-house counsel to fulfill the needs they know that they have. None of them say "analyzing law isn't our expertise, so we exclusively use law firms." But almost all of them use law firms, because there are niche specialties that aren't worth hiring for, and times when more lawyers are needed to handle a particularly heavy load.
WeWork can definitely fulfill similar analogous roles in real estate. When Facebook has three people who wants to work remotely in Missoula, co-working spaces will win their business. But Facebook is never moving its campus to WeWork, and any startup with over 50 people and decent funding will realize how unnecessarily expensive it is to use a coworking space, and cut out the middle man. What's left is not a $1T/year business.
No, that's not what is going on with Netflix and AWS.
Netflix stores metadata in AWS, and uses their OpenCDN for streaming traffic.
The metadata servers can autoscale, but not enough to call it elastic since it's not correlated with end-user requests.
> Netflix is as equipped as anyone to manage their own data center.
They don't think so, which is why after a 5-day outage they moved to AWS in the first place.
At a high level, you're wrong by 180 degrees. I'm guessing you thought Econ 101 can be applied anywhere, a common but wrong-headed fallacy by HN'ers.
Source: worked at Netflix.
And according to the article, 40% of WeWork's revenue comes from large corporations, so this isn't a one-off thing either.
With respect to utilization, there are some small businesses which are seasonal, or which have lumpy staffing requirements, for which we work might fit the bill.
Is the WeWork moat as big as AWS, probably not, but dealing with local real estate regulations and contractors in hundreds of jurisdictions around the world is not nothing.
If this switched to global, as I'm sure it is for enterprise accounts, I could see it being very valuable. If the variable cost of adding a desk in an office anywhere in the globe is, say, $500/seat that is so much easier than having to deal with setting up offices wherever you find talent.
That all being said, I have serious problems with the design of WeWork offices. Their horrible sound design means you· better hope you don't have an office neighbor that is making calls all day. The office I worked at had a private equity firm that rented out a corner of the building for a few of its remote employees. They then also rented the neighboring offices for those employees, which remained empty, so they could have privacy.
I worked for a startup that also rented out our extra space to other startups and there were a ton of benefits: conference rooms with tvs and teleconference hardware, phone booths, a very nice coffee maker and other kitchen appliances, shared outdoor space, nice furniture, copy machine, a receptionist... all things that most of the >10 person companies would not want to buy for themselves, but we all got to share because of the setup.
> With the rise of serverless computing and similar technologies, there's also the question of utilization. [...] AWS can make a lot of margin by pooling and smoothing demand for those occasional services.
I disagree with both points. I'm a small business owner - I was also a small business owner in 2012. (Two different businesses). One of the biggest changes that have helped me out nowadays vs. back then, is the fact that WeWork exists.
In 2013, when we decided we wanted an office, we started to look for one. This was a super long process, and in our specific case we eventually gave up and stayed with a previous arrangement (unimportant to the story - that's usually not an option). The reason this was complicated was:
1. We needed to actually find a good location and a place that looks decent. This a) took time, and b) wasn't easy for a decent price.
2. Once renting a place, we'd need to decorate it / etc to make it actually usable - most places aren't immediately ready. This also includes furniture/etc, without which the space isn't useable.
3. We'd also need to take care of a lot of related payments and setup - internet, electricity, etc. Internet alone is annoying, as you have to setup office routers/etc.
4. To make everything really complicated - we had no idea how much space to get. We were a 10 person company, with plans to grow. But leases are for 2 years - do we get a space for 10? Of course not, if we grow we are in trouble. For 20? That means we're paying for a lot of excess space for a few years.
Compared to the above, setting up servers is much easier :) And as you can see in point #4, WeWork can smooth out capacity.
In contrast, last year my new company (2 people) moved to a WeWork. It took 3 days - we looked at 2 locations (also non WeWork), picked WeWork as it was the best combination of price vs. space provided, and moved in a week later. WE recently grew to 4 people - it took 3 conversations, and we found a new room in the same building that can house 4 people, we moved a week later.
This is a company that can thrive in a Fed-fueled ZIRP economy that only goes up. If we don't dip into recession and keep growing for the next 15 years, this company will be genius.
But if there's ever a stumble in the road, it's also the type of company that immediately collapses on itself.
I also can't stress enough how detrimental Softbank has been and will be to Silicon Valley. They are dumping billions into companies that have no business being alive and if/when the econonmy collapses, it's going to be bad for the entire world. It's like preventing forest fires that clean up dead brush and instead sets up for a huge uncontrollable forest fire.
I'm personally trying to figure out how to protect myself, whether it's through buying US Treasuries, or gold or diversifying my cash in various currencies. But personally I don't think the fund is going to survive and there will be terrible repercussions from it.
Companies going bankrupt happen all the time, but if their demise is prevented because they keep getting capital injections from Softbank, then once there's a systemic event so big that they can't get their next infusion, then they will all go bankrupt in one fell swoop with a bunch of companies going bankrupt, the companies providing those companies services going bankrupt, hundreds of thousands out of jobs, etc.
Imagine if WeWork went bankrupt right now. All their employees would be fired, and all the companies that provide services (catering, janitorial, Salesforce? AWS/GCP? etc) would layoff those employees. The bankruptcy trustees would be making a mad dash to try to sell their assets before the markets collapsed, depressing the markets.
This is obviously a worst case scenario but that's what basically happened during the dotcom bust.
People's preferences vary of course but I imagine that, under those circumstances, a lot of those remote workers would like an office they could go into--at least some of the time.
Then he compares to that to We Work...well, don't many customers already have libraries, cafes, and their own homes to potentially work from? Did AWS customers have numerous server options to easily use in case they needed to save money? How are these comparable? Adding ping pong tables and surveillance tech to an open office work space is vastly less useful than AWS.
And corporate entities, surely WeWork will rely on those and not just contractors/freelancers/entrepeneurs, right? Well, corporations in a recession would likely lay workers off, so this dream WeWork has of gaining corporate partners seems unlikely in the next 5 years, if a recession is to hit as everyone claims. These corporate players will probably have excess office space of their own, never mind paying for more.
I appreciate attempting to present the bull case, but comparing WeWork to AWS is laughable.
As AWS got its start making it easy for startups to get access to infrastructure, the bull case for WeWork is that startups choose that environment over signing a traditional lease. It’s not that a startup can’t work out of a coffee shop, just like we could have theoretically run our own email servers. But a physical location and address has advantages and WeWork opens that to more people with less friction than the pre-WeWork options.
But that’s the bull case. I’m not a financial analyst and I’m not your financial analyst so this isn’t financial advice, but my risk profile tells me to pass on this opportunity...
Can someone ELI5 to me why spending a dollar on OpEx is better than spending a dollar on CapEx?
Instead, with CapEx, you go and spend $10 million on a data center buildout (raising a lot of money from investors which is work too) with $0 revenues coming in at the time, that's real money with no guarantee of any return.
The real magic, though, is flexibility: you don't have to bunch all of your server purchases into an annual (or worse) exercise, execute a buildout at a data center, and then somehow allocate them to internal teams consuming them prior to the next capacity planning exercise. You just fire API calls, and a bill arrives at the end of the month. The bill may be a lot of money, but the amount you were spending on planning, building, operating, fixing, and decommissioning your infra was a lot of money, too, split between big spiky equipment purchases and employee salaries with a dusting of leases and electricity on top.
And from an investor point of view, if the business fails you don’t have to worry about the sell off / write down of any hardware that was purchased to get the company started.
The simplification of OpEx vs CapEx is worth a decent premium, especially in the early days when no one knows if the company really has a chance and everyone is scrambling to figure out what you’ll be when you grow up (aka product / market fit).
If you can lease it instead, the tax burden is placed on the lessor. In Houston, that's around 3% of the value of the property.
They've been useful to allow established companies to expand and "open an office" in a given city with a handful of employees without the time, expensive, and effort of a long term lease. My company has done it at least twice for a year+ before they grew it into a full office.
After all, there are plenty of competitors to McDs and Wendy's, most of who are doing quite well even though there's a McDs on nearly every corner and all burgers basically follow the same recipe.
(That being said, I think WeWork isn't executing very fell. I'm partial to Cross Campus if I must use a hipsterish co-working space, and Regis if I want to use a professional temporary working space.
WeWork isn’t a brand new offering; Regus has been around for awhile. But it has mindshare and that has value.
The question is will it be an AWS or pets.com. I won’t answer that for you, but I’m not putting my money into its IPO... ;)
I'm sorry, but this just isn't true. The very first product launched under the AWS banner was S3, which was fundamentally different than anything else on the market. There were tons of companies offering shared and VPS hosting, but nobody offering an API-driven, usage-billed storage service like S3.
A few months later they launched EC2, which was absolutely comparable to the various VPS hosts (if differentiated somewhat by its API-driven use model). But S3 was first, and it made a loud and clear statement that AWS was aiming to build something unlike anything else on the market at the time.
Before AWS, companies did IN FACT time share servers. The whole mainframe model was that IBM owned the server and you only rented a couple of hours on it.
But before WeWork, people also rented office space. WeWork is not the first company to offer rentable office space to workers. They're not breaking new ground here.
Ok. It was so uncommon that I didn't encounter it for the 15 years preceding AWS. It's like pointing to a car that runs on vegetable oil. Yes there are IN FACT cars that run on vegetable oil, but nobody does it statistically. This is much different than the chance that a business (with income) is renting commercial space. Yes your local mom and pop pool company doesn't rent an office (and that's a non-trivial amount of businesses, as I've worked for some), but they aren't going to rent space in WeWork anyway.
For an extreme example, here's a shared hosting company that's been around since 2002: https://www.nearlyfreespeech.net/services/hosting
> Ok. It was so uncommon that I didn't encounter it for the 15 years preceding AWS.
That just shows that.. you may not have enough experience. Time sharing was the norm before personal computers.
Some good reading here: https://en.wikipedia.org/wiki/Time-sharing
Companies didn't own mainframes, generally. Your understanding of "exceedingly rare" is incorrect. The statement that AWS invented the rented server model is also incorrect.
What if the corporate partners are partners in flipping excess space in the case of a recession?
To predict the success by drawing similarity is always fool's game.
Also, whilst a normal business can't really build a "AWS competitor for Chicago" the "A WeWork competitor for Chicago" seems like a much bigger threat. If the only way that WeWork can win those situations is by running at a loss in competitive markets and then monopoly pricing in other markets you've got two choices: Either they'll never make money because they'll always be loss leading, or they're facing being broken up by a regulator.
I'm trying to think of a large business that could build (or did) an internal WeWork like division, and then offered that service to outside parties.
Huh. I guess that'd be a big white collar employer that did project centric work. Like a big consulting firm. Or an IT services unit, like Microsoft or Oracle.
Imagine Amazon bundling their own real estate, construction, facilities, space planning, and misc A/E/C functions as a service. For their own use. And then offering that service to outsiders.
That's what WeWork should look like.
--
I now predict that's exactly what Amazon will do.
Amazon will compete with WeWork and others in this space. With the advantage of themselves as their own first customer. And unlimited capital.
Is that true though? I've read many stories about internal Amazon teams not being allowed to use AWS and that, for the longest time, it was for customers only.
Edit: Target, Borders (the late bookstore) and gap were example users. It was called merchant.com (website url now redirects).
Supposedly AWS came about when merchant.com and the main site became hard to manager resources for, so they were broken out into services and APIs a la AWS.
https://techcrunch.com/2016/07/02/andy-jassys-brief-history-...
I think more companies should look at selling their internal core-competencies to outsiders. It would make starting and managing businesses easier for everyone.
AWS also operate out of a limited number of locations where they can optimize against their fixed costs (locations where they can negotiate power and bandwidth costs). Some of their running costs decrease when resources are not in use.
WeWork needs thousands of locations in order to be attractive to the target market and empty desks are pretty much the same cost as a full one (ongoing lease per sqft).
In San Diego there are just 2 WeWork locations, the closest being a 25 mile commute (through traffic hell) from my home. In order to be compelling they would need to be not much further than my local Starbucks.
The money glut printed since 2008 has mostly not gone into new productive capacity, it has gone into a lot of software-related hooey like Slack, WeWork, Uber, and various new social networks. I don't even think these have improved the target sectors that much, far less have they been worth the labour and other resources put into them.
It feels like another Fiscal Crisis is coming.
Total global QE is $12.3T.
U.S. stock buybacks alone could be about $5.3T--or an order of magnitude more than global VC investment.
Stock buybacks are just tax-optimized dividends.
I haven't used teams, but it's pretty great compared to say, Skype for Business, for instance.
It was aided in low education investors who are able to invest easier than ever.
I see technology as useful, but there are many companies that have not found a path to profit. this doesn't work.
Money is created only via debt, not by bank to bank lending, and not by printing.
Also, money is actually becoming cheaper (10 year yield is at its lowest) and we are probably entering a negative yield regime.
The underlying root cause is technology and demographic. I.e. the "glut" is due to low demand and not due to high supply. This is one of the reason that you see this big valuations.
I think wework is a noisy, distracting and expensive pit stop on the way to remote work. The company turnover at the weworks we were at was remarkable, to me. I don’t know the root causes (business closing? Unsatisfied?) but it seemed very transient.
Our businesses moved to fully remote and enjoyed a significant rise in productivity each time.
Wework feels like a massive bet on open plan offices. They didn’t work for us.
That commons is a fun space, and easy to plop down in, but not super-conducive to productivity.
On the plus side, some vendors come along with free beignets if you'll just listen to their pitch.
WeWork is indeed a pitstop. A pitstop to better offices for companies on the rise. Or a pitstop to working from home for people who think they need an office to work from but eventually don't.
I'm not sure what "noob" factor there would be... meeting clients at home would be worse. Meeting them at a cafe would be better than at home, but worse than an office. WeWork or any other coworking office is one step below your own office, but far above the alternatives. If you're worried about the signals you're sending to clients, at least a rented office (even at WeWork) sends the message "we have enough money to afford this". A cafe or home office does not send the same message.
But they can sign a deal with WeWork that gets them a 6-person enclosed office that they can move into tomorrow.
So you pay a premium to avoid the hassle of doing it yourself. Much like anything in life.
And if the expansion into London doesn't work out, they cancel the month-to-month lease with WeWork and their financial exposure is finite. You can't just walk away from a 3-year office lease.
This was highlighted for me when a friend’s company’s office was damaged by a burst water main and they moved the entire team to a local co-working space....until their office was renovated.
Sure - you could make a bet coworking is like Bridal magazines - and count on a large continuous flow of demand by very short-term customers. Not the kind of bets I like.
Two points I would’ve like to see him analyze given the AWS metaphor
1) gross margins - this article reports 15-20% not 30% AWS https://news.crunchbase.com/news/gross-margins-wework-and-th...
Maybe AWS was able to improve GM over time and the author expects similar trend but he should explore this given the whole biz is built around variable income.
2) comparing the core competency between AWS and WeWork. He only gives this lip service and assumes the two are the same but I don’t agree.
I buy the argument that There’s core competencies in server management. In the old days servers were pretty basic - you buy, install, and turn on. Done. But then companies realized all that fixed supply was expensive so they made server supply dynamic, being able to dial up and down on short notice. That, plus integrations with lots of dev tools, necessitated a lot of software on top of the hardware. So now a company can invest precious engineers in managing that, or can use AWS or Google cloud, where the fixed costs of developing that software scale infinitely. Plus add on new requirements around security, etc and it’s a lot for a company to manage in house.
Compare this to office space. The fixed cost of lease is NOT scalable (only so many people you can fit in a building), and the core tasks of managing an office are...basically the same as they’ve always been. Sure you have some new design trends and IT requirements, but it’s slow moving. And who manages office space? HR and IT, which while valuable, aren’t forcing companies into trade offs between working on that or new product features / revenue driving opps.
I definitely agree wework is valuable for the flexibility. I just don’t really see mass adoption from large companies in the long term. Sure some large company may temporarily use them when they enter a new market but they will revert to managing themselves once they feel confident in signing their own lease.
Saying what's the difference (valid question not pointed toward you) with Wework vs. IWG is like saying 'why a Porsche vs. a Chevy' or even 'Why a 911 vs. a Corvette'. It's not explained by things other than emotion over a brand. I say this as someone who has purchased many 911's and wouldn't touch a Corvette with a 10 foot pole. Doesn't matter the price or the performance. It's all in my head but that head is pretty emotional about that type of purchase.
(One other thing is it's likely that the people makeup of a wework office is much different than that of a IWG office (I am making a guess here I don't know but suspect it is). As such it's the same as 'why starbucks vs. dunkin donuts' for coffee. Very generally the people sitting and getting coffee at starbucks appear physically different than the ones sitting in a dunkin donuts.
Regus has 2.5 million customers but WeWork has only about over a quarter of a million. I live in a public housing estate in Singapore and there's a Regus Business Lounge in our estate's public library. We aren't even talking about the central business district, here.
I think WeWork has a lot more to catch up on in terms of scale and reach. Right now they're just building up hype like a tech company but really, they're just in the property space.
This is the key "problem." WeWork is a boring real estate business that is trying to frame itself as some massive scale startup. Add in growth fueled by a ton of VC money (not earnings), tons of leverage, not even for owned property, but leases, some questionable deals with the CEO, insane hype and trying to redefine accounting metrics, and in the end you have a "boring" business dressed up in a pretty hype coat made of red flags.
So essentially, in far fewer locations, WeWork has more customers.
I will need to find coworking space in a couple months and will be looking at Spaces due to my less-than-optimal experience at WeWork.
The main factors for our startup choosing the Regus office in San Francisco were price and privacy.
Regus was vastly cheaper when we evaluated the two options. I'll have to check with the CEO for the exact numbers, but it ended up being several hundred dollars cheaper per month. Also, WeWork offices generally have glass windows, while Regus offices are still traditional closed rooms with doors.
In terms of other benefits: - meeting rooms tend to be easier to book at a Regus location, since they don't seem to be used much. - WeWork offers a bunch of consumable amenities: all types of milk, coffee, tea, kombucha, (previously) beer. Regus only has very limited options for coffee and tea. - WeWork spaces host social events frequently. Regus maybe once a month? Our building management tend to host more events than Regus, interestingly enough. - Noise level. Common areas in WeWork are similar to a coffee shop if there are lot of members in that location, whereas it's usually quiet in the kitchen & common areas on Regus floors.
This might read as an IWG support post, but I still miss the social aspect and youthful energy behind WeWork, as one of the sibling comments alluded to. But does it make sense for a seed-stage startup to pay for the cost differential? No.
So, instead, I went to look on AirBNB. I could rent a full apartment for about the same amount of money, except this would come with a view, with a couch, a shower, kitchen, weekly cleaning service, and all kinds of nice things.
But I kept on looking. There are numerous extremely luxurious buildings in the city where middle to high class people live. And a lot of them have rooms for rent. So I considered my own office room inside an apartment I share with 2 others. I can lock the door and I get 2 pets for free.
Best of all: The building is only 2 years old. They have a full sized gym on the 22nd floor, 7 swimming pools of which 2 olympic sized ones and 2 infinity pools, free saunas, free yoga and spinning lessons every day, a bowling alley and gaming hall, an indoor soccer field, et cetera.
So I took that. The building even comes with integrated office rooms and a full floor with couches and desks and tables and ping-pong tables and table-tennis tables and a grand view of the city. So it's not like they're against people working from there.
The problem with WeWork is that they aren't that interesting, not even in cities that are more expensive. The credits you get only allow you to switch locations until they run out, and then you need to purchase new ones for a lot of money.
They should really do a few things:
1. Look at the area they're in, at the very least be cheaper than AirBNB when it comes to offering a space to work from. 2. Once someone is a member, allow them to work from ALL WeWork locations (in the public areas). No credits cost, nothing. 3. On the website, per location, clearly show how crowded it is and how crowded it is expected to be that day.
They're way too expensive for what amounts to a crowded and noisy library. At least in a library people are expected to keep quiet so you can work. At WeWork I've been told you're to expect people coming up to you.
Side note: WeWork might be a great choice for companies who want to rent their first office space. That's not something I looked into.
Absolutely spot on
Ben's AWS comparison is apt because I don't think many people consider AWS to be a natural monopoly. It has huge lock-in and a huge first-mover advantage, but is not a natural monopoly.
With things like hotels and travel companies, there is a hidden lock in with their integration with enterprise back end systems.
If there is any lock in, that’s my first guess as to where it would be: Big companies would integrate with WeWork tightly, and there would a lot of friction in setting up another company account, similar to what happens when big companies have a process around becoming an approved vendor.
WeWork, on the other hand, has very little “lock in”. Not much to stop your business from moving out.
As a startup co-founder and CEO, I've never found their offer compelling enough, way too pricey to put it bluntly.
And I really think that remote work is here to stay and grow.
In other words, I can travel and work remotely, and maybe once or twice a week check into a WeWork for a proper work space, unlimited coffee, and a bit of camaraderie and networking. For $100-$200 a month.
If it was quiet as a library and equipped with real desktop screens (at least two) and good keyboards, my opinion might be different.
And if working on a laptop is your thing, you might as well do that from an actual library or a Starbuck...
That's corporate hot desking for you.
My desk was a bit too close to the conference room and I could hear people talking aloud on the phone, it was overall extremely unpleasant.
Of course I could kinda work with the laptop and the noise, but I never attained the magic -flow-
There are a ton of obvious competitors, they are not big, but they are everywhere, at least in the UK. Hotdesk rental has been a common SME thing for ages.
What if same thing hapoened for office space. BYOD and support for remoting allows people to work anywhere. If marketing finds the company HQ unattractive, they could just move elsewhere.
Does it actually make sense for different teams to be stuck in one location. Should they instead work close to customers or partners?
WeWork has hundreds of competitors, including every building in a downtown with unused office space, to say nothing of better organized entities.
I’d love to know what industry is!
I’m not sure that’s true. IIRC AWS started as a way to monetise the excess capacity that Amazon had to have on-hand anyway to cope with spikes.
https://www.networkworld.com/article/2891297/the-myth-about-...
Imagine a WeWork competitor that launches in a few years, at the bottom of the coming recession, that isn't doing sketchy financial things to make their founder wealthy. They could match or undercut WeWork's prices at a time when WeWork will probably be barely alive (if they make it that long) and still make money.
"AWS for Offices" is a great story, but it forgets that AWS has some serious competition now. Hardware as a service stopped being a disruption and became the norm with a competitive market. So too will "offices as a service" if WeWork's model is correct.
Also, the founder dealing is not that relevant to the future of the company. Yes, he is a public persona, but for the day to day operations, I believe that there are operational personal that make the decisions.
The problems for anybody else are diminished returns and the limited amount of banks that are willing to give you money for nothing.
They're not even that great at what they do, they have regular downtime.
As a tech community organiser, Slack's biggest appeal is that our members usually already have the desktop and mobile apps installed because of work, so it's relatively easy to onboard everyone by just asking them to add another workspace.
I hope someone from WeWork reads this, and knows it to be true.
But when that market tightens up, and we see less new startups coming out and with less money than before, those startups will take a hard sobering look at their finances and decide they simply can’t afford to blow money on shitty overpriced hipster co-working spaces, which unfortunately for WeWork is the only product they offer. WeWork will run into cashflow problems and that will be the end of it.
Also, it isn't just tiny startups that are using We Work. The article stated that 40% of their revenue comes from large enterprises. The money will be much slower to dry up for the large, established companies.
-- Home offices for employees that can have one.
-- Move remote employees into corporate HQ or other existing offices, lay-off employees who refuse.
In a recession? Probably remote work. A small startup that's running into cashflow problems, and who has no dedicated office space -- coworking spaces seem like the first overhead expenditures to get cut.
Individual contractors and small teams (<10) will likely go back to working from home or out of cafes.
Larger, enterprise teams will have more, and better, options and may cut expenses by downgrading to cheaper accommodations either via less "hip" direct competitors (Regus) or taking on cheap/discounted leases directly.
You mean the people (mainly the CEO) who is cashing out massively as a result of the IPO?