This is a real mess.
What I mean is, they thought they were going to get away with it.
Nor their dumb dog![1]
[1] The parent reference is to the catch line in Scooby Doo, for those that aren't familiar. And quite well fitting to the situation. https://youtu.be/mbXxgQLlF08
https://thisweekinstartups.com/e969
One part that really resonated is when Calacanis is arguing that, once you become super rich, you need to rely on your authentic, pre-rich friends to give you candid advice (because after you become super rich, you can't really trust new friends when so many folks want a piece of your wealth). Calacanis' idea, which makes sense to me, is that Neumann didn't have a strong enough social base, so that he didn't have anyone candidly telling him stuff like "Umm, you know, this We trademark licensing deal is completely batshit insane and analysts will see this as a giant, bedazzled red flag" before he went ahead and did it.
Insightfully, Calacanis predicted Neumann would walk back the licensing deal, and actually talks about Masayoshi Son being one of the only people that can give Neumann the harsh dose of reality he needs.
I think this is all kind of a moot point, though. It's like WeWork jumped out of an airplane without a parachute and is now going "How do we fix this??" I'd put money down on some form of either (a) a restructuring or (b) essentially being taken over by the major lenders/investors as inevitable.
They're on the extreme end of "startup realizes public markets will call them on their shit" but you can see why they'd be confident they could pull it off.
Yes, and it caught up to them just a bit too soon for the IPO. Had the CEO been a little less brazen in his self-dealing, they might have pulled it off with more success.
With all the financial strangeness with WeWork and inside deals and etc I would think it doesn't look like a great investment anymore ... is SoftBank just "in too deep" and as far as they're concerned they have to double down?
If their end goal is having the profit margins of an electric company, then these valuations are pretty hard to justify...
PS: not too fond of WeWork myself, but that's how I could see it.
Basically: 1) if remote work continues to grow, they become an easy magnet because every company will pay for WeWork reimbursements more readily than some random local expenditure. 2) like AWS, they allow a big financial change: real estate moves from CapEx to OpEx, which is desirable for companies.
Edit: one tweet https://twitter.com/patio11/status/1161796809741627392
To be fair, most of the remote people I work with are relatively senior and that may make a difference. They probably care less about having the social aspect of an office and they probably tend to have more room at home for, e.g., a dedicated office.
There is also just the contingency aspect of it- I had a scheduled power outage in my building when I was working remotely, I could either take off that day, or just find a coworking or other space, but I chose to try a coworking space. Power outages may not be common, but there were also days when I had family in town and such, and just didn't want the distraction.
I went a few times when it was novel, but after that I really only use it less than 1 in 5 of my work from home days. And on some of those WFH days, I'll walk to the coffee shop accross from the wework to get an espresso and then go back and work at my house.
Point being, I don't find wework to be a compelling remote work offering when it's free. So it seems unlikely to me that there's very much room to grow in that market.
But why would they? Even wealthy companies now insist that most business travel is done in economy class. Big airlines can’t sell business-class seats just by making expense claims easy to file. So why does WeWork think it can sell flashy office space?
One of the points of uncertainty though is whether they can keep up the flashiness, ie, they might be selling business seats at economy prices.
At no time in those examples did I have to exchange funds, pass my corporate card, etc.
Speaking as a home remote worker (Salesforce/Heroku not IBM or WeWork) that likes to visit offices sometimes and travels quite a bit, having the option of on-demand access to working spaces with other humans, and a facility-access processes I can rely on, and a facility I can mostly assume will work would be a pretty great upgrade to my work experience.
Expense reports suck. It’s not just the process burden, but making that the norm rather than an exceptional process means that today’s automated-scanning systems will probably put more false-positive-powered issues onto your already full plate.
Removing the process makes it a tool that more people will use. That’s the value prop I see.
Office space seems a bit more eclectic.
As a side note: The airline analogy isn't correct. Business and Premium Economy products are doing quite well with growth of those two offerings having been quite robust over the last 20 years. I'd say belt tightening did happen, but with respect to first class fares. Easy fix...just rebrand your old first as business!
BA’s first class is on a par with Emirates business class, actually...
The problem is that wework is just some combination of shady and awful at business, and there's no reason to think they'll get any better with scale.
Their offices are also more professional, because they're designed for people to do actual work and not just be look like they're working.
[1]: Which leads to insane decisions like restaurants that make "Bloody Marys" with beer...
>> Didn't wework have to switch to kombucha after someone realized that a place where you pay money to hang out all day and drink is in fact a bar and you need a liquor license?
A "liquor" license and a "beer and wine" license are 2 different things. A beer and wine license is a few hundred bucks (depending on your location), and just requires some paperwork. A liquor license can be over $100k depending on your location.
Meanwhile, Regis has quiet facilities, with dedicated offices, cubicles, and conference rooms. It may not be sexy, but it's not trying to be.
For Regus, the opposite is true--most of their spaces are cubicles/offices with only a handful of locations offering "open-office" style spaces.
I don't know what WeWork you're seeing, but the startup employee experience in WeWorks is generally better, from a professionalism and productivity perspective, than typical startup offices --- if only because they've found a way to scale up cost-effective small private offices.
We ultimately moved to a fairly large private office in Chicago (Chicago commercial space is cheap), and I like it more than I like WeWork, and I don't like WeWork the company at all. But the notion that WeWork isn't providing professional office space is just false; the space they provide is, by a wide margin, more professional than tech industry norms provide.
Unless WeWork outside of NY and Chicago is starkly different than WeWork everywhere else, I don't see how this is even a viable argument. I'm eager to see the counterexample you'll provide.
† (I'm not talking about the WeWork conference rooms, which are excellent and highly professional, so much so that people I knew in Chicago would borrow our WeWork conference credits to hold client meetings in even though they had their own non-WW offices)
What is being missed though: WeWork have actually built out a fairly comparable level of capacity to Regus. The difference is that WeWork are heavily concentrated in major cities, whereas Regus is diversified (they have locations in Mongolia and Nepal, I believe).
The reason why is simple: Regus made the mistake of overbuilding in major cities last time round. The US business went into BK, they aren't making that mistake again. In fact, even taking this very capital investment strategy, you can see that they still have substantial swings in their business.
WeWork have built out massive capacity which cannot be filled (in London, they actually have a meaningful market share of new office space). They did this because you can show great short-term results. BK is inevitable.
I would go as far to say: anyone who believes this isn't bullshit has identified themselves as an idiot too (at least, in terms of investment knowledge). This isn't remotely difficult.
Not really surprising. Some uses--like a conference room for a big customer meeting--are pretty much business necessities. But things like an office for remote employees who mostly just prefer to get out of the house but not work out of free space somewhere are the sort of discretionary expense that companies will chop pretty quickly if they're tightening their belts.
I’m skeptical that’s a moat that will defend WeWork but it’s certainly a handy feature.
https://www.iasplus.com/en/publications/global/thinking-allo...
I was curious and looked them up a while back, it was EXPENSIVE compared to other options.
I'm not at all sure how many companies filter "We'll pay for an office for you to work at WeWork... but not elsewhere." In fact most remote work that I've seen isn't interested in paying for any local office space... they want to save on that, not spend more / manage it.
That type of premium felt irresponsible as compared to the possibility of increasing FTEs.
My own gut is they can price at a 1.25x-1.75x vs. market.
This implies that yes, they have to double down.
The only issue is that SoftBank appears to be unaware they need an angle. They are unaware that geometry exists. They are unaware that maths exists. They just seem totally unaware.
In my experience, it is often a complete waste of time to look at someone doing something stupid and think: "They probably know what they are doing".
In 95% of cases, near 100% in financial markets, that person is just an idiot.
Son's record as a VC is horrible. He raised something like 6 VC funds before 2001. None produced anything but busts. And he actually invested more capital on the way down.
His only quality is zealotry. This the absolute worst possible trait for an investor (he isn't an investor, he is a salesman).
SoftBank accounts for half the outstanding Japanese corporate bonds. https://www.ft.com/content/24c4a8a8-7885-11e9-bbad-7c18c0ea0...