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Comment by duxup | Hacker News Reader

It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it.

I know there were some theories on cornering the market, or getting some sort of huge buy in / contracts with companies hiring remote workers but for the most part there's plenty of office space (at least in my area) and remote work that I see rarely involves the hiring company shelling out extra for expensive office space for remote workers.

I wonder what other folks selling office space in the market think about all this? They seem to operate just fine and financially seem to do so with a lot less risk than WeWork.

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> It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it

The nutty thing is WeWork could have worked as a well-executed business. The core thesis, that companies of all sizes appreciate the flexibility of spinning up and down remote workplaces as a variable (versus fixed) cost has legs.

There is a borrowing-short-buying-long aspect to their business, but that could be managed through a combination of first-loss guarantees and sandboxed leases (on both sides).

The problem is the CEO, enabled by Masa Son, showed zero discipline on any level. Nepotism, self dealing, lack of focus, cost inflation...about the only thing they did right, it seems, was expansively disclose all of this to their investors.

The vibe I got from WeWork is that the CEO was phony but not fraud, and he joking admitted his ridiculous plans, and investors said yes assuming all the financially ridiculous stuff was a joke. Or it was an attention play where he got as far as he could by betting investors wouldn't read the fine print until they had too much sunk cost and had to pray for a miracle exit.

Don’t forget the weird cultish vibe of WeWork, like the forced summer camp, etc. This alone tells you something is very wrong.

They seriously had forced summer camps? WTF?

On mobile but look up their reviews in Glassdoor or indeed. All reviews are suspect individually but there is definitely quite a pattern.

Forced summer camp, nepotism, back stabbing politics, etc. Sounds like a hellish place to work.

it's not uncommon with hypey vc funded startups. I've gone to two different startup camps, it's very much so kool-aid drinking exercises

Note that in WeWork’s case it was not a “startup camp” like you mention, but an actual honest to God employee summer camp with mandatory attendance. Like a camp at a lake with archery & campfire stories, except everything is whitewashed with corporate retreat brainwashing.

Don't forget the "no eating meat" on WeWork business.

We was already being valued at around $17B in 2016 and 2017 before Masa came in and took it all the way to $47B. That $17B valuation was likely too high too so all the enabling blame isn’t on just Masa.

Side thing. I don’t know how things will work out, but SoftBank put in $9B and owns like 30% of the company. It’s valuation is below $20B now and who knows how low it’ll go. Or what will happen with them needing money. SoftBank and the fund are at best going to be out $4B. Is that what’s likely the case? That money is essentially flushed down the toilet for SB and their fund?

That is basically what they did, but they also marketed it really well and made the process seamless. Everyone points to Regus as an example of a company that already existed in WeWork's space, but as far as I can tell, most people have only heard of Regus because WeWork is so often compared to them.

Before WeWork, most people weren't aware that coworking spaces were an option. Startups would work out of homes or they would find cheap office space and sign long term leases for spaces they might soon outgrow. WeWork solved these issues for them.

Now, I don't think there's much of a competitive moat. I don't think there's much stopping companies from moving to any other co-working space. Their corporate governance issues are crazy. They are probably overvalued (at least as of their last raise in the private markets). But they certainly are the 900 pound gorilla in this space and the space has gotten much bigger as a result of them.

There's marketing and there's targeted marketing. All the people who need the services Regus provides know about Regus.

Right. I never heard of Regus until I needed to work from home. Then I searched for co-working space and voila Regus name on every building I found.

I googled WeWork when I needed space, but a Regus place popped up closer to me.

It probably depends on where you're located but co-working spaces have been a thing in Silicon Valley since at least the late 1990's (first Internet boom). Everyone in the tech industry knew about them.

Regus was very well known in professional communities, i.e., lawyers, accountants, consultants, before WeWork. Especially during the recession it was a great, professional looking place to meet with clients without the overhead of an office lease.

I wonder if by more people knowing about these options because of WeWork ... if more are actually doing more of it who weren't already?

There could be some value there, maybe, but I've looked at WeWork in my area and it's expensive... for having to share a lot of space. It seems like a high bar to get folks into that.

I heard about Regus years before I'd ever heard of WeWork, however, all of the other new players in the space (barely a week goes by without seeing an ad for a new building in London with flexible offices and coworking) have only really gained visibility since.

Have a feeling the newer, smaller players with more limited portfolios (and exposure) might survive better.

There is a place near me that is part of Regus, but you wouldn't know it, it's very much positioned as a co-working style location. They seem to be using the tactic of setting up parallel brands that don't have the baggage of the old, but have access to their capital, management and expertise.

I frankly don't see We work having any long term advantage over any of the other big players.

> But they certainly are the 900 pound gorilla in this space

They are very much not a 800 pound gorilla. That would mean that they could dictate the market, but with some of the most expensive prices for a mediocre offering in comparison to the competition, they can't really do that.

> Before WeWork, most people weren't aware that coworking spaces were an option

Is this true? I am skeptical. If it is true it speaks to the mindboggling ignorance of Silicon Valley decision makers. I was living in a small (<500k metro not in california in 2009, and there were already 2 branded “coworking” businesses (that were well marketed to the tiny tech community). I may be the exception but I had not heard of WeWork until much later, but I wasn’t in a talent resource decision making position at the time, it wasn’t really my need to know those things. If it was and I didn’t, I would have fired myself for gross incompetence.

Regus may be huge, but they're generally not listed in any of the coworking space directories I've been checking.

I know they're in my city, but the website location quotes daily prices based on a 24-month commitment.

Either they don't feel threatened by WeWork and independent coworking spaces, or they don't feel the need to adjust their terms and contract conditions... which I find curious.

Before WeWork, most people weren't aware that coworking spaces were an option

I remember co-working spaces and “live-work units” in London in the 1990’s.

I’ll admit that WeWork has a certain cachet, Millenials can’t imagine anything cooler than getting an Uber from the AirBnB to the WeWork, but that’s just a fashion and they’ll move onto something else soon.

Yeah that broad stroke of millennials isn’t at all true.

...as far as I can tell, most people have only heard of Regus because WeWork is so often compared to them.

This may well be true, but I'm not sure that's precisely a negative. Most people don't need to hear of Regus unless they're looking for ready-to-go space for a small company, or if they work for a company renting such space. (I'd heard of Regus, as I worked at a company renting space at Regus. And it was a really nice environment. This was back in 2010, by the way.) And I think anyone who was actually doing that search would have pretty easily come across Regus.

WeWork's "innovation" in some ways was marketing directly to developers, pitching themselves as "we're a tech startup ourselves, catering to tech startups just like you!", so people putting together startups would already know their name before they did a search for space.

I think the established office owners were astonished at the high valuations in an otherwise boring industry. I remember this article from a few months ago. https://www.reuters.com/article/us-usa-property-wework-value...

It also mentions the big problem with We, than in the next downturn the revenue will likely stop and it'll be in trouble.

The radical transparency is refreshing. WeWork became We because it doesn't work.

> I wonder what other folks selling office space in the market think about all this?

If I owned a bunch of office space, I'd be exiting now (or would have already exited). I think it's probably like the bitcoin effect: bitcoin got notorious, so all the other coins went up too. IMO, uncoordinated pump and dump.

That or maybe round up some traditional investors to prep for swooping up some good buys after the dust settles?

IPO valuation aside -- it is premature to write the WeWork model off

It could end up being a strong counter-cyclical model -- and outperforms as the economy tightens

Traditional office space is a 2, 5, 10 year commitment and a pain to move things around -- with WeWork you're paying monthly and relocating geographically is simple

CFOs will often look to pay more per month for shorter commitments which fit well with budgets and can be terminated quickly if situations change

WeWork also makes setting up an office in a new region super simple vs contracting with local landlords

I don't think anyone's writing the model of "lease office space on flexible short term basis, including by the desk" off. But the many other companies doing it without free beer, self-dealing and Ponzi scheme approach to growth and valuations are probably better placed to weather recessions...

The elasticity is nice, sure, but in a contraction wouldn't we see less startups needing office space overall?

If the economy is in the toilet it's hard to get funding to pay someone for office space to hold your startup that you can't fund.

And to the degree that We Work gets used as a "working from home" option, I expect that in any sort of crunch, many of those people will be told to just, you know, "work from home" and rent conference room facilities etc. on a daily basis as needed.

I'm sorry I've heard these claims but I'm strongly sceptical. WeWork source their office space on long term contracts and lease them on short term contracts. So in order for them to make more money during a recession there needs to be an increase in demand for office rental space during a recession. Even if that does occur, a competitor could come in and rent some of the office space freed up by the recession and out-compete wework by having lower costs. That's best case. In reality, in a recession companies look to lower their cost - the first people they'll get rid of is the high cost wework spaces, consolidating employees into larger regional offices (which traditionally has the side benefit of lowering headcount). No one is increasing their high cost offices during a recession.

In a bull period, you're right, CFOs will be willing to spend a little more on high risk projects to allow them to mitigate the risks of long term contracts, but that's not what happens during a recession. During a recession they're overwhelmingly looking to demonstrate a lean, low cost company to shareholders.

Like many of the wework stories, it'd be nice if it were true, but it's just simply not very likely.

If everyone moves from long-term office spaces to short-term ones, at the same time that overall office demand declines, then the price of traditional office space is going to crater... taking with it the price (or demand) of WeWork space, which is already not exactly operating at the best margins ever.

And it worked brilliantly

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