I've heard a lot of theories (cornering the market, the future of remote work) but I don't quite get what WeWork was selling folks on when it came to investing and evaluations that were so high in the first place.
Then you show that you're actually executing, at least as far as being able to grow and manage a real business with real revenues, which can easily get you another round.
From there they did two things. The first was to start to securitize the business. You can see this with things like their ARK spinoff, which allowed them to start raising money from real estate investors. Sure, real estate is a slow growth business, but it's backed by real assets, and it allowed them to start pitching to a new kind of investor while they left the equity investors in the original WeWork.
The second thing was what you mentioned, their pivot to "cornering the market". If you view VC investing, and especially SoftBank, as an attempt to find businesses that are going to eat the world with software, then you can see where WeWork's seemingly random pivot to "We" came from. You pitch the business is a fully vertically-integrated lifestyle where people live, work and send their kids to school. The potential returns on something like that would be insane, so if you can sell even a 1% chance of success you can see how it would be alluring.
It's also possible that "eat the world" was the pitch all along. I could see a world where Adam Neumann was smart enough to see the wholly integrated We as the end game from the beginning and pitch the real estate stuff as a path to getting there. The revenue and growth would be more predictable than something like a software product. The losses would obviously be more predictable too but predictable losses with a clear path to growth might not be such a bad thing if your end goal has a necessary condition of "be as big as possible".
I can see how this would seem compelling to a 22-year-old Google employee of the sort that gave us Google Glass and Google Plus, but was there any research done that this was a thing that normal people would want?
Some subset of people find this gross and creepy but it’s something a lot of young people demonstrably go for.
In my opinion the real risk would be the antitrust regulators.
They have more money than investment targets, so they basically fund a few moonshot projects that look like they have a 1%+ chance rather than a 0% chance.
I suppose the thesis is that once one of these eventually wins, the losses on the rest will be more than recovered. You just have to do enough 1 out of 100 projects.
Are we just calling "California hipster marketing" "tech" now?
WeWork is also a New York company.
You can only gather the returns from turning the world into grey goo once, and then what do you spend it on?
>It is rare for Son, who casts a wide net with his startup investments, to commit so much resources to a single company. But he said WeWork is more than just a renter of office space: it is "something completely new that uses technology to build and network communities."
>"WeWork is the next Alibaba," Son said, referring to SoftBank's early investment in the e-commerce company, which enjoyed meteoric growth as the internet took off in China.
>"I believe it will grow to a substantial scale and become one of our core companies," he said. https://asia.nikkei.com/Spotlight/Sharing-Economy/SoftBank-s...
Growth I don't get. Did they feel they were buying up a lot of undervalued properties and were going to dramatically increase in value somehow?
Office space seems like a mature market and it's not like if I own 3 buildings vs 1000 that there is that much efficiency that growth would get me.