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Comment by artfulhippo | Hacker News Reader

How is this anything but the sunk-cost fallacy, throwing bad money after bad?

Seriously looking for someone to explain why the WeWork glass is half-full.

They rent buildings long term for low prices and then lease them back out in small pieces at higher prices. If they can keep the buildings full enough, they could make a lot of money!

Right now most of their buildings are still pretty new, so they are not full enough, but that should change over time.

Yes Regus does this and is profitable - given Regus is valued at $3 bil It might make sense to buy them instead of pumping another $3 bil into WeWork that doesn't look like it will ever make a profit.

Maybe if you are talking about some random investor. But if we're talking about SoftBank, which already owns ~30% of WeWork, probably not.

Yes but sometimes even for companies in their position they say enough is enough to the losses and choose to let them go into administration instead. I'd say its unlikely SoftBank will choose this but it is an option for them.

They can kinda do something half way in that direction just by waiting. The lower WeWork's cash on hand gets, the harder of a position Neumann is in. Of course, it's not clear if it's a credible bluff since Softbank isn't in a great position either.

Interesting negotiating position!

Or buy Regus for said $3B and combine that with Wework at a much lower valuation. Own the market. Own 51% of the whole shebang. Done.

But in real life things are not quite that easy ;)

What would buying Regus get you besides a slow growth, lousy brand?

Lots of people who know how to run the WeWork model profitably?

A valuable and profitable business.

How much did WeWork's brand help exactly? It just made the crash harder. Nobody cares about a brand, and definitely not when it comes to office space.

Nope. WeWork is clearly the "go to" brand in the flexible office leasing category. Regus' brand is "has been".

I don't see how two massive profitable companies with more members and locations and revenue are somehow worse as a brand than WeWork because of something as silly as a brand name. Perhaps WeWork is meant for those who look at such superficial details when dealing with office space but it's not the majority.

Anyways whatever brand they had has transformed from asset to liability now when 75% of the valuation evaporated in 2 weeks. An overinflated bubble investment with no serious metrics or leadership is not clearly anything of reference.

You should go read up on branding.

On the financial side, yes, there's a tremendous opportunity to be hugely profitable. In 8 years, WeWork is now bigger than IWG after 30 years. Where do you think think the upside lies?

Regus does something similar, but slightly different.

Regus is geared towards small businesses anticipating a long-term home. WeWork is geared towards individuals and companies that don't know if they'll be around in one year.

As a freelancer, Regus is too large of a commitment while WeWork is more manageable.

I had a month to month lease with Regus a couple of years ago.

No true. WeWork's business has already moved very firmly into stabler, longer lived tenants.

Regus offers all the same flexibility as WeWork but without the flashy decorations and services, and thus offers a lower price premium.

If you still want all that then Regus has a new sub brand called Spaces: https://www.spacesworks.com/

Working out of a Spaces office - I'd have to disagree. Services not provided include microwaves, coffee, reliable Wifi, working Ethernet ports, comfortable office temperature, remotely competent staff, reliablly being able to unlock your office door, an ability not to throw away personal belongings in the kitchen, breakout areas (they're turning > half of every kitchen into another office and they're already tiny compared to WeWork's), clean toilets, clean kitchens, any events, any sort of help with letting guests into the building.

Have you tried the standard Regus offices?

Nope, I know our Spaces is converted from one but I never worked in it before that or in any other Regus. Any idea how they compare?

We use Regus in NY and LA. 4 and 10 person offices, changing daily or weekly depending on where the sales team is meeting. Works great for us. Everything is clean and it's always quiet. Kitchens are well sized and stocked. We know the reception staff in each location and they do everything we ask.

WeWork was much more expensive and a much noisier and busy environment, especially if you don't get your own dedicated office space, and if you're going to do that then major cities all have tons of subleases which are much more attractive.

WeWork buidings are filled with clients that are brought in by other SoftBank money. It's human-centipede equivalent of VC-funds circling back around to each other, in hopes that suckers will invest in it and then they pull out.

The most obvious problem with WeWork is that the company has been run by someone who is some combination of corrupt and insane. Changing that element is an obvious solution to at least try.

Why wouldn't it be easier to rebuild this in the midst of a recession from scratch when rent is cheaper.

Same reason rent would be cheaper - fewer potential renters, especially new small businesses

WeWork collapsing makes raising Vision Fund II impossible. Letting it survive until the fund closes makes the 6B worth it

WeWork dominates the flexible office leasing business any many large and important markets around the world. It would be difficult and perhaps impossible to replicate what WeWork has achieved. And since it can make money at 50-80% occupancy rates, there's a massive profit opportunity.

It would be difficult and perhaps impossible to replicate what WeWork has achieved

Well, apart from that IWG had already achieved it, of course.

Regus has taken 30 years to become much smaller than WeWork.

IWG is bigger than WeWork in every metric (sq footage, members, locations, and revenue) in 2018.

Anyone can grow fast by spending easy money without any need to earn a profit. What does that prove exactly?

It's been done for a century before and has 2 major profitable companies with sound and proven financials.

WeWork is absolutely nothing new, the industry already knows what the optimal numbers need to be and WeWork is nowhere near them to ever be a profitable business in its current form.

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