WeWork has a new CEO who is a real estate exec
social.techcrunch.com
social.techcrunch.com
...which makes sense, because WeWork is a real estate business, albeit one with an unproven model.
They’ve moved the cold brew downstairs so there is only one tap instead of two and replaced it with a much lower quality cold brew (the old one was extremely good — from a super high quality local source)... it’s small but feels like it’s probably the beginning of what is likely to be a long quality decline ...
Probably a joke in there about Shiner Bock too.
The model works, if the short term leases balance out the long term leases and other costs.
Have you ever been to a Regus? Most souless depressing places on earth.
WeWork was substantially different in quality.
Uber was amazing in the early days, the cars were better than taxis, I remember getting driven around in a Mercedes and not having to pay a premium for the nicer car. And there were cars always available, because the drivers were getting good money for every ride.
It turns out that these nicer features weren’t a consequence of software and maps and efficiently matching rides with cars, it was as simple as raising billions of dollars, and running the business at a loss.
I suggest it’s the same with WeWork. Their nicer offices weren’t a question of vision or aesthetic taste or efficiencies from technology. They were nothing more than spending Softbank’s billions of dollars and running at a loss.
I accept that you feel they were offering a higher-quality experience, but we have to come to grips with the fact that it was an illusion. They were never going to magically reach enough scale that they could break even or make money offering that service at that price to that “demographic” of customer.
I feel like WeWork is in some way in a worse situation than Uber, DoorDash, and other “gig economy” businesses. Those businesses can squeeze their employees (that they classify as independent contractors in order to maximize the misery they can inflict).
Who can WeWork squeeze? Nobody. The gig economy is nothing more than rolling back any and all protections for workers, but dressing it up as technological progress.
What is WeWork’s story? There’s nobody to squeeze, no regulations to flout in order to cut costs. There’s no inefficiency that iPads and WiFi and digital services get rid of.
So naturally, now that the money hose has been turned off, the squeeze is on WeWork and its customers.
You can get meals that retail for GBP 8 using this service. So that's a 37% discount in an industry that is notorious for its tight margins.
My first thought when I heard of it was "oh wow, better sign up before their VC money runs out"
Before I'd never consider going to a co-working space. Might as well go and sit in a grotty cupboard. Now I'm inspired to give it a go.
What’s easier? Regus learning how to offer free espresso and decorate their offices for the startup crowd? Or WeWork learning how to spend less money than it earns in revenue?
I already answered that - a pleasant environment - that's their competitive advantage. Regus aren't able (or don't want to) meet that part of the market.
By way of analogy, if we say that Amazon’s pricing is a “competitive advantage,” we can also explain what Amazon has done structurally that makes their pricing hard to copy. Anybody can set a low price on a product or service, but not everybody can do so and make money.
Same with WeWork. If a nice environment is a competitive advantage, we can point to something in WeWork’s structure that makes it difficult for Regus to duplicate.
If Regus can duplicate it without difficulty, then we need to rethink whether it’s an advantage, or simply something you happen to prefer, but doesn’t matter.
By way of a different analogy, consider free coffee in hotel rooms. Everybody prefers it, but for decades you got it in motel chains, but not from the big hotel operations.
Why idn’t they offer free coffee? Because their customers were actually corporations, and the things that mattered to corporations were centralized billing, locations close to airports and business centres, and so forth.
This allowed the big hotels to drag their feet on in-room amenities like free coffee or free WiFi. It wasn’t nearly the competitive advantage it appeared to be.
Regus being bland is probably something they consider a commercial edge tbf.
Much like we now have up-market coffee shops. It's not innovative, just a perfected execution of an existing idea.
Starbucks built an empire on the unserved masses of people who (1) wanted to be people who went to coffee shops & (2) were scared to go to actual independent coffee shops.
It seems a good path for WeWork to follow. Lower costs and broaden appeal, just enough to cater to people who won't use Regus.
Nobody's 'scared' to go to an independent coffee shop. This is a ridiculous snobby notion.
McDonalds makes terrible beefburgers too, but they're doing just fine.
OTOH, it could be because of all the fun toys that they attract that crowd.
WeWork is also substantially different in price.
In London, WW is probably 2x the price of a Regus office, for comparable location and surface area.
Sorry I dont see value in spending millions in some ar rig to project how an office space may look. It would take thousands of buildings decked out to make.the cost worth it... how stupid...
That vision has been clipped now, before we ever saw a chance to see it finish playing out. If part of their valuation was future potential, then I agree they were worth more while trying to be something new, than they are as just a real estate shell.
It's becoming pretty clear that neither Uber nor Netflix have that. Uber's biggest costs are drivers, marketing and regulatory issues which keep piling up. Netflix biggest asset appears to be original content as the platform itself has plenty of competition, and costs for content seem to go up linearly.
WeWork seems to just rent out real estate and at least on the surface it does not look like tech is defining fundamentally how they do it.
Uber services opportunities that couldn't be serviced by traditional taxi companies (on demand, low latency rides).
Which makes the crux of these businesses "Does your technology create enough additional, currently-unserved demand to hit your growth targets?"
Wework not so much it seems
But no, Netflix is no longer special there - Their tech is tried and true, the problems are still interesting but well solved. They ceased being a tech player... five years ago?
That being said, only a small percentage of their market cap is related to their technology. They could outsource the whole thing to BAMTech and it probably wouldn't affect them much.
But they are currently innovating massively in machine learning and other data analytics. They are also innovating in "Hollywood tech".
Hollywood still uses old tech to move from capturing the actors performance to putting it in front of viewers. They mostly still track their assets with Excel (or on paper!).
Netflix can get a show from filming to viewers a lot faster than most of Hollywood can.
I bet I could find that exact sentence used somewhere to justify wework as a "tech company".
This is how monopolies are started.
- They're headquartered in Silicon Valley or some city like San Francisco, Portland, or New York.
- They have an app.
- They are adjacent to actual tech in some way.
- They portray the image of being innovative in some way.
WeWork has all of those, making them a "tech" company in the eyes of journalists and the average person, though for the life of me I don't know why someone would install the WeWork app.
I keep hearing references to Theranos and Enron as if the two companies are even comparable (they are not).
Theranos was an outright fraud. WeWork has over 500,000 paying customers in a fully viable real estate business as proven by Regus.
The supposed loss of “massive value on the order of Enron” was fictional as WeWork is a private company. This was the risk taking of a few institutional investors who wanted that kind of risk! Venture funds lose money on a majority of their picks. So obviously Softbank’s largest-in-history 100B venture fund is going to have largest-in-history venture losses.
It’s actually a good business at its lower valuation now! Ask Regus how valuable 500,000 customers with that kind of growth rate would be to them.
I guess their 3bn market cap is a pretty good indication of what that kind of customer base is worth to them, given that they have acquired it without incurring massive losses per desk to do so. That's still a good deal north of WeWork's down round...
WeWork was growing at 10x that, however who knows now that this PR disaster of the century has happened.
With the ouster of Neumann now and a sensible CEO I wish they had gone public so I could invest. It’s a perfect contrarian scenario. I doubt you’ll see this much negative sentiment about a growth-stage company again for a long time.
And most people still don’t know they exist!