I worked from a few locations in Philly and they were always totally empty. There was like a staff of 12+ well-meaning but extremely bored WeWork employees there attending to my needs, and the shitty YC startup I was at a few years back got some insane discount for a luxe plan there. Even in like, 2019 before their failed IPO it was clearly a dog company.
Really a marker that we are at an end of an era of excess — glad that I got to enjoy the ride of other people’s money, even if only in a slight way.
I was at a WeWork in Philly two weeks ago and I was sitting on a couch when a rep met with a prospective tenant and was told that they were totally booked up at that location for offices. Later that day I was at another WeWork in Philly that was packed in all common areas.
There are some that are always a little sparse to be sure, like the Navy Yard in Brooklyn, but I’ve been to 75+ in the past year or so in 5 different countries and for the most part they are well used and the permanent office parts are really full.
Not saying it’s financially sound but the core product is real.
If I had to guess I would assume the issue is spending from boom times and debt. Theres an actual business there too.
Same here in Hamburg, Germany. Most offices are rented, it was hard to an office of the size we wanted, there was exactly one available in four locations.
Even their EBITDA is negative, so debt is not the (only) issue. Perhaps they have locked themselves into long-term overpriced rental agreements?
I’m curious how hard this is going to hit commercial real estate, which already seems to be on the brink of collapse. What are the cascading effects like the subprime mortgage crisis?
Afaict, the reason they announced that they most definitely may be going into bankruptcy next week is to play hardball with their commercial land lords and try to get a deal which will keep them alive.
The idea being that the landlords (and everybody) knows that the commercial real estate market is super depressed, so if WeWork disappears the landlords may be stuck with an empty building for years.
If they go into liquidation or restructure then all their liabilities go up for renegotiation. So the threat of this happening makes all contracts renogotiable regardless of timeline.
How does Softbank still keep standing? They keep losing on the vast majority investment they've made, and yet they haven't come up against any financial issues? I feel like Softbank going bankrupt is going to be the Black Swan that affects Silicon Valley the most.
They got a couple wins recently with the ARM IPO, Coupang IPO, and ByteDance (aka TikTok). WeWork (and Uber) has been a massive hole, but SoftBank is diversified enough that they can withstand it.
They have historically been one of the biggest movers in Chinese and Indian Growth VC, and have a significant presence in American Growth VC too.
They made oodles of money off Slack and DoorDash for example, and their 2010s investment phase was thanks to them being flush with profits from Alibaba and Tencent.
At the end of the day, compared to most other Growth Funds, they tend to hire some solid investors who know how to find capable operators.
Though, lapses of judgement do happen a la Neumann, but that's like saying anyone who invested in Pivotal or Joyent is dumb. This is VC. It's not guaranteed returns. There's a reason why it's called VENTURE capital.
Alibaba, ARM, Bytedance, Coupang, Oyo, Xiaomi, Didi, Slack, Doordash...Softbank has plenty of hits to make up for its losses. That's how the VC industry works.
They aren't afraid of risk and they've been around long enough that they appear to be at least an averagely competent investment firm which just takes way more risk than most would consider reasonable. Softbank was also founded in pretty much the perfect time in history for a firm like themselves to succeed, a highly speculative low interest rate environment.
Their hits have more than made up for their misses.
This is really good news for actual real players in the coworking space. Being disruptive with venture money conceivably helps new offerings along, but in this case it was never anything but a massive fraud that distorted the entire market.
No it’s not. The only other real player is Regus and they are absolutely f’cking horrible with bad poorly run spaces and predatory billing. They’re a scourge.
The WeWork product is fantastic and I’ve tried all alternatives. I’m in a different city basically every week and if they go under or stop being basically the same I’ll seriously mourn the loss.
It’s not the cost they’re both sort of comparable and WeWork isn’t really like the discount option.
It’s that WeWork is SO MUCH better run. The keycards work the website works and has current accurate information and so on.
Regus/Spaces makes the DMV look like an elite customer service organization. The second time you book on their app and end up at a building under construction you’ll say the same.
1. Asking the floor manager to practice his singing more quietly across the hall (seriously)
2. The rep supposed to be giving the tour forgetting to turn up and calling me several hours later to apologize
3. Someone loudly telepreaching from the next room every day in the style of shouting
There are no real players in the coworking space, and any interest for startups in the field was destroyed by WeWork. So no, this is not good news, just a nail in the coffin for the industry.
I personally don't visit coworking spaces as I prefer to work from a local coffee shop or go to the library. But why does there need to be a big national chain of coworking spaces? WeWork doesn't care about my mid-size town, but there's an independent co-working space here. You get access to some coffee, a good desk and chair, and Internet. I think they have some spaces for calls or little meetings, too. What does WeWork offer besides, I guess, locations in multiple areas?
A lot of people who use coworking spaces are small companies or digital nomads. Digital nomads like to travel and have a consistent working environment.
As a former coffee-shopper, I can definitely tell you the experience working from there vs a coworking space such as wework is night and day. It might be fine if you manage to find a good coffee shop and consistently abuse their space, but doing that in random new locations is tough.
Smaller coworking spaces ought to develop partnerships with other small spaces in other cities, to allow their customers the same “I can work from any city” perk that WeWork does. Fancy social clubs do this—e.g., if you have a membership at the Alta Club in Salt Lake City, it gets you access to the New York Athletic Club, etc.
Yikes. Sitting at a WeWork right now... Love it, I often have an entire floor jus to myself. Many locations are ghost towns, some have entire floors shut down.
I have a personal WeWork subscription and love every bit of it. I travel a lot and can use any of the WeWork locations to get my work done. Far better than any cafe I would ever be able to find (obviously)
As a private, non corporate costumer, I’m sad to see them go.
“Ghost town” probably depends on your location and country. The ones here are sometimes so full that if you don’t book in advance, you can’t get a seat for on-demand
I can echo the sentiment of "ghost town" in several WeWork locations from the outside, and many corporate spaces too.
I think the fundamental problem is they over-expanded too quickly and charge too much, leading to an oversupply of locations and a huge pile of leases in the debt column. They're glorified Regus and drank their own KoolAid that they were a unicorn rather than a business.
Exactly. Don't over-expand into random, dead-end, low-traffic strip malls. There is a WeWork location here that I've never seen a single occupant in because it's on a university campus between dorms and outside dining, and the lights are always off. Another Webvan/Worldcom perhaps.
Corporations are conduits for the founding shareholders and other beneficiaries of the money conduit
Success of the corporation has nothing to do with the success of the founding shareholders, if being used as a conduit: something to draw a salary from, something to sell related property to, something to sell your shared of. Authorize more shares to be created to replenish holdings. Vest at whatever speed you want (30 days? Why not)
Neumann understood that, his employees and sycophants should have understood that but did not. I’m currently with a company where all the employees have never been in a “tech startup” and think we are one, when we’re not. I’m the only one that seems to have experience with a tech VC backed tech startups to tell the difference.
I think its weirder that there aren’t more of him. Like, people either get too risk averse or comfortable at sort of outdated amounts of money. Or they create companies with this wide ensemble cast of characters for clout, which is also very outdated and unnecessary for what these companies do, which also prevents them from having flexibility on how to direct the conduit to their pockets. But its all so outdated, given the expansion of the money supply there should be way more Neumans, way more Bill Hwangs a version that didnt get margin called and liquidated everything successfully.
To be honest, I thought this had already happened. Maybe I'm just an idiot, considering I'd thought that had happened, and yet worked from a WeWork a couple months ago.
I wonder if ill be able to buy a wework sign on some sort of auction. I tried to buy one of the Twitter signs but they required thT you remove them yourself and secure associated permits etc. on your own. No joke
If necessary based on circumstances, consequences, and alternatives, potentially. In my case, at the time (dumb and early 20s), I simply could not afford the ~$60k to renovate the ~$30k property to local planning standards by the court ordered due date, due to the extensive damage caused to it by college student renters, nor would the city foreclose on the property or provide any relief. I made a calculated decision based on the opinion of attorney what the city could do for an unauthorized demolition operation, and it worked out. "Where's the house?" "What house?" I partnered with the local historical society so they could take as much as possible from the property of historical significance or value ("The house is in bad shape, take whatever you can before scavengers strip it").
Not an attorney, not your attorney. The intersection of reality and the legal framework is tricky. Determine your risk appetite, prioritized potential outcomes, and second order effects. Then act.
Delta, Six Flags and GM filed and successfully exited chapter 11 in recent memory.
I hope at least my local wework (in Brooklyn) doesn't get shut down! More and more people are coming in to use hot desks, though the private offices are still half empty.
it's kind of interesting that it's not though, isn't it?
intuitively, a shared office space makes sense to me. I find it really useful as a remote employee to get out of the house a couple of days a week, and for my employer it's pretty cheap and is a perk which helps them hire from all over the world, also cheaper than hiring american engineers.
Is it just a pricing issue? Hot desks are about 250 USD/month
well i read the whole thing, and it provided 0 facts about the actual economics of a coworking space. It was just an indictment of bad and dodgy leadership.
>We has consistently been so far off on any forecasts in their original pitch deck that it appears numbers are more of a nuisance than reporting metrics. Their forecasted profits: $14 million for 2014, $64 million for 2015, $237 million for 2016, $542 million for 2017, and (wait for it) $1 billion for 2018.
>Except in 2018 the firm lost $1.6 billion, which is likely understated.
These are the financial facts from the article. Tell us the math of your 2023 WeWork and compare to how much their lease must be, etc.
People keep saying that but they are just armchair-ing. The whole commercial real estate market is in trouble and it has little to do with how WeWork is run today, which is not the same as the money blowing Adam Neumann days.
I've been telling entrepreneurs to "know your limits." Knowing your own limitations gives rise to endless possibilities. Because I understand that my abilities are limited, I've surrounded myself with entrepreneurs who are more talented than me, and by letting them take the lead, infinite possibilities come to light.
I believe that the information revolution will last 300 years -- from PCs to the internet and on to AI. How do I make SoftBank into a corporate group that will keep growing for 300 years? Understanding that an organization can't be sustained with just one technology, one business model or one leader will let it prosper for a long time.
I don’t think that’s true, didn’t they sign a bunch of hard-to-get-out-of leases for properties that Adam Neumann purchased personally? How he got that past the board is beyond me.
Hah, not so much. Many times, WeWork loaned Neumann the money (at spectacularly good interest rates), he personally purchased the property, and then leased it to WeWork.
Reminds me of Enron, where the clowns in charge happily handed their corrupt CFO Andrew Fastow hundreds of millions to run a private equity fund that purported to purchase loss-making assets at a profit to Enron.
Then, after Enron reported good quarterly numbers, this fake fund would simply sell the stake back to Enron, with the CFO taking a gigantic management fee for orchestrating the charade.
Public companies have been banned from doing this, but I guess anything goes when you're private.
Ehh, I disagree. OP is incorrect in that WeWork owns little of their own real estate, but from what we can tell they were leased at fair market rates from their actual owners (some of whom are Adam Neumann himself, which is... bad).
The only parties that really got fleeced here were Softbank and their totally unclothed VC siblings who bought Neumann's messianic complex like rubes. Building owners by and large seem to have been treated fairly?
I would argue the gig economy has been worse, since those who got fleeced were largely working people being squeezed and having massive externalities and liabilities dumped onto them.
Well actually… didn’t they lease buildings with shell companies and almost no recourse by building owners? I think a bunch of commercial real estate holders are gonna be holding a bag of pants.
Seems he internalized the lessons from Ray Kroc, only he used real estate to extract wealth from investors/shareholders instead of franchisees. "owning the land on which the burger is cooked"
Scene from "The Founder"
"You have a miniscule revenue stream, no cash reserves, and an albatross of a contract....
What you ought to be doing is buying up plots of land, then turning around and leasing said plots to franchisees, who as a condition of their deal should be permitted to lease from you and you alone. This will provide you with two things: One, a steady, upfront revenue stream. Money flows in before the first stake is in the ground. Two, greater capital for expansion. Which in turn fuels further land acquisition, which in turn fuels further expansion. And so on and so
on. Land... That’s where the money is. (BEAT) And control."
Do they own a lot of buildings? I thought most of them were long-term leases. Their balance sheet only lists $3 Billion of property assets and equipment [1]; that's not that much office space in the tech capitals of the world.
Really a marker that we are at an end of an era of excess — glad that I got to enjoy the ride of other people’s money, even if only in a slight way.