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<\/a><\/p>\nIn September 2017, WeWork became the sixth most valuable startup in the world. The co-working company takes on long-term leases for raw office space and builds out the interior into trendy, millennial friendly spaces that are then subleased to Fortune 500 companies and startups alike, one conference room or desk at a time.<\/p>\n
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To provide a sense of WeWork\u2019s fast-spreading dominance, the startup has dazzled tech investors by portraying itself as a Silicon Valley-style company that serves as a \u201cphysical social network\u201d for millennials. It has raised over $8 billion to date, accruing over $4.4 billion through the Japanese tech giant SoftBank\u2019s Vision Fund in 2017 alone. Additionally, it was valued at $20 billion this year, which is the largest valuation in New York City and the third biggest startup valuation in the United States after Uber, Airbnb and SpaceX.<\/p>\n
The impressive valuation of a startup \u2013 which coincidentally encourages the startup lifestyle \u2013 is worth more than Twitter<\/a> ($12.96 billion), Box<\/a> ($2.44 billion), and Blue Apron<\/a> ($1.54 billion) combined, Business Insider<\/a> <\/em>reported. Yet, industry experts, professors, and the general public has been left scratching their heads whether the co-working giant can justify its grandiose appraisal. With a $20 billion valuation that is eight times that of a traditional leasing company with a similar business model warrants a major question: is WeWork overvalued?<\/p>\n <\/p>\n First, let\u2019s take a look at how WeWork came to be the highly talked about startup it is today.<\/p>\n <\/p>\n CEO Adam Neumann was born in Isreal and moved to the United States in 2001 after serving as a naval officer in the Israeli military. \u201cBefore I started WeWork, I owned a baby clothing company based in Dumbo, Brooklyn,\u201d he said in an interview with Business Insider<\/a><\/em>. The company, called Krawlers, sold clothes fit with padded knees for crawling babies. \u201cWe were working in the same building as my co-founder Miguel McKelvey, a lead architect at a small firm. At the time, I was misguided and putting my energy into all the wrong places\u201d he said.<\/p>\n McKelvey and Neumann noticed that the building they both worked in was partially vacant. With the combination of their individual architectural and entrepreneurial expertise, they came up with the idea to open a co-working space for other entrepreneurs. Although it took tremendous convincing of their landlord, McKelvey and Neumann opened the first floor of a co-working startup called Green Desk in 2008 \u2013 the early incarnation of the company that would contrive WeWork. The \u201cgreen\u201d in the name was inspired by the company\u2019s focus on sustainable co-working spaces featuring recycled furniture and electricity that came from wind power.<\/p>\n <\/p>\n Despite Green Desks near-instant success, Neumann and McKelvey eventually sold the business to their landlord, Joshua Guttman. The WeWork co-founders recognized the importance of being green, but felt the focus of their business should revolve around community. The two founders knew they were onto something and possessed a strong concept. After pocketing \u201ca few million\u201d from the Green Desk sale, the two men founded and launched WeWork.<\/p>\n <\/p>\n WeWork, in its current iteration, opened its doors to New York City entrepreneurs in April 2011 and has since expanded to cities across the country and worldwide.<\/p>\n <\/p>\n At WeWork offices, options include a single desk in an open floorplan, dedicated private offices with doors, and full floors for more established companies. Amazon.com Inc. and International Business Machines Corp. have both taken advantage of the entire-floor leasing option. Common spaces feature comfortable couches, fun and interactive amenities like foosball tables and beer kegs to encourage meetings and socializing, and various office events take place frequently.<\/p>\n <\/p>\n Moving on, we must raise another question: what industry is WeWork in exactly?<\/p>\n <\/p>\n Neumann has blatantly denounced defining WeWork as a real-estate company or tech company. The \u201cWe Generation,\u201d as he calls it, strives to encourage sharing and collaboration rather than isolated office places. Neumann instructed the WeWork Public Relations representatives to push back against any characterization in the media of WeWork as a myopically defined real-estate company and instead encouraged the description of WeWork as a \u201clifestyle\u201d or \u201ccommunity-focused\u201d company.<\/p>\n <\/p>\n In an interview with the Wall Street Journal<\/a><\/em>, Artie Minson, WeWork\u2019s president and chief financial officer said, \u201cwe frankly are our own category. We use real estate and services to empower our community.\u201d Minson supported the company\u2019s sky-high valuation, stating it made sense because investors are looking to WeWork\u2019s plans for growth and confident in the acquisition of millions of members in the future.<\/p>\n <\/p>\n The WeWork client is \u201ccoming to (the company) for energy, for culture\u201d Neuman stated at an event this summer, aiming to breakaway from a pigeonholed industry classification. The Wall Street Journal<\/a> <\/em>reported that Neumann and other WeWork executives described the company \u201cat various times\u2026 as a community company, a lifestyle company and a platform for entrepreneurs.\u201d<\/p>\n <\/p>\n Neumann went on to add<\/a>, \u201cwe ourselves are still discovering what is the best type of company that we want to be. We\u2019re taking the best practices out of the for-profit world and best practices out of the nonprofit world.\u201d<\/p>\n <\/p>\n Skeptics continue to question whether WeWork should receive the tech company treatment, especially in valuation, when real estate is so integral to its main product and subsidiaries. In addition to co-working space, WeWork dabbles in communal housing, early education, and, strangely, a wave pool business.<\/p>\n WeLive, WeWork\u2019s attempt to infiltrate the residential real estate industry, features shared expansive kitchens, large laundry rooms with ping pong tables and other interactive amenities, and free WeWork cocktails on rooftop terraces and in mail-room themed bars. That\u2019s right, what serves as the WeLive mailroom during the day is converted into a happening bar at night designed to bring the inhabitants together to socialize and expand their network.<\/p>\n Bloomberg Technology<\/a><\/em> noted that \u201cWeWork wants to parlay its success with co-working into a \u201cwe\u201d lifestyle brand that incorporates not just work but living and wellness for community-minded people.<\/p>\n <\/p>\n Similar to other tech-giant influencers like Facebook\u2019s Mark Zuckerberg, the WeWork co-founders have taken a keen interest in early education. In Fall 2018, the company is set to open a private elementary school for \u201cconscious entrepreneurship\u201d inside an New York City WeWork space. The experimental school was tested via a pilot program of seven students, including one of the five children of WeWork Co-founder Adam and Rebekah Neumann.<\/p>\n <\/p>\n The project is being spearheaded mostly by Rebekah Neumann, who attended the prestigious New York City prep school Horace Mann and received a bachelor\u2019s degree in Buddhism and business from Cornell University. She told Bloomberg<\/a><\/em> the school will \u201c(rethink) the whole idea of what an education means\u201d but is \u201cnon-compromising\u201d on academic standards.<\/p>\n <\/p>\n \u201cIn my book,\u201d she stated, \u201cthere\u2019s no reason why children in elementary schools can\u2019t be launching their own businesses.\u201d Can anyone say, \u201cBaby Boss?\u201d<\/p>\n <\/p>\n The most peculiar industry expansion for WeWork, however, was the purchase<\/a> of a \u201clarge stake\u201d in Wavegarden, a wave-pool start up. It remains unclear how Wavegarden\u2019s technology, which can produce up to eight-foot-high waves for surfing at various water facilities, fits with WeWork\u2019s common-space persona. A company spokesperson told the Wall Stret Journal <\/em>that WeWork has \u201cmade meaningful investments to significantly enhance (the company\u2019s) product offering.\u201d<\/p>\n <\/p>\n Throughout the various expansions and acquisitions of the WeWork brand, one narrative has remained the same: \u201cthe \u201cwe\u201d brand promotes a seamless integration of meaningful work and a purpose-driven existence.<\/p>\n <\/p>\n The \u201cWe\u201d model has proved popular. As of October this year, WeWork established itself in 172 locations in 18 countries, granting its 150,000 a variety of locations to work from. The workspace provider employs over 3,000 people. The startup is rounding out the year with an impressive purchase of the social network company Meetup which strives to connect individuals during their off-work hours based on common interests. WeWork hopes the acquisition will help establish a sense of community in its shared workspaces, Inc.<\/a> <\/em>reported. The most valuable component of the purchase, however, is Meetup\u2019s 35 million user base.<\/p>\n Some Silicon Valley investors and others in the real-estate industry say the company\u2019s well-crafted image belies the unremarkable nature of its business. For instance, let\u2019s consider WeWork\u2019s competitors. With an indeterminate identity, it is hard to say just who WeWork\u2019s competitors are or if the company even has any contenders due to its multitude of market engagements. IWG PLC<\/a>, an office-leasing company with a similar business model to WeWork, manages five times the square footage and has approximately one-eighth the market value. Boston Properties Inc<\/a>., the United State\u2019s largest publically traded office leaser, owns five times the square footage that WeWork leases and manages while boasting a market capitalization of $19 billion.<\/p>\n <\/p>\n Barry Sternlicht, who runs Starwood Capital Group LLC with more than $50 billion of real-estate assets under management, said, \u201cif you had positioned (WeWork) as a real-estate company, it wouldn\u2019t be worth (its valuation).\u201d Neumann \u201cdressed it up and made it into a community, and that turned it into a tech play\u201d he said.<\/p>\n One argument against WeWork surrounds it\u2019s \u201cexpanding\u201d clientele base. A large portion of WeWorks client base is comprised of startups. If there were to be a downturn in the market, it would become increasingly difficult for startups to raise funding. If startups don\u2019t have the funding necessary to sustain themselves, WeWork might run into trouble staying profitable with a decrease in leasing demand as its clients wouldn\u2019t be able to pay the rent for the office space.<\/p>\n <\/p>\n WeWork was swift to negate any doomsday arguments, stating that only a small fraction of its client base are other tech startups. \u201cVenture capital-backed companies only makeup mid-single digit of the total population of our WeWork member companies,\u201d a spokesperson told Business Insider<\/a>.<\/em> \u201cThe membership is very diversified across multiple industries and our fastest growing segment is larger, more mature companies who have joined for the value proposition of more affordable space, community, networking, and flexibility \u2013 as well as services (healthcare, payment processing, etc.)\u201d.<\/p>\n <\/p>\n<\/a><\/p>\n<\/a><\/p>\n<\/a><\/p>\n<\/a><\/p>\n<\/a><\/p>\n