WeWork continued its expansion into many new businesses this year — all but burying its former co-working startup moniker.
Editor’s note: Inc. magazine will announce its pick for Company of the Year on Monday, December 10. Here, we spotlight a contender for the title in 2018.
WeWork, the co-working startup that launched in 2010, is known for renting out office space on flexible terms, but co-founders Miguel McKelvey and Adam Neumann clearly have much larger ambitions.
In 2018 alone, WeWork opened a private school called WeGrow and a physical store called WeMrkt, both in New York City. Neumann has even expressed a desire to one day have entire WeWork communities, where everything from your apartment to the school your children attend is brought to you by WeWork.
“When I think of We, I think of an ecosystem that brings it all together,” Neumann said at the 2018 U.S. Conference of Mayors meeting in Washington. “The fabric of that ecosystem happens at the building, at the neighborhood, and at the city.”
Thanks to a number of significant company milestones, 2018 has also been a breakout year for WeWork. In September, it surpassed JPMorgan as the largest occupier of office space in Manhattan. The finance giant has 5.2 million square feet of office space compared with WeWork’s 5.3 million. Other services WeWork has introduced in 2018 include Powered by We, which crunches data to design and build optimal workspaces for companies in their own offices; HQ by WeWork, a private headquarters designed for companies with between 11 and 250 employees; and WeWork Labs, a program designed to help early-stage startups grow.
Evolution of We
“As our business has grown, both our membership and service offerings have diversified,” a company spokesperson told Inc. “We’re also continuing to see the profile of our membership base change in positive ways, including longer deal terms, larger deals, and large global accounts.” (The founders declined to comment for this article.)
What’s more, as the company has grown, so too has its membership. WeWork now has more than 268,000 members in 287 locations, up from 150,000 in 172 locations a year ago. The company’s occupancy rates have also increased from 78 percent to 84 percent during the same period.
If all of this diversification and growth sounds expensive, it is. While the company has raised more than $7 billion from Japan’s SoftBank — its largest investor — and its revenue during the first six months of 2018 more than doubled year-over-year, to a reported $763 million, the company has been losing money at an accelerated rate. WeWork posted a loss of $723 million during the first half of 2018, more than double its losses from the same period last year. Despite these losses, SoftBank hasn’t flinched. The company committed $3 billion to WeWork in November at a reported $45 billion valuation, giving it the largest valuation of any startup aside from Uber.
WeWork has faced its fair share of personnel challenges, too. In addition to a well-publicized cleaning-staff strike in 2015, the company this year dealt with sexual assault allegations. In October, Ruby Anaya, a former director of culture in New York, filed a lawsuit against the company claiming she was sexually assaulted at two WeWork events. Instead of properly investigating the incidents, WeWork fired Anaya, the suit alleges. WeWork called Anaya’s claims “meritless” in a statement, adding that Anaya was “terminated solely because of her poor performance.”
Critics of WeWork’s business model have pointed out that having so much exposure to real estate represents a real risk, as a market downturn could lead its startup and small-business tenants to end their leases with the company. As WeWork has grown and evolved, however, so too has its client base. Today, businesses with more than 1,000 employees account for more than 25 percent of WeWork’s total membership. Large enterprise clients like IBM, Microsoft, and Salesforce now represent the fastest-growing segment of members, according to the company.
This growth makes perfect sense to Dror Poleg, an adviser at private on-demand office space company Breather, a WeWork competitor. He says that companies actually want to nurture their own culture and minimize distractions to help employees produce their best work. “WeWork is realizing this, which is why they are now trying to move away from co-working,” he says.