The (Corporate) Coworking Paradox

Doron Faibish
Sep 17 · 4 min read
A workspace. An article about coworking paradox created by WeWork
A workspace. An article about coworking paradox created by WeWork

Many financial headlines in recent weeks are dealing with the intentions of the workspace giant WeWork to go public. There were countless articles with opinions ranging from blazing admire to the founder Adam Neuman and his meteoric ascend to sheer disbelief in the company and the viability of its business model.

For me though, there is one topic that was left aside in the gigabytes of content created on the subject matter. Regardless of whether WeWork is losing today tons of money and will never earn a dime or, on the other hand, generate huge profits to its stakeholders, personally, I think that the real story is that it’s about people (not those you think of…).

Showing people meeting at a workspace
Showing people meeting at a workspace

Being a freelancer or an entrepreneur was always tough (and always will be). A lot has been said and written about the challenges and hardships of starting and running your own business. Many people that did it and had great success are giving advice about the ‘right’ way to do it (or write a book, or blogs, or posts…you get my point). But the thing is, that there is no one recipe. Every case is different from the other. People that succeeded once, failed in later attempts and people that failed many times succeeded on their tenth attempt. What is common though for first-timers is their feeling of solitariness during those first steps (and sometimes, also much later into the journey).

This loneliness is a real pain, and coworking started back in 2005 with the purpose to solve this pain (some ancestors already started back in 1995). It was the way of freelancers and solopreneurs to be in an environment with like-minded people, where they could overcome problems they encounter and create meaningful networking (I mean real networking, not +500 digital connection you hardly know). The interaction between like-minded people in the same workspace even if they do not necessarily belong to the same profession or line of business reflected the diversity, which usually fosters openness. The combination of diversity and openness quickly led to …. innovation. It wasn’t quick, but this successful model was duplicated from San Francisco to London and then to other places. This was a good and flexible ‘work as you go’ solution for this group.

In parallel, another trend gained momentum. In the last decade, many large corporates understood that they will have to adapt their business to the digitalization revolution (or die). But transformation is hard, so they started by establishing innovation departments designed to lead and guide this process.

It was also around that time that Adam Neuman founded WeWork. Not surprisingly, his first clients were… freelancers and entrepreneurs because they were going to coworking spaces anyway for about 6 years at that time. This group of freelancers, solopreneurs and small startup fueled the meteoric growth of WeWork. In the beginning, prices were reasonable, and it seemed the obvious large-scale solution for this group.

But here’s the catch. The large corporates looked at the hype and saw the innovative ecosystem that takes place at the coworking spaces and for obvious reasons could not ignore it. Someone probably scratched his head (or her) and said to himself “I want my innovation team to produce this kind of innovation”. So why not…put them in a coworking space. Brilliant!

For WeWork that was a relief. Instead of hunting freelancers, solopreneurs, and startups that in many cases are short on cash and limited in what they can pay, WeWork can now just lease an entire level to a corporate with deep pockets, and it will also be for a longer-term. Let’s say 3 or 5 years. This gives WeWork much better visibility to its revenue stream. This led to an increase in prices to a level that only a few freelancers can pay for a hot desk. In fact, WeWork admits this in the filing documents for its IPO:

“As we have scaled our business, our membership community has expanded from mostly freelancers, start-ups and small businesses to global enterprises”.

The thing is, that this evolution is kind of a paradox. The innovative ecosystem that was created by a community of freelancers, solopreneurs, and startups is being effectively kicked-out from the corporate coworking spaces to make room for the deep pocket corporates. The real question is what does it make these spaces now? Is it more than a regular office building housing a few large teams (sometimes even only one)? Will the innovative vibe remain? I suspect that the answer is probably no. Pursuing KPIs and profit lines gave an echoing knock-out to the vision.

Bottom line — It’s always about the people. They will just need to figure out a new solution for the pain called loneliness.

To balance it, I feel obliged to mention that small coworking spaces (and in Berlin, there is a sizable number) still serve the purpose and pursue the vision. It’s just that in a city with hundreds of thousands of freelancers and entrepreneurs, there is not enough room for them in co-working spaces.

If you got this far, you probably have an opinion. What is your take of it?


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