Expanding in Asia: Insights from WeWork’s journey in Korea
Hi, I am Jamie Na from Korelya Capital, a VC fund investing from Series B in European technology companies. We help our companies through our extensive network and presence in Asia. 60% of our portfolio companies already operate in Asia and leverage Korelya’s extensive network.
Today, I am sharing the second interview of a series dedicated to Asian expansion for global tech companies. We will discuss market opportunities, sales strategy, and recruiting challenges when opening an APAC market.
Korea’s concentration of tech-savvy consumers certainly makes it an appealing expansion target for western scaleup companies. Yet, it is also a make-or-break market, where powerful local competitors have succeeded in containing services such as Google, Whatsapp, or Uber.
WeWork Korea’s achievements seem all the more interesting to examine in such a context (this article will only focus on the story of WeWork in the Korean market). The global workplace provider opened its first office space in South Korea in August 2016 and currently runs 19 locations across the country.
Matthew Shampine, former General Manager of WeWork Korea, shares how he led WeWork’s journey to Asia.
It all started when looking for an office in NYC
Before joining WeWork, Matt was an entrepreneur himself who had co-founded a company with a few of his friends. They started running their company from their friend’s apartment in New Jersey before finding their first office in NYC. Quickly realizing that three developers and a designer did not enjoy running an office, they went online, found a co-working space on Craigslist, and moved into the very first building of WeWork.
There weren’t many other members at WeWork at that time, so Matt and his friends spent a lot of time with the co-founders, Adam Neumann and Miguel McKelvey, and ended up being contracted by them to build the proptech’s back-end system for everything they would need, from conference room scheduling and billing to member management. The following year (2011), Matt co-founded WeWork Labs, the WeWork’s incubator space for early-stage startups, with Adam, Miguel, and Jesse Middleton before gradually getting more involved in WeWork’s path of expansion.
The Asian journey begins
In 2015, Adam texted Matt and two other colleagues, asking them to come over to his place the next day. “As we got to his house, he congratulated us having the opportunity to move to China and open up WeWork in Asia — letting us know that we were to leave in two weeks. We started Chinese classes the next day and in two weeks time, we indeed hopped on a one-way flight out to Asia.”
Strong backing from investors
As Matt points out, one of the most significant things that WeWork did differently than other companies expanding to Asia is that they strategically planned to fundraise within the region.
From 2016 to 2018, WeWork raised billions of dollars in investment led by Japanese tech giant SoftBank, SoftBank’s Vision Fund, Hony Capital, Legend Holdings, and other investors.
With strong Asian investors on the Cap Table, WeWork could expand into Asia with partners who were available to offer an accurate understanding of the dynamics of the local market, as well as access to their local network. These investors contributed in “helping us prioritize, especially in the early days, but also gave us a lot of legitimacy when we went in for initial conversations with local landlords.”
Alongside the support from local investors, WeWork used what Matt describes as one of WeWork’s “cheat codes”: drawing participation from the existing global customers. “Global companies of course had their office spaces around the world. So when we would enter new markets, we would always make sure that we told all of our customers in the US and Europe that we were going to these new countries in Asia.” WeWork was able to jumpstart the business by getting the multinationals to move in early at their newly set spaces, and this helped make local customers more eager to join the move. Matt adds, “In a lot of cases, being able to be in the same office space as those big players used to be completely impossible before WeWork had existed.”
Entering Korea and changing the market
As their business in China seemed on the right track, Matt moved to Seoul in 2018 to accelerate the growth of WeWork Korea, where he confronted two extra challenges. First, the proptech company had to start a business with close to zero name recognition, unlike other Asian markets where the likes of WeWork had already existed. Additionally, it was a totally different real estate market — more so than almost any other country in the world.
Common commercial real estate practices in Korea at that time were unique. This contracting culture made it more difficult for WeWork Korea to succeed at first and required Matt and his team to introduce not only WeWork and the concept of office-sharing, but also more global practices between landlords and tenants, such as Tenant Incentives (TI) and long-term leases. To that effect, the WeWork Korea team spent a considerable amount of time building education materials that focused on educating brokers, landlords, and the government about the value of WeWork.
It actually turned out that the long-term lease policy that WeWork adhered to could bring tremendous benefits to building owners. In 2018, WeWork played a key role in resuming the sales talks of Seoul Square, one of the landmark buildings in central Seoul, which had been struggling for years to find a new owner as the occupancy rate showed no signs of recovery. The stalled discussions gained fresh momentum after WeWork signed a deal to lease 3.5 floors of the building on a long-term lease. With the new entry, the vacancy rate fell to less than 10%. Consequently, in the following year, Seoul Square was acquired by a consortium led by NH Investment, one of the largest securities firms in Korea, for $873 million ($73 million jumped in 7 years). The deal was marked as the largest trade of a single building in Korean history.
To the local government and international government, WeWork tried to prove that it’s beneficial from a tax perspective, a job creation perspective, and from a CSR perspective, and so on.
Empowering local team to execute WeWork’s playbook while adjusting it to the local market
“WeWork didn’t change much across any dynamic of business. And it worked amazingly well all over the world.” If you visit a WeWork space in any country, you’d know that you’re in a WeWork. Matt says, “it was very purposeful; we saw that people were much more similar than different.” Wherever a WeWorker goes, every piece of equipment in any WeWork branch works automatically the same — keycards, wi-fi passwords… even the printers.
WeWork had strong global standards, though local team members had the ability to adapt to the local context. “We really believed in hiring great people and letting them help drive localization.” Hiring someone with a great local network was a key to success. The local team was trained to adapt 80+% similar or same template to the market and then customize minor things to an extent, such as artwork and events. On the marketing end, the strategy had to be much different due to Koreans’ preference for local platforms, such as Kakao and Naver. Back when WeWork started its operation in the country, global marketing tools like Google AdWords were even less used than now.
Full commitment of founding expatriates
But Matt highlights that the most important thing is to be really willing to go. “When the three of us came to Asia, we literally just gave up our lives with no idea when we’d be going back.” On a side note, he still hasn’t gone back to the States and, in 2020, co-founded a proptech startup called “Dongnae” in South Korea.
Achievements
Driven by corporate demand for alternative offices amid the pandemic, WeWork Korea was one of the only markets to experience growth. At the same time, New York and London locations hemorrhaged money due to extensive lockdowns and social distancing measures during the peak of the COVID-19 situation in 2020. Furthermore, when you pass by the streets of downtown Seoul, you will see a lot of iconic buildings with WeWork signage on them!
At Korelya Capital, we are deeply aware of the importance of the last two topics and provide our portfolio companies with the know-how and support to take their first steps in Asia.
If expansion in Asia is on your roadmap now or in the next few years and you want to know more about our Asian platform, please reach out on LinkedIn.
