We Work’s valuation came down from $ 47billion to $ 8billion. Experts think it was overvalued by by 9 to 15 times. Its nearest competitor Regus (IWG) runs four times as many centres as We Work, yet it was valued 1/10th of We Work.
Mark Dixon started Regus in 1989. It offered working spaces as We Work does. Today it runs 3,934 business centres in over 1,000 cities across more than 110 countries. Regus is profitable with the annual revenue of more than $ 3.25billion. It’s market value is $ 4.5billion, nearly half of We Work’s current market value. It employs nearly 10,000 employees. It entered India in 2013.
In 2003 Regus USA had filed for bankruptcy, as it expanded fast during the dot com boom. It came out of the bankruptcy by focusing on profitability. Regus’ founder suggests that serviced office business should have multiple sources of income other than short term lease. Regus generated nearly 28% of their revenue from services such as office staff and tech support. We Work’s revenue from services is not more than 5% of its revenue.
VC Nikesh Arora said,”Money in the right hands and right founders, right potential long-term platforms works,” Arora said. “But it doesn’t work willy-nilly on every pet walking and hotel room renting website.”
Indian players such as Oyo/ Innov8, 91springboard, Awful, Bhive and Innov8 are copying We Work’s model. They may either shit down or downsize. They can see how Regus built its business slowly and steadily. Co-working is not the technology business. It is a real estate rental business.