How WeWork Plans To Be Profitable in 2021

Finally, some fiscal responsibility

Joshua VanDeBrake
Jul 14 · 6 min read
Photo adapted from Morning Brew on Unsplash

The Rise and Fall of a Star

By now we’re all pretty familiar with WeWork’s infamous fall from near-IPO stardom. But for context, let’s recap real quick:

  • WeWork raises money. A LOT of money.
  • Then more.
  • Then SoftBank comes in with even more.
  • And more (SoftBank’s investments in WeWork total $10 billion).
  • WeWork eventually reaches a potential IPO valuation upwards of $96 billion, though most estimates put it at $47 billion.
  • WeWork files for IPO; public scrutiny ensues. Their S-1 raises questions. Big questions. Questions like, “How can a company that loses $219,000 every hour be worth so much, or anything at all?” And, “What is that line item for?”
  • Controversy occurs within leadership due to shady, potentially self-serving deals (like the founder licensing the name “We Company” to WeWork for $5.9 million).
  • WeWork Founder, Adam Neumann, steps down as CEO.
  • IPO filing is postponed. Then canceled.
  • WeWork valuation drops. A LOT.
  • Then more.
  • When the dust settles, “The We Company” has lost nearly 95% of its pre-IPO “value.” Some people call it a scam and a fraud.
  • And SoftBank pulls out on part of their bailout deal.

Somewhere along the way, a big shift in leadership takes place. Among others, a new CEO and new Executive Chairman are appointed.

Great. I think we’re all caught up. And that brings us to today.

A New World for WeWork

After WeWork’s spectacular fall, few people existed who truly believed this company had any sort of future besides a spot in our history books of “what not to do.” I was not one of those few. I thought WeWork was dead.

You can imagine my amazement when I read that WeWork is now on track to becoming cashflow positive in 2021. Put differently, this business — which was aggressively pursuing a relationship with oblivion only months ago — has rapidly and completely changed its trajectory to head in the opposite direction: becoming a viable, sustainable business.

Now, a few questions remain:

  • How did WeWork achieve this? And what caused their turnaround?
  • Who is the mad scientist behind re-engineering this catastrophically-losing company?
  • What does a “profitable” future look like for WeWork?
  • And, most importantly, what can we learn from this?

We’ve got some ground to cover. Let’s get to it.

“Everybody thought WeWork was mission impossible. [That we had] zero chance. And now, a year from now, you are going to see WeWork to basically be a profitable venture with an incredible diversity of assets.”

— Marcelo Claure, Executive Chairman of WeWork

Shortly after Adam Neumann stepped down as CEO, SoftBank placed a new Executive Chairman in charge of WeWork. Who better to put than SoftBank Group’s own Chief Operating Officer, Marcelo Claure? Even better when his credits include turning Sprint around and later negotiating its merger with T-Mobile.

Among many other things, Marcelo Claure apparently excels at taking floundering businesses and turning chaos into structured, profitable order.

But How Did WeWork Turn Around?

This is nothing short of a miracle, given what the business has been through since filing its S-1, plus the fact that we’re in the middle of a global pandemic, but the new leadership made massive structural changes and seems to have fundamentally changed the business in ways that turn it eventually into some sort of success story. Maybe not the $47 billion success story some people thought it would be, but a success nonetheless.

Part 1: Massive Restructuring + Cost-Cutting

These structural changes started with massive, aggressive cost-cutting — including roughly 8,000 jobs. Prior to its fall, WeWork employed over 14,000 people; today, that number is a much lower 5,600. This number was only just reported, so Wikipedia hasn’t even updated their page yet.

In addition to cutting its workforce, WeWork negotiated or terminated a large number of its expensive leases including in New York and Baltimore.

Further, they sold off many non-core business units that they’d short-sightedly scooped up leading up to IPO. Unfortunately for the original founders and investors of those businesses, these purchases had largely taken place in all-stock or mostly-stock deals when WeWork still had a sky-high valuation; meaning the stock they were paid for their companies are now worth pennies for every dollar.

Part 2: Environmental Factors + New Deals

A curious side effect of the COVID pandemic is how it’s increasing pressure on commercial real estate. This, I would guess, has made it somewhat easier for WeWork to renegotiate some of their huge, long-term lease contracts.

And as workforces have been forced to move to a remote environment, companies are starting to see the value of flexible office space. And not just small startups. Even the big players searching for solutions. In the past month alone, WeWork has reportedly signed new lease contracts with Microsoft, Citigroup, Mastercard, and ByteDance (TikTok’s parent company).

To top it off, an internal memo (seen by the Financial Times) tells employees that the massive restructuring the company embarked on in February is over; after 8,000 cuts, they are not letting go of any more people. I can only imagine the wave of relief sweeping over each remaining employee, knowing they made it through the most turbulent time in the company’s history.

This same memo states that WeWork has spent more than $20m to renovate spaces to distance customers from one another, and it further encourages employees June was the company’s best sales month since February.

Given the changing work environment, plus high demand for quality workspaces that are sanitized and make people feel comfortable, this all makes a little more sense.

Things really are starting to look up.

What’s Next for WeWork?

6 months ago, WeWork was collapsing. They weren’t even on the verge of collapse; they were in freefall with absolutely no future. But today, we see a glimmer of hope — a potentially bright future for the company. A future where profitability isn’t some abstract concept that nobody is really interested in, but one where it’s a reality. The reality and the result of a successful business. Imagine that.

After the craziness and high-profile, three-sheets-to-the-wind failure that WeWork has endured, there’s still a chance that it could turn out to be a successful business. And here I was, thinking it could be the next Enron.

Takeaways and Lessons Learned

Studying WeWork’s journey and evolution — as we’re doing now and as I’m sure many more will do in the years to come — gives us a rare opportunity to learn from some truly valuable insights.

The first and most obvious takeaway is that the right combination of leaders, plans, and mentality (and cash), can take even the direst of situations and companies (who have zero apparent future) and turn it into a success.

Second, sometimes in periods of abundance, even the most well-intentioned of us can lose sight of our business fundamentals. Spending extravagantly here and there or choosing not to negotiate for the best deal possible (instead just making it happen in the name of “growth”) is perfectly fine, and in some situations even call for it. Here and there. But an ongoing practice of ridiculous overspending will lead to trouble.

Closing Thoughts

If the team at WeWork manages to pull off their plan for profitability in the timeline they’ve stated, it will be a genuine miracle. But at this point, they’re already halfway there. They’ve already restructured and set their new plans in motion.

As for WeWork (and the rest of The We Company, if that even exists anymore), it appears they’ll be sticking around — albeit with a more conservative business, more reasonable valuation, and a different focus.

But the old model was completely unsustainable; so it’s probably for the best.

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Joshua VanDeBrake

Written by

Passionate about Marketing, Startups, & VC. Marketing Manager. Ambivert. Millennial.

The Startup

Medium's largest active publication, followed by +686K people. Follow to join our community.

Joshua VanDeBrake

Written by

Passionate about Marketing, Startups, & VC. Marketing Manager. Ambivert. Millennial.

The Startup

Medium's largest active publication, followed by +686K people. Follow to join our community.

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