The Rise and Fall of WeWork…
Tequila shots, private jets, superpowers. With investors like J.P. Morgan Chase & Co, and Goldman Sachs Group — what could go wrong?
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WeWork, the ill-fated co-working start-up “unicorn” that rose in the financial boom years, is today most famous for two things: its swift collapse from a huge valuation of $47 billion, and the outlandish behaviour of its founder and CEO Adam Neumann…
Any founder-CEO worth their salt knows full well that a billion dollars is nothing.
What’s cool in this day and age is a trillion dollars. And, just for a moment, for a glimmering half, a second Adam Neumann might be that man to do it.
About Adam.
Adam Neumann grew up on a kibbutz in Israel, where the communal ethos inspired him. He liked the idea of community and fairness, but he liked, even more, the idea of making a huge amount of money.
The two didn’t get along in his sleepy commune — but it was possible that they might in New York, where Neumann landed in his early twenties.
Neumann tried to melt the two thoughts through various ideas — first a pitch for women’s shoes with retractable heels; and then an idea to sew knee pads into baby romper suits and sell them to New York — Manhattan yummy mummies.
But it was when Neumann stumbled upon the idea of communal, flexible office spaces that things started to happen. This was not a novel concept— Neumann’s original ideas were not good, and his good ideas were not original either.
But with his unique cocktail of utter self-assurance, towering height, and do-or-die attitude, the entrepreneur managed to make things happen.
Adam is not your average man. He is someone who takes over a room. He is very tall, and he is very charming.
He knows how to identify his audience and find out what they want to hear — and deliver it to them. Those are great skills to have, no matter what you’re doing in life.
WeWork: The Early Days
Co-founders Adam Neumann and Miguel McKelvey started their journey in Brooklyn back in 2008 when they established GreenDesk, an eco-friendly co-working space. By 2010, they’d sold the company and set up WeWork’s first location in the SoHo district of New York City.
By April 2011, the first WeWork Labs was officially opened, which functioned as an incubator for start-ups.
In 2014, WeWork was dubbed by Forbes “the fastest-growing lessee of office space in New York” and was set to become “the fastest-growing lessee of new space in America.”
The Investors:
One of the great mysteries of modern finance is how to make money when you know there’s a bubble, or at least how to get much, much richer than everyone else. The obvious way is to bet against the bubble, easier said than done.
“A million dollars isn’t cool,” Sean Parker once said to a young Mark Zuckerberg. “You know what’s cool? A billion dollars…”
What you can do, however, is trying to find a way to soak up as much money as possible from optimistic investors and then furiously distribute it to yourself and your family, so that by the time things turn, you’re already rich.
And to properly pull this off, you would need to find investors with a lot of money. It was just as important for WeWork to serve as a parking place for Saudi and Japanese cash as it was to provide office space for businesses.
In the introduction to SoftBank’s most recent annual report, Son thanks shareholders for their support as “we continue to move forward, inspired by our belief in the power of technology to build a more connected, efficient, and joyful world”
By 2018, WeWork began expanding to college campuses, raised an additional $900 million in funding, and secured a further $3 billion from SoftBank.
Very much enjoying the high-rolling lifestyle, around this time CEO Adam Neumann reportedly purchased a $60 million private jet to be able to hop from location to location.
When the company legally changed its name from WeWork to We Company in January 2019, it had to first pay Neumann a reported $5.9 million to license the trademark.
However, Neumann returned the large payout after facing backlash from critics for this “‘most egregious’ example of the co-working company’s mismanagement.”
Later in the year, WeWork secured another $2 billion from SoftBank — though they considered investing as much as $16 billion.
WeWork was hoping to make upwards of $3.5 billion from the IPO to continue funding its uninhibited growth. Continuing his streak of questionable moves, before the IPO was supposed to go live, Neumann liquidated $700 million in stock.
But, when the We Company filed S-1 paperwork to go public, the losses were revealed. Many analysts subsequently shared their deep-seated misgivings over WeWork’s future ability to be profitable and didn’t expect the brand’s valuation to exceed $20 billion.
In September 2019, the IPO was postponed, and the company was “besieged with criticism over its governance, business model and ability to turn a profit.”
What You Can Learn From We Work Mistakes
1. Don’t Get Ahead of Yourself:
In the early days of a successful brand, it’s very tempting to get ahead of yourself. The funding is rolling in, consumers are loving your product.
WeWork did just that. Constantly adding new investors, rapidly expanding to new cities, countries, and continents, and buying up other businesses left and right — all before they were anywhere close to being profitable.
2. Don’t Overpromise and then Underdeliver:
Another one of WeWork’s biggest mistakes was to overpromise and underdeliver.
In September 2019, Neumann was forced to sell the Gulfstream G650 — not only because of the failed IPO but also because it created problems with employees who were promised bonuses and didn’t receive them.
Leaving We Work:
Since leaving WeWork, Adam has bounced between the Hamptons, Long Island, and Tel Aviv, Israel.
He has recently made some investments: in a residential living company, and in a car-sharing company in Israel. But his billion-dollar payout from SoftBank is currently tied up with lawyers.
Final Thoughts:
For its first five years, WeWork had a meteoric rise to fame and success. Billions in funding, locations all over the globe, and executives that lived a high-rolling lifestyle.
But sooner or later, all mismanaged companies will see their downfall. From getting ahead of itself to overpromising to keeping a CEO that was clearly more of a risk than an asset, WeWork came crashing down…
Credits: Joseph Bullmore, Reeves Wiedeman & Cory Shroder
By Pete Moore — Seamless Entertainment
