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Here’s how WeWork became one of the most successful startups of this decade, before crashing – Silicon Canals


This decade has seen many startups that rose to new heights, and then some that never made it. However, maybe no story is as interesting as that of WeWork, the co-working space, which started off as one of the most promising startups of this decade but ended up being bailed by its own investors. At the peak of its journey, WeWork’s valuation hit $47 billion but in less than a year, it needed an $8 billion infusion to avoid running out of money. 

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Bloomberg has summarised the startup’s entire journey in a video that’s aptly titled ‘The Spectacular Rise and Fall of WeWork.’ Here are some points to remember from the startup’s journey, in case you are planning on going big with your startup or if you want to avoid making the same mistakes. This is basically a case study of what happens when a startup with no effective oversight on how to spend gets its hands on too much money, too fast. 

How it all started

The company started after its now ex-co founder and long-time CEO Adam Neumann came to study in New York. After trying his hand at a few businesses, he was struck with an idea of subdividing a space and renting it out with Miguel McKelvey who is a co-founder of the company and a trained architect. The two started their journey with a company called Greendesk, which was the first iteration of WeWork and was later sold. 

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In 2010, WeWork was born and it was a great time to start a co-working company in New York City. The startup actually had a solution for numerous landlords who were sitting on empty office buildings and the first building by WeWork started in Grand Street in downtown Manhattan. Soon after the business took off, they received some early investment from a venture capital firm called benchmark, and used the money to grow and take on new leases. 

Explosive growth 

By 2015 WeWork quadrupled its valuation to $10 billion with over 23,000 customers who were paying for its memberships in 32 locations. The startup rented out desks for as little as $45 per month and instead of standing out just as a co-working space, the company brought a sense of community for like-minded people who are working together. Now, more investors were turning its gaze towards the thriving startup. 

SoftBank entered the picture in 2017 and invested around $8 billion in WeWork, which further increased the company’s evaluation to a whopping $20 billion. Backed by SoftBank’s investment, the startup quickly expanded its footprint around the world and in 2019, SoftBank floated a potential investment of $16 billion, which meant a controlling stake in the company. 

However, during this time of growth, another company called IGW was doing well and trading at a fraction of WeWork. Looking at both companies, IGW was making profit whereas WeWork wasn’t. However, with SoftBank’s investment and the green signal to spend the money, the startup went ahead to open more offices around the world, investing in other companies and even opening up a private elementary school in New York City. 

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The Crash

While WeWork was expanding at an unprecedented rate and its valuation through the roof, there was no actual profit to be shown. This is being blamed on reckless expenditure by a company that made multiple bad investments. The startup announced in August 2019 that it is filing for an IPO and this was the first time that its investors were able to look into the company’s performance metrics. 

The filings also revealed that in the first six months of 2019, WeWork amassed losses of about $690 million, bringing its total losses to almost $3 billion in the past three years. The fact that the company was making huge losses changed a lot of things as investors started to pull back from the company and that it isn’t ready to go for an IPO as a company that protects the value for shareholders. On September 17, WeWork officially pushed back its much-awaited initial public offering.

 Adam Neumann resigns

After pushing back WeWork’s IPO indefinitely, the company’s board and its biggest investor, SoftBank decided that there needs to be a big change inside the company. Neumann was believed to a liability for the company instead of an asset. Late in September, Neumann resigned saying too much focus has been placed on him, realising he’s a distraction to the company. 

Senior WeWork executives Sebastian Gunningham and Artie Minson were appointed as co-CEOs. Neumann’s $60million private jet was put up for sale, along with multiple WeWork acquisitions and the IPO was postponed indefinitely.  WeGrow, the startup’s private elementary school was also shut down and thousands of employees were to be laid off. 

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It was reported that the Co-CEOs secured themselves multimillion-dollar severance packages when the company didn’t even have enough cash to pay severance to its thousands of rank-and-file employees that it plans to lay off. At this time of uncertainty and unrest at WeWork, Softbank injected a $9.5 billion into the company, bailing it out. Now, WeWork is valued at less than $8 billion. 

Lessons for startups 

It is quite evident that the top echelon at WeWork didn’t have any oversight or accountability on what they were doing. Running a business in a completely unprofitable manner, lack of board oversight and no adults in the room saying no almost led the company to the ground. WeWork is believed to be a good example of the fact that any company can’t go too far without proper management and oversight in place. 

In the summer of 2019, the shared co-working space company WeWork was considered one of the most valuable startups with a $47 billion price tag. It was more valuable than Airbnb,  Stripe and SpaceX. However, in just a span of a few months, it’s valuation down to $8 billion and the very future of the company is uncertain.

Image credits: WeWork

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