The latest highly capitalised US-based startup WeWork Cos which connects users with work spaces has been valued at $16 million leaving the online real estate sector mystified.
According to a report in the Wall Street Journal (WSJ) WeWork’s new round of funding was led by Beijing-based private-equity company Hony Capital Ltd and Legend Holdings, its parent company.
With the valuation of the business up to $16 billion from $10 billion last year, WeWork is one of the world’s most valuable startups.
The Wall Street Journal says it would be the third-most-valuable publicly traded office landlord were it publicly traded, despite controlling a fraction of the square footage of the leading companies in the sector.
Essentially, WeWork rents space from landlords, turns it into a communal atmosphere and rents it out month-by-month at higher prices to companies and individuals. The workforce is young and hip, the spaces prominently feature arcade games, plush couches and beer on tap.
Having started in a single New York location, WeWork has grown to 65 sites, mostly in major US cities, with a handful in Europe and Israel, and the company is rapidly adding locations.
The Wall Street Journal says WeWork executives are targeting at least 1 million members, up from about 50,000 today. They say said WeWork will ultimately host numerous large companies that want a well-designed communal space.
WeWork Chief Executive Adam Neumann has led fundraising rounds totaling more than $1.3 billion since the company started in 2010.
Investors have included Fidelity Investments and T Rowe Price Group as well as well-known venture-capital investor Benchmark Capital.
The WSJ argues these investors are betting WeWork’s model will be a dominant form of office space in the future, the same way Uber is becoming for urban transportation.
Neumann himself concedes in a blog it is unclear how much global demand there will be for “WeWork and its glassy co-working spaces”.
However he continues “despite cultural differences, at the end of the day, we are all one and we all want the same thing. We want to pursue our passions.”