What other postmodern corporation, serving more than 400,000 members in 27 countries, has made investments in office space, retail, housing, preschools and college campuses, food startups, and a wave generator for inland surfing?
Early in the WeWork’s existence, Co-Founder Adam Neumann described his ambitions for the startup as a “physical social network,” something WeWork seems to embody more and more with each new addition to its mission.
Though the company has maintained its you-can-make-it-if-you-hustle-harder ethos, WeWork has also become increasingly focused on large corporate clients, not just the freelance creatives for whom kombucha on tap is a desirable perk. At a time when WeWork’s core business is rapidly expanding—the company recently became Manhattan’s largest office tenant last fall and wants to grow its 10,000-person global workforce by 6,000 new employees in 2019—it’s also continuing a strong pivot toward servicing corporations.
The strategy, which includes building and managing entire offices for Fortune 500 companies, is akin to Airbnb seeking out the business-traveler market. WeWork made a name for itself flipping C-class office space into cool hangouts for budding entrepreneurs, and it has moved up the value chain right at the moment when corporate America is hungry for flexible spaces and more engaging offices.
“This represents a shift in real estate from a simple commodity to a consumer product,” says Scott Homa, Senior Vice President of U.S. office research for JLL, an international commercial real estate firm. “You used to go into the market looking for a warm, lit shell you could occupy in nine to 12 months. Now, it needs to be a much more immediate, consumer-friendly, consumer-centric product.”
WeWork has long been criticized for its large debt load; Vanity Fair called it “a $20 billion house of cards” while the Wall Street Journal said it was “fueled by Silicon Valley pixie dust”. The company has also been taken to task for its extensive number of long-term leases, leading many to accuse the “insanely overvalued” startup of simply playing office space arbitrage. When lead investor Softbank downgraded a significant investment from $16 billion to $2 billion, many read that as a sign of WeWork’s weakness.
It’s also true WeWork has yet to become profitable. Its final 2018 financial results show that annual revenue more than doubled, to $1.82 billion, even as losses nearly doubled to $1.93 billion. The company would argue, as any good startup (and many of its peers contemplating IPOs) does, that this is due to a rapid—and healthy—period of expansion and investment, one expected to continue as investor confidence has meant the company has $6 billion cash on hand and a valuation of $47 billion. WeWork and coworking at large are also rapidly growing, and in many ways, shifting toward a more sustainable, less risky core business model.
Many see coworking and office space evolving, in tech parlance, toward a space-as-a-service industry.
Read more here