The Secret Behind WeWork’s Valuation
How Adam Neumann created tremendous value for a co-working space.
How Adam Neumann created tremendous value for a co-working space.
There is probably an ample amount of debate regarding the success of now-debunked We Company (currently WeWork). However, it is no question that it successfully posed as one of the most exciting “tech companies” despite being in the co-working office share business, which is not a new industry.
At one point, the pseudo tech company had a ludicrous valuation of $47bn, which is absurd considering that it is mainly a real-estate play. Although one of the largest public companies in the flexible office leasing industry, IWG, had much better financials and operational metrics, their valuation was a fraction of WeWork’s.
IWG actually has a higher revenue ($3.4bn vs. $1.8bn), more countries (120 vs. 29), more locations (3,000 vs. 528), more members (2.5m vs. 0.5m), and more profits, but IWG is only worth $3.1bn.
How does that happen??
We ofcourse looked at that every single day, and said what are we missing? Is there an ingredient that we are missing out? But we never found it — Mark Dixon, CEO of IWG
We Company: Elevating the World’s Consciousness
One of the reasons behind this insane valuation was the grandiose ambitions of Adam Neumann and claiming to be more than an office space. His primary mission was not simply to revolutionize the workspace.
Elevating the collective consciousness of the world — WeWork Mission
To elevate the world’s consciousness, they had businesses in other areas to support this mission, such as lending furnished apartments (WeLife), building education facilities and programs for young children (WeGrow), and a luxury gym concept facility (Rise by We).
“If you have a business that is mission driven, you will attract the best people. If you attract the best people you have to remember this, you have to take care of them. The most important thing in every business is the employees making it work every single day”. — Adam Neumann Speech at Baruch College
Although the company had terrible financials, it was one of the most exciting companies of our time. It is incredible that a company with a simple business model — long-term leases on short-term revenue obligations ($650/week) — could rise to the levels of the We Company.
When explaining a company, you have to start with why. The mission allows companies to attract the best talent, keep investors excited, lead to higher valuations, and have attractive partnerships. The problem with We Work was that it had a great vision, but the strategical roadmap to reach its mission was poorly managed and executed.
Great companies don’t hire skilled people and motivate them, they hire already motivated people and inspire them. Simon Sinek, Start with Why
If you have a product that has reached product-market-fit and are looking to scale your company, it is worthwhile to sit and write down the vision and the strategical roadmap to support it.
Where are you headed, and what does the destination look like in 3–5 years?
Why do you exist?
What do we need to build, and how do we get there?
“Leadership requires two things: a vision of the world that does not yet exist and the ability to communicate it.” — Simon Sinek, Start with Why
It certainly did wonders for WeWork. Their recent SPAC valuation is worth around $9bn — still three times the size of IWG.