Bloomberg.com television on YouTube.com reports to rise and fall of WeWork.com. For those who don’t know who or what We Work is, it’s a technology-based company that delivers various online services to those searching for amicable solutions.
Below is the video transcript verbatim from the YouTube.com video discussing We Work provided by Bloomberg for your recreational reading:
(Source: Bloomberg.com ~ YouTube.com/Bloomberg) I think when you cover IPO shows and high flying startups, you're used to seeing dramatic changes over short periods of time, but nothing in my experience has really compared to what we work has undergone. I think people felt like they blinked and and everything was different at last reporting.
They're running out of cash very quickly here. Sources have told Bloomberg that the company could run out of cash by next month.
I was surprised at the vitriol and the speed with which investors apparently rejected what we work was trying to do from the first day that we started we work.
It was about bringing people together. There's an energy that you feel that energy, something that's hard to explain. It's something that either you feel it or you don't. We like to call it the we generation.
And less than one year we work went from one of the most highly valued startups of all time to losing more than three fourths of its value, ousting its Rockstar CEO and desperately needing a cash bailout from its biggest investor just to keep the lights on. In order to understand how we got here. We need to take a look into the mistakes made along the way. The ambitious vision of we work is effectively dead, period. This is a case study of when a company got too much money too fast with no effective oversight on how to spend it.
They are no longer the market leader. That company is going to get smaller and it's never gonna be ten times bigger. I mean, the story is over.
As late as summer twenty nineteen, the coworking company we work was considered one of the most valuable startups with a forty seven billion dollar price tag more than SBN B Stripe and Space-X. But in just a few months time that valuation has vanished and the very future of the company is in doubt. To understand how this happened. It all starts with the company's now former CEO and founder, Adam Newman.
Adam Newman is the co-founder of We Work and was its CEO for a long time. He came over to New York for college after being in the Israeli navy and started a few businesses, including my favorite example is a baby clothes line with kneepads.
His landlord was actually showing him another building in Brooklyn when he came up with the idea of sort of sub dividing that space, which McGill McKelvie, his co-founder, who's a trained architect, sort of came up with the plans and then boom there away. They started a company called Green Desk, which they sold, and that was the first iteration of Wewak, which they started in 2010.
We work as a new environment for the workspace of co-working. We're sort of where it started. Today there is a movement in changing the way people work.
2010 was a great time to be starting a co-working company in New York City for a bunch of landlords with empty office buildings vacancies. We were actually presented a solution for them. The very first building down in Grand Street in downtown Manhattan was where we work, launched its first co-working spot. And from there was sort of boom from 2010 to 2011 that doubled in size.
And from then on, the growth was exponential with their original investors were people who were involved in commercial real estate. They got some early investment from a venture capital firm called Benchmark and eventually sort of kept growing, kept taking on new leases and and started to grow the business starting in New York City.
Business grew quickly, and by 2015, the company already quadrupled its valuation to $10 billion, counting 23000 customers, paying memberships in 32 locations, renting desks for as little as forty five dollars per month.
We were ex whole idea was let's not just be a commercial office leasing company. Let us accelerate the new world of how people work and make it better community.
Being surrounded by a group of like minded individuals, being part of something bigger than yourself inspires people to work harder, spend more time at work and just have fun doing it.
And initially, this attracted the attention of young entrepreneurs looking to expand their companies. We thought it's about time to give you a tour of where we work.
A tour of where we work. A tour of where we work.
You got tokes. He got you. You got your Red Bulls. Incredible group of people. Everyone that I've met through the we were communitys been absolutely awesome. And all the staff here are incredible.
It's almost like a cult like sensation that they created with the very early employees sort of realizing that we work was more than a company. It was a bit of a family. It was a community and a members to sort of realize that they realized they could lean on each other in terms of networking, in terms of growing their own businesses.
This excitement drew in even more investors to the company that Ms. And his company. You know, it's not 2.0. It's 10.0. I mean, he's taken it to really the next the next level. And when you walk into their space and you see the energy, you see the excitement, you see the interaction. It's a very, very powerful concept. And the most crucial investor would be Softbank.
I would say the time that I think we were really started to take off was when Softbank invested in them in twenty seventeen. That gave them a valuation of $20 billion. And that's really when you start to get into the high ranks of other venture backed private companies. With SoftBank's investment, we were quickly expanded its footprint throughout the world, and it's the beginning also of this partnership between Adam Newman and Masayoshi Son, who's head of Softbank.
They had this meeting that is often told again and again in the law we work where Adam made this pitch and Masa said, that's great, but let's make it even bigger.
We Work is actually one of over 80 companies that Softbank Vision Fund has backed with its over $100 billion. SoftBank's idea is there's lots of money out there in this unique period of transformation. Let's make everything happen faster with more money. And let's enable companies that have smart ideas to get even more ambitious, bigger and faster.
Between 2017 and 2018, Softbank would invest around 8 billion dollars into we work, doubling its valuation to $20 billion in 2017. In 2019. Softbank floated a potential $16 billion investment, which would give them a controlling stake in the company. Ultimately, they would scale back to just $2 billion, but it was enough to double. We worked valuation again to 47 billion.
So at 47 billion, which is a little bit of an illusory number, it's not real. But that put we work in the very top tier of high valued young startups.
So the reaction from a lot of the real estate world was, wow, that's crazy in part because there's a company that trades in the U.K. called IWG, used to be known as Regis. It trades at a fraction of that. And people were looking at that company, which is profitable and we work, which is not, and wondering what the gig is. Why? People didn't understand what Softbank maybe needed, that they didn't.
And that's because in many measurable areas like global square footage, members, locations, countries, revenue and profit IWG is either similar or much higher than we work, except of course, for one area. Valuation where we work was valued nearly 13 times higher than IWG.
We of course looked at that every single day and said, what are we missing? Is that something that we're not doing? Is there something that we're missing? Is there an ingredient that's sort of there that we are missing out on that we can add into what we're doing?
But we never found it after getting these investments from Softbank and license to spend quickly. That's just what we work did opening more and more offices around the world, making investments in a variety of different companies and even opening an elementary school in New York City.
It's almost stuff of legend right now how breathlessly Waywire expend its money on things from a company that makes wave pools to a company that makes superfoods led by a guy that Adam met while he was surfing.
You know, when you see a startup that's in the commercial real estate sector, investing in an indoor wave pool company and in a children's school, you know, something has gone wrong.
But just how wrong wouldn't be fully realized until we work announced in August of 2019 that it would file for a public offering.
It was the first time since a bond offering last year that investors were able to peel back the curtain and see into the company's financial performance rate its metrics, see its growth.
I got up really early and was reading it. And I remember, you know, on my way into the office, it was still dark outside and there was a small line and just a couple lines about how Adam Newman, the CEO, he had personally purchased the trademark to the word. We sold it back to his own company for five point nine million dollars.
I looked at that and I thought, that's kind of weird. This was just one of many examples of how the corporate leadership, including Adam Newman, seemed to find opportunities to enrich themselves at the expense of shareholders and at the expense of the company.
The filings also showed in just the first six months of 2019, we were lost six hundred ninety million dollars, bringing its total losses to almost three billion dollars in the past three years.
Things start changing rapidly. Investors are telling we work and its bank is, you know what? This isn't for us. People are throwing out numbers as low as 12, potentially even as low as 10 billion.
All these things that raised a few red flags and just started kind of added fuel to the fire. This discussion of this company ready to go public, it just doesn't feel like it has the controls in place that you would expect of a public company that needs to protect the value for shareholders.
On September 17th, we work officially pushed back its much awaited initial public offering.
We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong.
The board and in particular Softbank, its biggest investor, decide that there needs to be a big change and needs to come from the top and that Adam is now more of a liability toward the company than he is an asset.
On September the 24th, he resigned, saying Too much focus has been placed on me. He realized he was a distraction to the company in a vote with old Baldrick TOS, of which he was one. He actually voted against himself.
Remaining as CEO to senior we work executives Sebastian Cunningham and Artie Minson were appointed as co-CEOs. Among their housekeeping items sell Neuman's $60 million private jet put multiple. We work acquisitions up for sale, postpone the IPO indefinitely closed down. We grow the company's private elementary school and lay off thousands of employees.
We reported that the co-CEOs Ordinance and Sebastian Cunningham have secured themselves multi-million dollar severance packages at a time when the company doesn't even have enough cash to pay severance to its thousands of rank and file employees that it plans to layoff.
Softbank would ultimately bail. We work out injecting a much needed $9.5 billion into the company, which now is valued at less than eight billion dollars.
Now that Softbank has bailed out, we work. I think the overarching sense is one of uncertainty for everyone who's involved in this company. You know, when I've talked to ex employees, when we work, they often feel pretty drained by the experience.
They felt like they came in drinking the Kool-Aid, thinking we work was going to change the world and make everyone more connected and help people do what they love. And by the time they left, they felt like they hadn't really been valued and that the company was kind of all over the place and they felt worn out.
There are some cautionary notes for every other young company running the business in a completely unprofitable manner. The lack of board oversight that there was no adults in the room saying no. And so I think what happened at we work as a sign that you can only run a company without guardrails for so long.
I mean, I think it's basically a shocker for everyone. I don't think anyone's seen anything quite this big and this strange go down. But for those of us in tech, there is great precedent for a transformational change getting underway. And then a bunch of the early folks sort of flopping. I mean, there was a time that eBay was 10 times bigger than Amazon. Now Amazon's 50 times bigger than eBay. There was a time that MySpace was the only social network. Now the only one is Facebook. Those kind of reversals happen quite regularly. And so it's not really a surprise that the first mouse to chase the cheese is the one that got caught in the trap.
I think that's roughly what happened that we were I think we work as sort of both a little bit of an outlier in this era of technology startups, but also kind of the perfect encapsulation of what this era of sort of easy money and no rules has delivered in in startup land. (Source: Bloomberg.com - YouTube.com/Bloomberg)