WeWork stands as the most valuable start-up in the United States, being valued at $47 billion dollars. But within a year, the coworking company was in need of an $8 billion dollar infusion of cash just to keep the lights on. Bloomberg tracks that story in their video, the Spectacular Rise and Fall of WeWork.
What’s the story behind the story? Basically, the WeWork story is a tale of a young company that got “too much money too fast with no effective oversight on how to spend it.” Blame starts with WeWork’s CEO, Adam Neumann. Neumann came to New York from Israel to go to college. He also started a few different businesses chasing the “American dream.” Eventually he landed on the idea of coworking, and with the help of co-founder McGill McElwee. The pair started a company called Green Desk, which they sold but that also served as the first iteration of WeWork.
The idea was perfectly timed. Landlords throughout New York were sitting on office buildings that were empty. WeWork’s idea gave them a way to use that space. Growth for WeWork was exponential. Commercial real estate investors provided the backing, and then Benchmark, a venture capital firm, stepped in. By 2015, the company had quadrupled its valuation to $10 billion with 23,000 customers and 32 locations. Young entrepreneurs flocked to the idea. In 2017, Softbank invested into WeWork, jumping their valuation to $20 billion. Even though that valuation wasn’t a real number, it didn’t stop the company from spending like it was.
In August 2019, WeWork filed for a public offering, and that’s when things started to unravel. For the first time, potential investors got a look a the company’s financial performance rate and metrics. The company’s leadership was doing things to enrich themselves at the expense of shareholders. In the first six month of 2019, WeWork lost $690 million, bringing its total losses over three years to almost $3 billion. Neumann was ousted, and layoffs were announced. SoftBank now controls the company. It’s a tale of a grand vision destroyed by irresponsibility.