WeWork Business Model | The Secret behind WeWork's Success

Anagha S Anagha S
Jul 21, 2021 4 min read
WeWork Business Model | The Secret behind WeWork's Success

WeWork is the fourth highest valued startup in the world after giants like Uber. It took on to the startup world through their idea of co-working spaces which became very popular in a very short span of time.

As the name says it gives office spaces for various businesses and entrepreneurs to pursue their work at a cost which is far lesser than what they would have had to spend if they were preparing a workspace from scratch.

WeWork was founded in 2010 and it was valued at $47 billion at its zenith. One of the major reasons why WeWork worked was because of the responsibilities that the business owners can leave out by renting work spaces from this start-up.

However, since it’s announcement of initial public offering in August 2019 the company has received a lot of criticism and humongous loss. Following that the company postponed the IPO indefinitely and two years later in March 2021, it announced that the company is going with the merger with BoX acquisition Corp.

The Smart Pitching approach of WeWork
Business Model of WeWork
How WeWork is Making Money Through Renting
FAQ

The Smart Pitching approach of WeWork

WeWork has successfully created an image wherein they posed themselves as a technology driven startup even though their basic level rests upon real estate. It is only in the development of a particular workspace that they deploy technology and not necessarily in the ways of doing business in itself.

However that is not how WeWork portrays itself to the world or to their investors. This is because of the fact that these days technological companies tend to receive funds rather than non-technical ones.

The valuation of the WeWork has proved this correctly. Even though it does not make any profit or have a stable cash flow it is still valued way above its counterparts whose valuations are not even half of that of the WeWork even though they have better profit and cash flow.

Hence the way it portrays itself has a significant role in helping the startup to gain value.

Business Model of WeWork

One of the major partners of WeWork is entrepreneurs and small business owners who want office spaces for various purposes related to their organisation at a very cheap rate. Some of these people may not even need the spaces for a long period of time.

WeWork has suitable packages for all these kinds of people. The ones who rent out space from the work need not worry about any kind of bills or maintenance or connectivity. All these are handled by WeWork in itself.

As far as business owners are concerned this in itself is a huge advantage for them. The fact that it will cost more than double of the rent that they have to pay for the work, had they had to set up a workspace like the ones offered by WeWork.

On the other hand, as far as the people who lease these work spaces to WeWork are concerned, they prefer the ways of the organisation. It is because WeWork takes large work spaces for lease for at least 10 years. And then they divide them into smaller work spaces and rent it out to other businesses.

Here the owner will always prefer entering into an agreement with one organisation for a long duration than with multiple small buyers for a short duration of time. This also means that they will be able to keep track of the transactions and focus on other businesses in a better manner. They need not worry about finding a tenant or dealing with too many agreements at the same time.

The requirements of rework and the demands of the lender matches along with the needs of small businesses. In this way all the three partners do their business smoothly in all regards.

Revenue of WeWork
Revenue of WeWork

How WeWork is Making Money Through Renting

Although the nuances of WeWork look sophisticated at the end of the day it is an office space renting company. Majority of its revenue comes from renting of spaces to people.

They take in real estate spaces from owners for lease and then convert them into smaller work spaces and common areas. They devise their packages in such a way that it suits all kinds of people.

Sometimes these areas are as small as per room or maybe even a floor. It can also be as large as a whole building in a prime location. Independent freelancers and workers who require office spaces with better connectivity only for a small duration find the services offered by WeWork the most advantageous.

From small businesses to big companies like OnePlus have also rented office spaces from WeWork. The rising of shared office culture was also a great advantage for WeWork and it has undoubtedly contributed to its success.

Conclusion

Over the years WeWork have been experiencing severe losses due to their carefree approach and improper planning. The only reason why WeWork continues to survive is because of its high valuation and funding that it received purely due to the way they portray themselves as a technological company.

They have also tried to expand their niche beyond work spaces. They have a very attractive state of the art architecture in spaces in prime locations which significantly adds to their value and an elite image.

WeWork can at the same time be an example for how a business should put themselves in front of others and also how not one should plan their initiatives. Their strategies and models have got a lot to learn from.

FAQ

How does WeWork make money?

WeWork generates revenue by renting office spaces to businesses and companies.

What is the valuation of WeWork?

The valuation of WeWork is $9 billion as of 2020.

Who is the founder of WeWork?

WeWork was founded by Adam Neumann, Miguel McKelvey in 2010.

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