WeWork Case Study: A Fall From The Pinnacle Of Success

Devashish Shrivastava Devashish Shrivastava
Oct 14, 2020 14 min read
WeWork Case Study: A Fall From The Pinnacle Of Success

Here's a thoroughly studied WeWork case study briefing the history, business model and the fall of WeWork from the pinnacle of success. WeWork American organization that gives shared workspaces to other companies and organizations.

Established in 2010, it is headquartered in New York City. WeWork oversaw 46.63 million square feet of space in 2018. WeWork structures and fabricates physical and virtual shared spaces and office administrations for people and companies. WeWork has more than 5,000 representatives in around 280 locations, spread crosswise over 86 urban areas in 32 countries.

In January 2019, the firm declared its plan to rebrand as "The We Company"; it was valued at $47 billion at that time. In that year, troubles started brewing for the company.

Adam Neumann left his position as the CEO and surrendered a greater part of ballot control in WeWork from 26 September 2019. WeWork also postponed its arranged securities exchange posting until the end of 2019 as issues began to arise in its corporate administration, valuation, and other business aspects.

On September 30, 2019, WeWork officially pulled back its S-1 documenting. The proposed IPO was thus delayed. The organization's valuation fell below $10 billion, not exactly the $12.8 billion it had raised since 2010.

History of WeWork
Business Model of WeWork
WeWork Business Growth
Future of WeWork In India
FAQ

History of WeWork

In May 2008, Adam Neumann and Miguel McKelvey started GreenDesk, an "eco-accommodating coworking space" in Brooklyn. In 2010, Neumann and McKelvey sold the business and began WeWork; its first area was New York's SoHo district with halfway financing from Manhattan land designer Joel Schreiber who obtained a 33% stake in the organization for $15 million.

By 2014, WeWork was considered "the quickest developing renter of new office space in New York", and was on track to turn into "the quickest developing tenant of new space in America. "During the monetary emergencies, there were these vacant structures and these individuals outsourcing or beginning organizations," Neumann told the New York Daily News.

"I knew there was an approach to coordinate the two. What isolates us, however, is community." WeWork collaborated with several organizations, including new businesses such as Consumer, HackHands, Whole Whale, Turf, Fitocracy, Reddit, and New York Tech Meetup. In 2011, PepsiCo put a couple of representatives in the SoHo WeWork, who went about as guides to littler WeWork part companies.

The first WeWork Labs opened in New York's SoHo in April 2011. WeWork Labs works as a startup hatchery, furnishing an open workspace to empower joint efforts among individuals who "don't have their business related thoughts completely cooked."

The company had 51 cooperating areas over the US, Europe, and Israel in January, 2015– twice the same number as it had towards the end of 2014. On June 1, 2015, WeWork reported that Artie Minson, previous Chief Financial Officer of Time Warner Cable, would join the organization as President and Chief Operating Officer.

On March 9, 2016, WeWork declared that it raised $430 million in another round of financing from Legend Holdings and Hony Capital Ltd., pegging the organization at $16 billion at that time.

By October 2016, the organization had raised $1.7 billion in private capital. In October 2016, the organization reported its arrangements to open a fourth area in Cambridge/Boston region. It opened workspaces in Boston's Leather District and Fort Point in 2014.

On January 30, 2017, the Wall Street Journal composed that "SoftBank Group Corp. is gauging speculation of well over $1 billion in WeWork Cos., in what could be among the principal bargains from its new $100 billion innovation fund."

In April 2017, the organization began offering wellness classes at some of its areas and opened an exercise center at a New York location. In July 2017, the valuation of the organization came to around $20 billion.

WeWork Space
WeWork Space

Later that month, it was reported that WeWork would expand to China using $500 million contributed by SoftBank, Hony Capital, and different loan specialists to shape "WeWork China".

In September 2017, WeWork ventured into Southeast Asia through the acquisition of Singapore-based SpaceMob, and it put aside a financial limit of $500 million to develop in Southeast Asia, the home of more than 600 million people. The association's top rival in China is Ucommune, the main Chinese unicorn in the coworking space.

Uncommune Workspace
Uncommune Workspace

In late October 2017, WeWork purchased the Lord and Taylor Building on Fifth Avenue in Manhattan from the Hudson's Bay Company for $850 million. The arrangement incorporated the use of floors of certain HBC claimed retail chains in New York, Toronto, Vancouver, and Germany as WeWork's shared office workspaces. The deal was formally finished in February 2019.

In January 2019, WeWork declared that it would move into a two-storey structure in Tampa Heights in 2020 as a component of their venture into Tampa. On April 29, 2019, WeWork documented privately for an IPO.

On July 18, 2019, Wall Street Journal detailed that Adam Neumann sold $700 million of his WeWork stock before its IPO. The organization was hoping to raise over $3.5 billion from its IPO.

The We Company recorded S-1 desk work to go public. Media inclusion featured the organization's overwhelming misfortunes uncovered by the S-1 documenting disclosures, while experts communicated apprehensions over WeWork's capacity to end up productive later on.

Smartkarma, an expert on speculation research expressed, "We can't understand the reshaping's that would be important to verbalize a way to gainfulness here," and noted it didn't anticipate that the organization's valuation should go beyond $20 billion.


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Business Model of WeWork

WeWork was established in New York in 2010 to offer cooperating spaces to business visionaries, new businesses, specialists, and enterprises. WeWork has developed quickly, making it one of the biggest and most obvious cooperating chains on the planet.

It presently has more than 5,000 representatives in about 600 areas around the world, incorporating stations in many U.S. urban areas and 32 nations that includes Brazil, Germany, and Thailand.

How Does It Work

Superficially, WeWork's business model resembles a moderately ordinary land play. Over the 550+ areas it operates in, everybody from solo business people to enormous organizations can lease everything from a work area to a private floor. WeWork is not the same as your normal land organization β€” it conveys an incentive to the inhabitants and the landowners.

WeWork gives its occupants something that is conventionally elusive, an on-request adaptable space with momentary leases (even on a month-to-month premise at times). This takes care of the problem of continuous shifting, one that affects developing businesses.

The process of shifting involves finding another office space, moving in, marking a long haul rent, rebuilding the space, and moving out to begin everything once more elsewhere.

At the point when an organization exceeds it's WeWork participation, it can move up to a progressively extensive alternate space, a private office, or even a private floor β€” diminishing erosion from changes. Clients don't need to consider all the particulars of leasing office space, and they gain admittance to a lot of office advantages (free espresso, quick web, etc).

For landowners, WeWork offers huge incentives, including higher rents, an extended inhabitant pool, and increments in land esteem. In a blog entry distributed in 2018, the organization announced lease premiums between 15-29% in structures it managed in New York and Los Angeles. WeWork claimed generation of $250 million in extra income for proprietors in New York, Chicago, and Los Angeles alone.

Space Used By WeWork

WeWork's feels managing a business workspace is an intense issue regardless of how enormous (or little) your association isβ€” and it's once in a while a center competency. Consultants and the employees of nascent stage companies don't have the financial backing to pay for office space, and end up telecommuting or working out of some stop-hole arrangement.

A below-standard working space could restrain joint effort and profitability. Small and medium sized organizations battle with spending requirements and restricted assets, and development directions can make space needs a moving objective.

Venture associations face close consistent strain to cut expenses and increment productivity β€” land and activity costs can be a difficult barrier to cross. WeWork positions itself as the answer to these issues. By giving turnkey, versatile workspace arrangements, the organization vows to wipe out the contact associated with finding, involving, and dealing with a workspace.

Consultants and new companies get the advantages and preferences of having an office space without the expenses and obligations that accompany it. Small organizations get adaptable, reasonable space alternatives that can be reconfigured as needed.

WeWork rents a couple of floors of a structure from a property director in a high-thickness urban zone. It revamps the space to incorporate a blend of private workplaces, meeting rooms, parlors, and open workspaces.

It adds additional facilities such as espresso, office supplies, and brew on tap. WeWork pivots and leases workplaces to a blend of specialists, solopreneurs, new companies, and huge organizations.

WeWork essentially fits a larger number of bodies into its spaces than a run-of-the-mill corporate office. The normal per-individual office space in the United States is just shy of 200 square feet, as indicated by the US General Services Administration.

WeWork individuals can anticipate under 100 square feet. WeWork does this without yielding specialist profitability or fulfillment. Indeed, a center guarantee at WeWork is that its spaces are deliberately intended to cultivate greater efficiency and more development.

Services Added With Value by WeWork

Another factor adding to WeWork's guarantee of "greater profitability, more development" is the worth-added administrations the organization offers to individuals. In 2018, it relaunched WeWork Labs, a hatchery style program for new companies planned for helping them develop their business.

In February 2019, the organization reported a redo of the WeWork application, complete with new ability sharing highlights planned for making it simpler for clients to discover, interface, and team up with different individuals.

Once individuals enter the WeWork environment, it becomes hard for them to leave owing to the benefits. The organization's open recording archives report a net enrollment consistency standard of 119%.

WeWork's developing exhibit of significant worth included administrations β€” going from espresso and office supplies to showcasing programming and an administrations commercial center β€” push it past a basic landowner into a sort of full-administration proficient "hatchery" where an individual can arrange, develop their business, adopt new abilities, and have the everyday details of dealing with a workspace dealt with.

On the off chance that an organization or individual moves to another city, there will be another WeWork area sitting tight for them. If a vital accomplice or specialist organization is required, WeWork can help find the ideal option. What's more, as the organization develops from a little startup to a large organization, WeWork's administration scales to keep up with the upgrade.

Analysis Of Data

An essential piece in the WeWork ecosystem is the utilization of information. WeWork has for quite some time been utilizing information to advise participating organizations on areas, where they ought to be set, and what the blend of workplaces, workspaces, and courtesies should be like.

As of late, the WeWork has started to create products out of its information capacities with the "space-as-an administration" offering "Powered by We". Presented in 2017, Powered by We denotes a critical change for WeWork.

Earlier, WeWork's administrations were limited to the spaces that it involved. Through Powered by We, the organization has started to grow its range outside its own leases into organizations' current spaces.

This has a one-two punch impact, empowering the organization to order the more significant expenses that accompany serving endeavor customers, while simultaneously shedding one of its most noteworthy wellsprings of both expense and hazard β€” the leases themselves.

Share Of Workspace

The common workspace level is the least worth offering that WeWork has β€” not the organization's most beneficial part, however a significant establishment for what's worked above it.

These mutual workspace collaborations are what many picture when they hear the words "cooperating space." Members come in every morning and either snatch any accessible work area space in a typical zone if they have what WeWork alludes to as a "sweltering work area" enrollment or, for $100 or so extra a month, settle in at their very own committed work area in the common workspace.

As indicated by the WeWork site, these common workspaces are intended for new businesses and little organizations, specialists, advisors, and telecommuters. Hot work area participation start at $190 every month and can reach upwards of $600 in costly urban communities like San Francisco. Committed work areas run from $300 to $700.

Central Station By WeWork

The level above office suites, central station by WeWork will be WeWork's "white name" answer for big business customers. Instead of setting the organization up with a space inside a current WeWork premise, the central station is set up in independent areas sourced by WeWork in an area of the customer's decision.

Customer organizations pick one of four "configurable designs," running from an open warm-up area to official suites. Customers also pick inner staff to oversee everyday tasks for their area, with WeWork taking what the site alludes to as an "in the background" job.

WeWork Labs

A striking case of how WeWork uses esteem added administrations to draw organizations into the WeWork system comes as WeWork Labs. WeWork Labs is WeWork's "worldwide development stage" β€” an in-house startup hatchery that enlarges the central WeWork workspace offering with extra highlights, including devoted program directors, week after week occasions, pitch evenings, workshops, and financial specialist presentations.

Relaunched in 2018, the program is at present offered in more than 60 areas β€” 16 in the United States and others in significant urban communities over the world, incorporating into Brazil, China, Israel, Singapore, the UK, and Thailand, among others.

WeWork Labs
WeWork Labs

The organization says 1,000 new businesses have been brooded through the program as of December 2018.

The key factor that separates WeWork Labs from other startup quickening agents is the plan of action; instead of the standard hatchery model of taking value in the business, WeWork Labs charges a level expense, basically an up-charge to what the startup would some way or another compensation for space at WeWork.

Costs for the program's US areas go from $300 - $600 every month. There's a key measurement to WeWork Labs too as effective organizations move on from the program and develop into undeniable organizations, they become potential clients for WeWork's growing suite of administrations.


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WeWork Business Growth

The We Co., the American firm which works collaborating office spaces under the WeWork brand, has posted vigorous income development in India, even as it reels under huge misfortunes universally, demonstrates the organization's first open administrative recording.

We Co. posted an overall deficit of around $689.7 million and an income of $1.54 billion in the initial a half year of 2019. According to a report by Reuters, it is hoping to raise $3-4 billion through the first sale of stock (IPO), which is probably going to be propelled in September this year.

Since its entrance in India in 2016 through an organization with Bengaluru-based Embassy Group, WeWork has been forcefully extending its impression. At present, the organization has 23 collaborating focusesβ€”nine each in Bengaluru and Mumbai, and another five in Gurugramβ€”involving 39,000 seats.

Internationally, We Co. is available in 528 areas in 111 urban communities crosswise over 29 nations. According to the recording, the organization earned $3.5 million in the executive's expenses in the half-year finished 30 June, enlisting 118% bounce from $1.6 million in the year-back period.

WeWork Rentals By Industry - Wework case study
WeWork Rentals By Industry

In January 2019, the organization's valuation was expressed as $47 billion, however by September when an IPO was arranged and deferred, the valuation was decreased to $10-12 billion, not exactly the $12.8 billion it had raised since 2010.

Throughout the final quarter of 2019, WeWork's evaluated market capitalization has kept on falling to a limited extent because of various examinations on Neumann's conduct and strategic approaches.

In 2018, WeWork's misfortunes and income both multiplied. As per the Financial Times, the organization lost $219,000 every hour of every day from March 2018 to March 2019.


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Future of WeWork In India

WeWork India, a completely possessed backup of Embassy Group, plans to raise $200 million (about Rs 1,421 crore) to support its development and more than twofold the quantity of work areas it works to 100,000 by 2020 from 48,000, even as the organization fights falling valuation and speculator confidence in its worldwide business.

Since the dispatch of the American shared workspaces supplier in India, the Bengaluru-based Embassy Group has put Rs 1,500 crore in the WeWork partner. The target at is present are the six main markets in the nation, including Bengaluru and Mumbai.

The raising support plans come amid discussion around WeWork's first sale of stock. WeWork's parent, The We Company, pulled back IPO seven days after the SoftBank backed adaptable office startup removed author Adam Neumann as its CEO.

"Despite everything, we keep up a great association with WeWork all-inclusive and will hold the brand," said Karan Virwani, chief, WeWork India.

The organization holds the establishment for WeWork in India till the end of 2021. It might want to hold onto the brand; however WeWork holds the main right of refusal and can purchase out the Indian realty designer.

International Haven Group had paid around $200 million for the establishment two years prior. As of now, the realty conglomerate holds an 80% stake in the establishment.

Independently, Embassy Group intends to concentrate on business, modern, collaborating, and co-living portions to grow its impression in the nation. It has 10 million sq. ft. of business with a private stock of Rs 4,800 crore.

FAQ

What is the concept of WeWork?

WeWork is an American organization that gives shared workspaces to other companies and organizations. Established in 2010, it is headquartered in New York City. WeWork oversaw 46.63 million square feet of space in 2018. WeWork structures and fabricates physical and virtual shared spaces and office administrations for people and companies. WeWork has more than 5,000 representatives in around 280 locations, spread crosswise over 86 urban areas in 32 countries.

Does WeWork make money?

In January 2019, the organization's valuation was expressed as $47 billion, however by September when an IPO was arranged and deferred, the valuation was decreased to $10-12 billion, not exactly the $12.8 billion it had raised since 2010. Throughout the final quarter of 2019, WeWork's evaluated market capitalization has kept on falling to a limited extent because of various examinations on Neumann's conduct and strategic approaches.

Can WeWork be profitable?

It is hard to tell that WeWork will be profitable ever. The company has negative cash flow. According to WeWork's initial-public-offering disclosures, its losses are running ahead of its revenue. WeWork is not profitable on its preferred metrics either.

What is the problem with WeWork?

The problem is it has negative cash flow. According to WeWork's initial-public-offering disclosures, its losses are running ahead of its revenue. WeWork is not profitable on its preferred metrics either. Also WeWork's is that its whole business model is flawed with excessive leverage.

What is the WeWork scandal?

In January 2019, the firm declared its plan to rebrand as "The We Company"; it was valued at $47 billion at that time. In that year, troubles started brewing for the company.

Adam Neumann left his position as the CEO and surrendered a greater part of ballot control in WeWork from 26 September 2019. WeWork also postponed its arranged securities exchange posting until the end of 2019 as issues began to arise in its corporate administration, valuation, and other business aspects.

On September 30, 2019, WeWork officially pulled back its S-1 documenting. The proposed IPO was thus delayed. The organization's valuation fell below $10 billion, not exactly the $12.8 billion it had raised since 2010.

How much is WeWork worth?

In January 2019, the firm declared its plan to rebrand as "The We Company"; it was valued at $47 billion at that time. In that year, troubles started brewing for the company.

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