WeWork, now known as WeCompany is an almost allegorical boom and bust startup story on steroids. Its founder and CEO Adam Neumann is currently disgraced and forced out of the company albeit with an over billion-dollar payday. The company is going through restructuring, and its future is in doubt. However to understand the bust, it's important to comprehend its stunning ascent.
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Its boom was remarkable as the company grew from a single location in New York City in 2010 almost basically on a lark to its peak valuation of $47 billion in 2019. WeWork launched when Neumann approached an owner of an empty building to convince him to let Neumann rent out desks and office space.
From these humble beginnings, WeWork grew to have over 800 locations all over the world by 2019. In fact, it rebranded itself as "We" and branched out to various ventures including education, housing, and health. Of course, its core business remains to rent office space and desks to its members on a short-term basis. It proved to be a perfect fit for the increase in flexible work and remote jobs. Additionally, empty real estate was abundant due to the recession and financial crisis.
The setup was also ideal for startups and small businesses who could add office space with their headcount. The model was instantly successful and popular, and the company gradually added locations. By 2013, its success caught the eye of venture capitalists who and invested significant sums into the company which accelerated the company's growth. In many ways, WeWork is a pretty simple real-estate company that rents property to tenants and can hopefully turn a profit. However, WeWork's charismatic CEO Adam Neumann was able to sell WeWork as a technology company. The purpose of this is to get a higher valuation.
The company used its artificially, high valuation to attract even more investors and pursue growth more aggressively. Neumann's ambitions were validated as WeWork's valuation steadily climbed, and Softbank
The partnership portended bright things for Neumann and WeWork, as he would be getting even more ammunition to grow the company vertically and horizontally. Despite WeWork's growth and impressive valuation, there remained doubts as to whether the company could ever become profitable. These doubts translated into reality as the company struggled to get funded at higher valuations. In the final round instead of investing $16 billion, Softbank invested $2 billion.
WeWork finally unraveled during the IPO process. Its financial filings revealed that the company was in rough shape and far from profitable. Its valuation plunged. Later-round investors certainly lost money, and Softbank wrote down its investment by $9.1 billion. Eventually, Softbank was forced to take over the entire company, pushing the CEO out. Now, Softbank must impose severe changes in order to ensure WeWork's survival.