The company has 0 tech brand among employees (how many ex-FB or ex-Google engineers work there?) and outside of Benchmark’s early round none of the VCs are SV-based.
Point is the media is making this out to be an indictment on some SV tech bubble but people in SV are looking at this from the outside like everyone else.
Its not the media, I think its just true. Had WeWork IPO'ed under the same conditions a year ago, I think it would have been 'fine'. but the glut of SV unicorns losing money, hating investors, and slowing growth has got people highly concerned.
This list of companies (slack, lyft, Uber, Pinterest, beyond meat, crowdstrike, tesla, spotify, Pinduoduo, Dropbox, Snap, Domo, Blue Apron, Box, Shopify, Zillow) has 310 billion in market cap and -18.67 billion $ in revenue (back of the envelope calculation).
If I missed anyone or made a typeo/mistake, let me know how I came up with the numbers: https://docs.google.com/spreadsheets/d/1L2ElCY853kgWACC3Q48Q...
EDIT: I am not saying all these companies are bad; I am invested in some of them! Just that the sheer size of these companies and their total losses are unnerving lots of people to such a point that the market had no appetite for WeWork.
You’re confusing revenue and earnings/net income. Revenue is the sum of the sales. Net income, or earnings, is how much money is left after accounting for expenses. Uber alone has tens of billions of dollars in revenue.
Edit: wow I didn't realize Slack had such a large market cap. That is a LOT of growth priced in, probably more than is justified.
They don't hate investors, just the likes of you or I, and who can blame them? Softbank gives them money on a $47bn valuation, don't have to deal with reporting requirements, don't have short sellers (which SV types seem to be really annoyed by?!).
(Disclosure: I work at Twilio.)
Yes, Silicon Valley's smartest minds may see through it all. But in routine media coverage, the company's own version of its story (OVOIS) gets much of the ink. It takes a while for more investigative reporters to call BS and defy the company's OVOIS.
Actually, my feeling here is that institutional investors have realized that We isn't a tech company. That's why the IPO would probably only have fetched them at most a $20B valuation, rather than the higher valuation they've been awarded from the private markets as a supposed tech company.
So this may not be an indictment of "Silicon Valley IPOs" in particular, just investors saying "no" to a clearly overvalued non-tech company, and that company then deciding that it won't accept a likely more-reasonable valuation.
(Not saying there aren't plenty of overvalued tech companies! But this might not really have anything to do with that.)
It is (too some degree) an indictment on the Softbank and/or blitzscaling strategy that a lot of SV startups follow.
My wife just started a contract at a new WeWork office in London. The lobby features a giant but non-functional as skateboard ramp, and two DJ booths, both manned (at 9am on a Monday). The bathrooms feature the very latest in digital toilets, but they aren't flushing, and nobody can figure out how to reboot them.
At an aesthetic level, this couldn't be more Silicon Valley if Mike Judge were in charge of the service design.
In this context, the media pile-on may be annoying -- but it's inevitable, and basically deserved.
After the third such class, I decided to get the hell out of my lease.
It's like their entire corporate culture is built around finding creative ways to not work. It's awful environment to build a startup in.
The graffiti in the Broad St. NYC location is cringe inducing.
On more than one occasion I've witnessed people omit that their office is based out of a we work location. Just too embarrassing to be associated with them.
Ours just has bathrooms & coffee machines that are offline for weeks at a time.
Question: How do you think this company got a $40B+ valuation?
Answer: By renting office space to "Silicon Valley" companies with equally silly ideas and terrible financials. It epitomizes SV.
Here's a news headline: "Tech company" brand value damaged by WeWork; WeWork not in the club key investors say
What we see now is the second stage of this: companies which have a marginal involvement of technology in their core business (which is true for basically all companies today) try to paint themselves as "tech companies", with the goal being that investors put them in the same box as Amazon, Microsoft, Netflix, Salesforce et cetera.
And since investors are just as stupid as anyone else and just as susceptible to fall for herd-like behavior as anybody, this strategy works to a certain degree.
WeWork is even taking it one level further. They still have close to thousands software engineers to build... Things though.
Well it is based in New York, so it really isn't a Silicon Valley company. It's a NYC one.
This sounds like an awful metric.
CloudFlare... Now there's a proper tech company.
Why do you think valuations varied so wildly? You get the same thing with Tesla, it's valued more as a tech company than as car company.
According to that Tesla is somewhere inbetween a tech company and car company. Also it's the only car company that used software to substantially improve the performance of the car using software after selling it.
You can't put a horn on a dog and call it a unicorn.
https://www.bloomberg.com/opinion/articles/2019-09-06/people...
5 stock splits and 3 CEOs later, day one investors will receive roughly 2 pennies back for every dollar invested just 2 years ago.
Only people who won were those who dumped free shares on the market (insiders), and maybe consumers for getting subsidized food of questionable quality.
Once valued at 2 billion USD, a paltry 150 million will get the job done now.
The idea is that it not only measures growth, but measures new customers in relation to churn, with the idea that it's a lot easier to have a long term successful business if you have, say, 1000 new customers and 50 that leave in a month (net 950 new customers) vs. 5000 new customers and 4050 that leave in a month (though also 950 net new customers).
Blue Apron was legendary for its huge churn rate and commensurate high customer acquisition costs. Curious what its quick ratio was, and whether it was just basically ignored.
VCs are focused on whatever metric reels in the next layer of suckers. GAAP exists for a reason.
I don't get it, but then I don't have any trouble cooking for myself and my family. I didn't grow up learning how to cook. I spent a little bit of time figuring it out and then it became easy and didn't require a subscription to some sketchy company.
There's also no way that you're coming close to the prices at a supermarket when you're buying individual meal's worth ingredients instead of bulk, a bag of potatoes, or a bottle of seasoning instead of one potato and one pinch of whatever inside some single serving plastic wrapping.
For me I eat a very peculiar diet so I usually just pick up yogurt and fresh bread from the grocery store on my way home from work, and when I'm feeling particularly lazy I will order steamed chicken and steamed broccoli from the local Chinese shop who really have this amazing technique of steaming that I seem unable to grasp!!
Or is it that the price point allowed for marginal profits and they thought that by scaling up it would cover the fixed operational costs and thus lead to profits.
Where do you think it went wrong?
https://trends.google.com/trends/explore?date=today%205-y&ge...
Want to browse Pinterest? Open the app. Want to get Pinterest? Go to the App Store. Heard someone say 'pinterest' but don't know what it means? Search google.
Your link is only showing that last one.
https://trends.google.com/trends/explore?date=today%205-y&ge...
That’s a parody from 2017. It’s probably more true now than ever. We actually cancelled our BlueApron last year in favor of another meal kit service - and might end up canceling them overall for grocery pickup from our local grocery chain.
Being tech companies means that they’re viewed as part of a group of companies who have pulled of billion dollars IPO, so they’re wrongly focus on “no less than the one billion”. Mentally the jump from 1 billion to 2 billion is also a lot less that the jump from 150 million to 1 billion, so why not go for 2 billion.
"We're going to really fuck anyone willing to do business with us" is not a compelling story for a company trying to grow, but it's great for investors. Also, I'm not just talking about the landlords and customers, you better believe the plan is for the lenders to get pennies back on the dollar too.
A monopoly on real estate?
Yeah no.
Doesn't change the fact WeWork is an overvalued real estate company that believes it is a tech company.
If they could figure out how to do printing without PCClient, now that would be a business worth 47B all on it's own...
To be fair, you could say that about many 'tech' companies. Weworks 'innovation' may well be getting to over the hill tech company in record time!
> Were the New York-based company to fail to meet this target by the end of the year, it would need to secure alternative funding.
Does this mean, its now a ticking time bomb?
When you read this and that Softbank has committed to buy 1/3 of the shares sold at IPO it does sound like it's going to pop sooner than later (that may include the vision fund if WeWork crashes)
For some reason every startup nowadays is the next Amazon or Facebook. Poised to become the market leader in their field of expertise. Most of the IPOs are losing big money yearly but the market is happy to support them with billions of dollars. Actions that would make Warren Buffet cringe but could make money if you're lucky.
This invites startups to take advantage of the situation. To me this is one of the dark sides of our society because the ones at the bottom of the pyramid losing their money are you and me saving for our pensions.
Indeed. For all the platitudes otherwise, the vast majority of startup founders do this primarily because they want to become rich. Judging a startup by any other metric is at the end of the day at least somewhat disingenuous.
If all you know about two startups is that in startup 1 the founder exited the company with $10 million in his bank account and in startup 2 the founder exited with $750 million in his bank account, which would judge the bigger success?
"Elevate the world's consciousness" --> Dont mean to be negative but what the hell does that even mean? Imagine your landlord told you that.
Been following this story closely and Adam Neumann is such a crook, from the outset he just wanted to take advantage of public shareholders. His intentions were to screw them. Don't forget that lot of the shareholders for big IPO's are pension and mutual funds and hard working middle class families indirectly or directly own a bulk of these. This is how they get screwed.
I am so glad the market called his bluff.
My guess is "building more floors"
Well, when one provides an anti-work work place, the people actually trying to do their work need to elevate their consciousness to get anything done.
WeWork parent says IPO still on despite setbacks
#dotbombveteran
You start with the story the bankers sell you. They all want to tell you you're going to be bigger than you ever thought possible, because, well... those fees are awfully nice.
"We're going to IPO you at 20% of $PREVIOUS_VALUATION"
The counter-argument was, well, "We don't think you're worth that much, you're probably worth only $20B."
The problem is here... well there's not really a financial position you can take here especially as the short price skyrockets. Maybe you get some smug satisfaction, but overall, everyone in the early stage of trying to win the IPO for their bank is going to tell you what you want to hear.
Now... things suddenly change, you need to shop it around. Well, maybe you don't get the number you want. Maybe you do? You edge it a little down. Yet, all the benefits you have as a private company (insert your It's Always Sunny in Philadelphia Pepe Silvia meme of Mack trying to connect the dots) you can't really keep entirely as you try to collect that public check.
Matt was spot on here, of course, they're going to try and take apart some of those political rights that usually people grumble about (see Snapchat IPO) and then somewhat get over as time goes on.
Yet even that didn't do the trick! So you slash the economic upside, and once again that's not enough.
Maybe you even set the price low enough that you can hype it and it will go up, but at some point, the market will give its verdict and in this case: WeWork didn't cut it.
In many ways, it's an interesting litmus test of the health of the tech industry. Yes, there's been a bull market for this last decade, but bubble... maybe not. Maybe, this is great example of Wall Street being serious about how much large private companies are worth? Either way, what a crazy saga nonetheless. I wonder if they'll be able to (somewhat paraphrasing Matt) turn the dial from growth to revenue and approach the market later? Time will tell I guess.
Maybe we'll get an Alex Gibney documentary out of it!
This is something I don't get. Pretty much all of these businesses are aiming at dominance on some sector. They entered into the game with the understanding that it's all or nothing.
If they don't achieve that dominance, or if the sector itself turns out to be less than worthwhile, isn't it more likely that these companies are worth essentially zero, rather than some percentage of their target value?
"My friend’s entire company is locked out of their WeWork office because an umbrella fell, jamming the door. No one can figure it out. It’s been like this for 2 days." --https://twitter.com/NeerajKA/status/1173997679363407872
Too good.
I suspect that SoftBank & Saudi money will be the biggest casualty of current tech boom. They just throw money around.
I doubt legally they can do it, and no ones going to be taken in by it, it just casts doubt on all the other investments by Softbank.
Even if all those offices were the whole building (I think many (most) are just a subset of the floors that’s not much for the entire city.
Although it’d be interesting for all the people working in them, I wonder how that’d work out.
Another odd thought--would you count an oil company like halliburton's well leases? I know that square footage is normally used for buildings as to account for multiple stories, but if we count commercial land leases then either an oil/gas company or a large agribusiness would almost certainly come out on top.
A couple quarterly filings have already begun to bring some of these companies closer to reality.
When on-boarding a new employee, companies would be able to automatically provision them a desk/office at the closest WeWork to them. This allows companies to have access to a much bigger pool of talent, and allows employees to have access to a bigger pool of companies.
On top of that, the flexibility means commutes are much shorter, as co-working spaces can be efficiently distributed across a city and its suburbs. Even when an employee moves to a new company, they could theoretically stay at the same WeWork site, rather than have to deal with a new commute.
I always felt this was the fatal flaw in WeWork’s model. Once telecommuter culture has been established, companies realize they can just make their employees pay for their office space and deduct it.
For most things where you benefit from “going in to the office”, the benefit is reliant on having a set of people in the same place. If everyone is all over the country, what is the point of office space in the first place?
Reports out now are saying the likely market cap of the company is less than the cash raised by the company. Speaking generally that’s typically a beyond ugly situation for non-investors hoping their stake/options is going to make them some $. Think about it... it wouldn’t be right for some employee equity/options holder to get money while investors lose money.
Haven’t seen much written about the details specific to We/WeWork, but given all the crazy governance issues identified to date with its corporate structure it wouldn’t be surprising if such clauses are very complex.
Would be interesting to see something simple, like the total value of all the employee equity, according to different IPO prices/valuations, and then compare that to the changes in the CEO's wealth on the same axis.
I don’t know enough about how SoftBank manages it’s children to know if I should be worried...
So, sounds like an easy sell. But it depends on the price.
Once the stock has gone IPO anybody can trade.
