How did WeWork fail so spectacularly in an amazing market?

With its quantum leap from the business section of the newspaper to the front pages, it is pretty clear that WeWork is a strong candidate for the title of “The worst attempted IPO. Ever.”

When WeWork filed its S-1 in preparation for an IPO, investors were offered a first glimpse behind the curtain. What they discovered resulted in an 80% plunge in WeWork’s valuation, sidelining of the founder and CEO, and shuttering of two of the three brands (WeLive and WeGrow). Now in survival mode, Softbank, the main investor, is pumping in close to $10 billion just to prevent a total and immediate meltdown.

This crash and burn happened in the coworking market – truly one of the most significant real-estate innovations in decades. Coworking enables running a business or creating a start-up in a dynamic environment with zero investment in office space and no long-term commitment. It is very much in line with many aspects of today’s economy and offers a product with global value.

We have identified the following concepts which coworking providers can leverage to create viable business models and growing, profitable companies.

1. Variety –

Coworking is not a “one size fits all” product. A hipster designer in Williamsburg will have very different needs than an accountant in Stamford, Connecticut. Coworking providers should address the broader market with multiple brands, not just the high visibility “sexy” niches. Look at the hotel industry; Hilton has 17 brands addressing a wide variety of markets, consumer needs and demographics.

2. Location, location, location –

This is the #1 rule in real estate. One of the original mantras of the coworking revolution was “Working near home not AT home.” Rothschild Blvd. in Tel Aviv is a great place to work, but if it takes an hour to get there, a 10-minute bike ride to a suburban office sounds pretty good.

3. Community –

Community is more than just a random assortment of people who happen to be sharing office space. It must function as an internal marketplace and a place of true collaboration.

4. Privacy –

Most people looking for space want private offices. Cramming a lot of people into an open area with just about enough space for a laptop each is not very conducive to work for most people. A two-bytwo meter glass cubicle provides neither privacy nor a humane work environment.

Aquariums are for fish.

IT IS UNDERSTANDABLE that the WeWork fiasco may have left investors a bit queasy. This can be mitigated by presenting investors with a realistic business model, one that looks like a real-estate business. If it looks like a duck, walks like a duck and quacks like a duck, then it’s a duck. It is not a technology play. There is more technology at work in the elevator taking you up to the 60th floor than there is in running a coworking location there.

The coworking paradigm shift may present a challenge for conservative real-estate people. Buildings are leased rather than owned, and tenants have no long-term commitments, but real estate metrics still apply.

Coworking is “office space as a service” and will continue expanding globally, providing nurturing environments for small businesses, professionals and entrepreneurs. By enabling the social interaction people need – “working alone together” and getting out of the home office and the coffee shops (without giving up the coffee) – the market will thrive.

SoftBank’s challenge right now is not just financial, it is also culture clash. Adam Neumann created a very strong corporate culture at WeWork that filtered down throughout the organization and to the customers. Further clashes with SoftBank and its Saudi Investors are unavoidable.

As an aside, Neumann has received lots of bad press. True, he has pocketed cash on the order of magnitude of his investors’ losses, but he does not seem to have misrepresented the business model. He wowed investors with charisma and vision, not through lies. To quote SoftBank founder Masayoshi Son, “I turned a blind eye.”

Adam, if you are reading this, let’s hope you put those billions to good use. To quote from the WeWork prospectus summary, “Elevate how people work, live and grow.”

The writer is founder and CEO of Coworking Israel, operating for over 10 years in Raanana.