Sceptics abound, but there may be more to the startup than meets the eye.
The office design phenomenon.
WITH HIS FLOWING locks and hip clothes, Adam Neumann, co-founder and chief executive of WeWork, looks less like a property baron than the frontman of a rock group. In interviews, he speaks expansively on the subjects of character, destiny, and God.
Yet Neumann, a veteran of the Israeli Navy, also has a reputation for being an intense and demanding businessman. Both sides of his character come together through WeWork. Neumann thinks of his property startup as a profit-making version of Israel’s famed communal farms—a sort of “capitalist kibbutz.”
The co-working company leases buildings, renovates them to be deluxe Silicon Valley-style offices, and then rents out those offices one desk or conference room at a time. During 2017 alone, WeWork raised $4.4 billion from SoftBank’s Vision
Fund. As of October, it had 172 locations in eighteen countries, used by more than 150,000 members. WeWork itself employs over 3,000 people. And it capped the year by buying Meetup, the social network designed to bring people together in their off-duty hours.
In the eight years since its founding, WeWork has become the largest private sector occupier of offices in central London, and the second largest in Manhattan. Its expansion has been fueled by SoftBank’s almost-$100bn Vision Fund, which last year put several billion dollars into the firm, valuing it at $20bn. This is more than most big property companies, even though it is not yet profitable. SoftBank is expected shortly to invest another $3bn into the company in a deal that could lift its valuation to $35bn.
What does it actually mean to WeWork-ify your headquarters, exactly? Good question. “I rarely come across people outside the company who have a really solid understanding of what it is that we do,” Josh Emig, WeWork’s head of research, told Inc. Magazine, “and [they] especially don’t have an understanding [that] technology is a huge component of that.”
WeWork insists that its operational prowess is something that competitors can’t replicate. The company has developed in-house logistics software to coordinate every aspect of building and managing its locations. WeWork is also seeking to automate office functions like access control with custom hardware. There are even standing desks that remember your height preferences.
“I rarely come across people outside the company who have a really solid understanding of what it is that we do,” Josh Emig, WeWork’s head of research, “and [they] especially don’t have an understanding [that] technology is a huge component of that.”
Big questions regarding the future of the company nevertheless continue to swirl. Sceptics wonder about the model’s viability in an unsentimental, margin-driven property industry that is prone to painful ups and downs. As a result, they scoff at its valuation. While WeWork’s top brass talk of it eventually becoming a $100bn firm, others regard a tag of $20bn as already extremely stretched.
WeWork does deserve credit for reimagining the conventional corporate office. It has spread design innovations from tech companies such as Google. A large common area with sofas and work desks, fruit-infused water, and open lines of sight welcomes visitors
to every location. Each is manned by a concierge who gets to know “members” and curates events ranging from yoga classes to investor talks. The halls and stairways are deliberately made narrow as a way of encouraging people to interact. In the lounges, music is played loud enough to prevent eavesdropping on private conversations. The firm uses a mixture of anthropological research, sensors, and data analytics to hone and customize the designs.
At its location near Grand Central Station in midtown New York, a member working at an advertising startup says his old ad agency was so full of politics and corporate silos that he rarely socialized with colleagues. In his new co-working space, he often enjoys a beer or plays video games with people from other firms. Meanwhile, down the hall, the boss of an Icelandic yogurt firm says running instant focus groups on new flavors in the lounge helps speed up product development.
Research suggests that employees are happier in co-working environments like those run by WeWork. But the firm’s real genius is that it is also far cheaper for employers. Property experts estimate that firms typically spend anywhere between $16,000 and $25,000 per employee on rent, security, technology, and other office-related expenses. Neumann insists they can get all of that from WeWork starting at just $8,000 per worker. Efficient use of space is one key reason. Ron Zappile of Colliers, a property-services firm, reckons that typical corporate offices use some 185 square feet per employee. WeWork members get by on 50 square feet per head.
WeWork also hopes to advise firms on improving corporate culture. A forthcoming product, described in a case study prepared by Harvard Business School, envisages WeWork helping firms transform by applying its methods. Neumann observes that firms are often much bet- ter at taking care of their customers than they are at looking after their employees. In addition, WeWork offers a range of services for members, such as third-party health insurance for startups, which make up a small but growing part of revenues. It has acquired America’s Flatiron School and offers its computer-coding classes to members. It recently launched WeWork Labs, whose services for startups include mentorship from seasoned entrepreneurs, matchmaking with big firms, and other benefits.
“The halls and stairways are deliberately made narrow as a way of encouraging people to interact.”