WeWork

Scep­tics abound, but there may be more to the startup than meets the eye.

CEO Magazine North America - - CONTENTS - BY RENATA BARRAGÁN IL­LUS­TRA­TION: GUS MUR­RI­ETA

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.”

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