The Daily Telegraph - Saturday - The Telegraph Magazine
The rise and fall of Wework
Charlotte Lytton investigates
We are taking over the world! We are taking over the world!’ It was 2011, and Adam Neumann was stumbling, intoxicated, towards the lift of a private members’ club in Hong Kong, blaring Jay Z from a portable speaker. A car was waiting at the exit to whisk him and his new investor to a waiting private jet. Suit-clad diners stared as the 6ft 4in, 32-year-old entrepreneur revelled in his newest cash injection, secured over Peking duck – one that would soon lead his company to a valuation of $47 billion.
A year earlier, Israeli-born Neumann had set up Wework, a millennial-friendly coworking space where freelancers and companies could rent a desk by the day. With the option of an attractive membership package or simply to pay as you go, plus free beer and kombucha on tap, social events aplenty and a space decked out with plants and soft furnishings – not to mention the games arcades and skateboard halfpipes – this ‘capitalist kibbutz’ promised to replace office drudgery with whimsy and opportunity.
For almost a decade, Neumann – whose bombast and self-belief towered far above his huge frame – would continue to shake the pockets of venture capitalists (VCS) around the world, creating a company with 14,500 employees and 800 offices spread across 33 countries; not bad for a kid who hadn’t learnt to read until he was eight.
That was until, in 2019, his quixotic ‘vision’ and taste for the high life (and indeed getting high) caused an implosion that would send the ‘disruptive’ brand spiralling to the tune of $3,000 per minute. As a pair of Wall Street Journal reporters, Eliot Brown and Maureen Farrell, put it in their new book, The Cult of We: Wework and the Great Startup Delusion, Neumann’s remarkable crash and burn is ‘a vital parable of the 21stcentury economy’. It is the tale of a man who ‘raised too much money, set expectations too high, partied too hard, and, ultimately, flew far too close to the sun’.
Adam Neumann had spent several years mulling what might make him rich by the time he met Miguel Mckelvey in a lift on his way to a rooftop party in 2005. Then 26, Neumann – the son of doctor parents who divorced when he was seven, with a peripatetic upbringing behind him that included 13 house moves (and a kibbutz) by his early 20s – had decided that New York was where he would make his name. By the turn of the millennium, he and his model younger sister, Adi – a former Miss Teen Israel – were living in the city, where Neumann’s earliest venture, a baby-clothing company, was failing to get off the ground. Looking for something new, he bonded with Mckelvey, who worked for a digital architecture firm, over tales of their non-traditional early starts in life (the latter had grown up on an Oregon commune with five mothers) – and even more so, over the news that a friend’s father was making vast sums by renting out office space to tech companies.
Neumann and Mckelvey decided to copy the idea, and set about convincing a landlord to turn his New York apartment buildings into co-working spaces, with the extra profits to be split between them. Green Desk began life in 2008: workers trickling into 155 Water Street paid $45 a day for a desk, before the company took over more spaces across Manhattan, espousing a free-coffee and eco-office ethos that would become Wework’s calling card when it was founded two years later.
Hailed as the ‘office of the future’, Wework’s offering boasted an ‘eminently Instagrammable’ aesthetic, according to Brown and Farrell; one in which ‘mid-century-modern couches sat by windows where light streamed in; jugs of fruit water glistened with curated colourful medleys of honeydew, cucumbers, and lemons’, and ‘staff would post pictures on Instagram of the inspirational slogans scrawled on T-shirts, printed on mugs and spelled out in neon signs at Wework offices. ‘Hustle Harder’, ‘Embrace The Hustle’, ‘Do What You Love’, ‘Thank God It’s Monday’. It was, says one former employee, ‘like millennial catnip’.
To all intents and purposes, Neumann and Mckelvey were in the humdrum business of real estate. But Neumann managed to whip Wework up into a mythical entity – where work and fun became one. These weren’t your corporate, greige offices, but colour-splashed hubs of creativity, and with the burgeoning legend of outlandish parties and Neumann’s misbehaviour, they became all the more attractive to freelancers and companies alike, with VCS desperate for a slice of the action.
Determined to glamorise the brand by every means possible, Neumann began a PR offensive – having his team call up every reporter who used ‘Wework’ and ‘real estate’ in the same breath (Brown included) and insisting that each reference be changed to ‘tech company’. Egged on by his wife, Rebekah – Gwyneth Paltrow’s cousin and a fully paid-up member of the Manhattan elite – Neumann was not just out to rent desks, but to ‘elevate the world’s consciousness’. And his ambitions knew no bounds: at a Global Summit – one of many annual parades of A-list speakers and keynote speeches for staff – intentions to launch Wesail and Webank were announced (although they never made it off the ground); these would join Welive, their apartment complexes, ‘holistic wellness club’ Rise by We, and Wegrow, the $42,000 per year school in Manhattan that Rebekah had spearheaded, which featured classes on yoga, farming and mindfulness. They were ‘building this world and empire’, Farrell says of the couple’s limitless ventures, which also included a plan to collaborate on Elon Musk’s Mars mission.
‘The two of them [Neumann and Rebekah] are these cartoon caricatures of crazy, woowoo Silicon Valley founders,’ Brown adds. Their every move ‘was stuff you literally wouldn’t believe’: tequila shots for staff at 10am; dispatching workers to a $10 million company festival in LA to hear Rebekah interview Red Hot Chili Peppers frontman Anthony Kiedis about his heroin addiction, before an entrepreneurship competition judged by Ashton Kutcher and P Diddy. ‘Everything had to be extreme – startup culture turned up to 11,’ Brown and Farrell say. Each increasingly wild aspect further cemented the pair’s vision for a future in which home life and work melded, and turned an ever-larger profit. ‘Adam is just like a magician, and he was really able to get people to believe this thing,’ says Brown. ‘The rest is marketing and charm.’
‘Everything had to be extreme – start-up culture turned up to 11’
Marketing and charm turned out to be two very lucrative elements – enough to convince both Neumann and his investors that he was ‘going to be president of the world, and live for ever’. Wework’s speed-of-light ascension came from the wads of cash that big-name VCS were regularly pumping in: by 2019, Neumann had raised over $10 billion, one of the largest sums for a US start-up in history. Every new investment meant another building somewhere in the world becoming a Wework, more staff on the roster, and more outrageous parties. No matter that the company was not profitable (or even close to it) and in 2018 alone burned through $1.6 billion. ‘Losses were par for the course’ in San Francisco, the book explains, where ‘a decadelong deluge of money into Silicon Valley had established new cultural norms. Excess was in. For investors, it was the cost of doing business.’ From Uber to Airbnb and Spotify – similarly au fait with rattling through billions – ‘Wework was growing to grow bigger than all of them,’ Neumann said, and would be worth $100 billion by 2020.
And so Neumann – who by 2019 had pegged his personal net wealth at $10 billion, had six homes (one of which featured a room shaped like a guitar) and individual nannies for each of his five children – wouldn’t stop devising ever more creative ways to secure his cash flow. When prospective investors came for a tour, employees would be dispatched to the Wework 110 Wall Street
HQ and told to act as models, to play cards or chat in front of financiers to give the appearance of a zeitgeisty, trendy atmosphere; the Notorious B.I.G song Juicy should always be blaring when Neumann passed, he decreed, with an investor. Which, given he was always late, meant staff were often left listening to it on repeat for up to an hour.
Optics remained everything for a company that spent as much as it brought in – and usually more. The bills kept racking up: by late 2015, expenses were $414 million, and in the first half of 2016, it was losing $1 million a day, so Neumann tried to level off the losses by firing seven per cent of his workforce. He couldn’t ask them to pack up their desks, obviously – that wouldn’t be Wework. So instead he relayed the news at a company meeting as trays of tequila shots were handed out, and Darryl Mcdaniels of RUN-DMC performed It’s Tricky to bewildered staff.
Traditionally, start-ups would rely on venraising ture capitalists when the first two or three rounds of funding. By then profitable (they hoped), they would take the company to the stock market and undertake an IPO (initial public offering) in which their financial history would be revealed. Amazon followed this route in three years, Apple four; for startno ups, the rules longer applied as abundant streams of VCS clamfunnel oured to money into the ‘hot’ new companies du jour. Remaining private meant no
quarterly earnings reports for investors who would take them to task for bad business, and – crucially for Neumann – less founder scrutiny. This closed-door policy ‘let problems fester inside these companies’, The Cult of We makes clear, allowing the organisation to operate in ‘a prolonged adolescence, living under the roofs of abiding VC parents’.
Had the newly rebranded We Company gone public then, in 2018, aged eight, there would likely have been questions about why its employee count had grown fourfold in the space of a year and a half, or why Neumann’s huge new office had been built with a high-powered ceiling vent to absorb fumes from the joints he smoked.
Still, the cloak of company privacy meant Neumann was never more to outsiders than the billionaire Peter Pan of New York, partying with Lucy Liu and Demi Moore, in an ever-growing bubble that could never burst. That was until documents for the IPO were finally filed in August 2019 and the floodgates of scrutiny opened. At that point, the ‘IPO for Wework was a true necessity – they were burning money at a very alarming rate, and given that they’d kind of wrung the rest of the world’s funding sources dry, they were clearly going to need a ton more money to keep the lights on,’ explains Brown. Suddenly, the billions Wework was losing, the vast over-projections in value and Neumann’s bizarre antics were laid bare, in excruciating detail, for the first time. Then came a story from Brown in the Wall Street Journal which revealed the CEO had left a chunk of marijuana stuffed in a cereal box on a private plane – and the company that for almost a decade had been ‘fuelled by Silicon Valley pixie dust’ hit freefall.
‘It seemed to us that he was frantic,’ Farrell says of Neumann’s attempts to pick up the pieces ahead of the company going public that September. But by the end of the month, the damage was irreparable: Wework’s valuation had been slashed to $10 billion, and the IPO was called off. Neumann voted himself out as CEO and cashed out $700 million of We Company stock; Mckelvey left the next year. ‘I was speechless, I didn’t actually believe it, it was so inconceivable,’ Brown says of this spectacular fall from grace. ‘Everyone had bought it for so long.’ The Neumanns ‘had really lost touch, just to an extraordinary degree throughout 2018 and 2019. It must have been really difficult for them – all within a period of a few days – to realise they were actually still mortals.’
Wework still exists, although its current reality isn’t exactly the entrepreneurial utopia its founder envisioned when its first international outpost opened in London in 2014, and four years later became the capital’s largest office occupier. Run by real
estate executive Sandeep Mathrani, who was brought on board in 2020 after Neumann’s exit, it swiftly ran into the global problem that was Covid, and how its fortunes may shift hinges on what a post-pandemic world looks like. Have we given up on the office for good, or will co-working spaces fill the gap?
Thus far, the death of Wework may have been exaggerated – with its buildings open throughout the past 15 months (restrictions permitting), even traditional companies have sought desks several days per week at its outlets, while those craving a break from working at their kitchen table have taken a spot, too. Wework’s expansion has slowed, but downsizing hasn’t been required; the company’s flexible rental options have helped it to retain its appeal to freelancers and more traditional set-ups too. According to a recent report by investment firm CBRE, 86 per cent of companies globally plan to employ flexible space in the future; research from digital coaching site Ezra predicts that 6.5 million people will be working flexibly come 2025. Wework currently accounts for around 500,000 of those, one of whom is Rob Burgess, who after five years of renting ‘doesn’t see any reduction in Wework’s appeal’ since the pandemic hit. The 49-year-old founder of the frequent flyer website Headforpoints. com says the physical space has long been a draw for his company’s young employees. ‘The social events on offer (and the free beer) [is] important for attracting staff in their 20s,’ he says, adding, ‘We were happy
to pay a premium for the lifestyle elements.’
Izzy Rose, 22, agrees. A social-media executive at marketing and PR agency Goho, her team settled in at the Victoria branch once lockdown lifted last year (the company previously rented its own offices). She cites the ‘flexibility, simplicity and friendly atmosphere (and the booze after 4pm)!’ as her favourite elements of the space. She thinks co-working ‘will become more and more popular, especially as we return to normal’.
Wework’s on-tap prosecco evenings help too, she says – though Charlie Ward, the 32-year-old founder of Weekend Club, a remote co-working space for start-up founders, considers some of the company’s endless add-ons ‘a bit over the top’. The Moorgate branch, for instance, has 3,000 desks. ‘In smaller spaces you can get a bit more of a community vibe,’ he says, ‘as it’s easier to get to know people if you see the same ones every day.’
The Neumann affair hasn’t dented Wework’s cultural cachet for Burgess. ‘Without a doubt, the founders wasted huge sums of money on spurious projects… the business itself, however, is a huge success from the perspective of the members. You will struggle to find anyone who has used Wework who doesn’t like it,’ he says.
But will Neumann’s ‘toxic brew of confirmation bias, fuzzy math and hubris’, as the book calls it, stop more start-up fledglings moulding themselves in his image? A glut of TV shows – including a fictionalised series about the Neumanns, Wecrashed, starring Anne Hathaway and Jared Leto – indicates that the mystique remains. The Cult of We’s authors ‘really hope [the book is] a wake-up call,’ Farrell says. ‘I hope [people will say] we can’t let this happen again.’ Wework’s numerous other ventures could never have worked, Brown is sure, and the company’s finite success was down to the fact that from employees to investors, people were ‘so easily fooled and [had] their minds bent so easily… It’s really common in Silicon Valley, where everyone is living in this future vision of their company and not looking at the reality.’
What comes next for the man dubbed a ‘billionaire loser’ remains a mystery. Since the almighty fallout, the Neumanns have hunkered down first in Israel, then in their $1.7 million Hamptons home. Farrell believes Neumann is far from finished, though. ‘He clearly wants to do something big,’ she says. ‘I think he’s still manically plotting out the next act.’ And there will be one, of course. ‘He can’t not, and she can’t not. Whatever it is, they’re obsessed with being back in the game.’