I feel especially qualified to write about this, since my WeWork office in 2013 was physically adjacent to the main conference room used by WeWork’s central corporate office at 222 Broadway.
I can’t count how many internal meetings I overheard, empowerment team-building sessions, and pitches to prospective investors literally right outside the door of my workspace.
Even though I left my WeWork space in 2015, I feel confident that what I witnessed in the early days made it completely non-surprising that the finances turned out to be unsustainable. Not to say co-works can’t be profitable, but because this particular company was built on a culture of manipulation.
First I’d like to acknowledge some of what was done right:
- WeWork’s hipster branding was genius and perfectly in tune with young entrepreneurs. All the “everyone can get rich doing whatever they enjoy”, however saccharine, was joyful and inspirational. The company’s own flamboyant success seemed an undeniable validation. The energy was palpable, especially in contrast to an uncool place for our parents, like Regus.
- For anyone hiring young people, the ability to provide a large fun community setting, including opportunities for dating, was extremely appealing. A big pain point for tiny startups is that there’s no social life to speak of, so WeWork could fill that gap.
- Good on ya, figuring out that young people are willing to tolerate 24 square feet of office space if you give them a lot of leather sofas in the common areas and fresh fruit in the water cooler.
- The initial business plan was “we own all our properties, so after landlords discover that we’re making money hand-over-fist, there’s nobody to raise our rent”. (What a great way to get high initial valuation: capital assets! But then someone decided they could get massively larger if they leveraged it, and, well… we see how things turned out.)
Now for the nonsense:
- THE APP: So many times I overheard “we have an app” as a pitch to investors. They were desperately pushing for valuation as “an app company” rather than a real estate company.
- Nobody used the damn app. Book conference rooms online? Big deal. Scan a QR code to buy snacks? So what. They told service providers like graphic designers and accountants the app would let them find clients within the local community… Maybe one or two, but for most this was complete fiction.
- THE SURVEY: One time they did a survey of customer satisfaction. It was very lengthy and involved. I overheard in a corporate meeting a junior team member asking “Aren’t we going to go over the results of that survey?” And the senior team member chided them, “No, that’s a waste of time. We only give the survey so people feel heard. The more time they spend answering the questions, the more attentive they think we are. See, it’s psychology. People are happier just because they answered it. It’s ‘best practices’ to ask, not to listen.”
- THE ATTITUDE: Then there was the time I saw Neumann striding through the lobby with entourage in tow, scoffing about “Wait, why would I talk to that guy, is he even rich?” Not a nice look. I understand a CEO courting investors needs to make sure they’re qualified, but this snotty tone was echoed by the “community managers” and other support staff. A pervasive air of “we’re cooler than you” did not appeal to all customers. It’s an office, not a private club.
- EYE CANDY: Speaking of looks, there was the unclassy explanation I overheard about how important it is to have good-looking young women at the reception desks. “Girls feel safer around other girls, and men like to have someone pretty to say hi to when they come in to work.” Right, so people of the wrong age, orientation, gender, preference, or race were right to feel unwelcome. Got it.
- UNIQUE? Guys, you didn’t invent cool co-work spaces. I loved my fun little office at Sunshine Suites TriBeCa in 2008, a beautiful space run by Cheni Yerushalmi. It was fun and high-tech, decorated with a bit of a nightclub aesthetic. Since 2001 they pioneered the identical business model later made famous by WeWork, all the way down to the “month-to-month rent with 1.5x security deposit”. Cool people there? Yeah, I saw Gary Vaynerchuk daily as his [then] 5-person Vayner Media was a neighbor down the hall.
- COMPS: Compared with renting an ordinary commercial office, WeWork charged at least 4x the price per foot. Maybe 10x, depending how you count common areas. It might make sense for companies of just a few people, but as they grow it gets absurd. (Unless they’re spending VC investment capital, which was often the case.) It’s not that hard for a business owner to figure out how to buy their own West Elm sofa, cappuccino machine, and laser printer. Especially with all the money they save by paying fair-market rent.
- FRAT PARTY: Not everybody actually wants to be interrupted by 11am Open Bar Do-It-Yourself Margarita Parties directly outside their office door on a work day.
Okay, so final conclusions:
I must admit, it was fun to work in a setting so vibrant with activity. If a WeWork were within walking distance of my apartment today, I might still be willing to pay their price for a one-desk or two-desk spot. And this time I’d know to choose a spot that’s not adjacent to the margarita station.
But my experience of the moral compass was fundamentally elitist and dishonest. So, congrats, guys, on taking over the world. Ish. I’m not surprised you’re bankrupt after discoveries of gross exaggerations.
I see quite a few folks online now congratulating each other about how life-changing it was — and I’m sure that’s true for them. Especially the ones who cashed out before the company crashed and burned its investors.
It must have been exhilarating, burning limitless capital while following the Pied Piper of Softbank, getting promotions every few months and growing from a few dozen employees to thousands. The early hires came to command staggering levels of executive responsibility in short order.
But as a tenant, I was often astounded by the incompetence of WeWork team members. From my perspective, it appeared as a culture of “make it up as you go.” And of “Worship the Founder, drink the Kool-Aid, or be fired. We are a team of believers.”
They were a cultural phenomenon, and they deserve tremendous credit for that. But the claim to defensibility and uniqueness was a scam. I heard enough people say “The finance guys go nuts, just tell them ‘Bro, we have an app!’ They love this stuff.” IJBOL, that line got Masayoshi Son at Softbank to lose $14.5B, but its value in the marketplace was obviously overstated.