| > Why is WeWork considered a tech company? They are considered a tech company (by the people who consider them a tech company) because they say they're a tech company. And they say that because tech companies get higher valuations. > And what exactly is wrong with their business model? [...] It says they take long-term leases and sell short-term leases. Right. So in the good times, you can make a fair bit of money doing this, but in bad times you'll lose a lot of money, as all the short term leases drop off. Traditionally companies in this space work around this by buying their own buildings, by having fat margins in the good times, by not making very much money, and by occasionally going bankrupt. :) It's a perfectly valid business model, but it's not super attractive to investors; it's capital intensive and not very profitable. IWC (formerly known as Regus) has about 5 times the locations WeWork does, and is worth about $3B. $3B is a lot of money, so there's nothing wrong with the business model, but it's also a lot less than the $47B people were talking about for WeWork until very recently. WeWork is trying to find a way to do something different or cooler, in the hopes of finding a reason they should be values completely differently than IWC, but so far that's translated into renting buildings, thin margins, no profits, and no story for why what they're doing is fundamentally better or more valuable than what IWC is doing. Yes, they have a live DJ in one of their London buildings and IWC does not, but IWC is making money and WeWork is not, and I mean...you can hire a DJ if that turns out to be the critical feature missing from other office space. > That seems straightforward and potentially lucrative if they're adding value Right. Especially now that Adam Neumann has stepped down, there's no reason WeWork can't find their niche as another IWC. The problem is, as another IWC, there's no real reason they'll be worth even $10B (again, IWC is much larger and only worth $3B), and Softbank backed them at much higher valuations. Just because WeWork has a profitable niche doesn't mean their investors will be okay. For Softbank the difference between a $5B valuation and a $0B valuation is minimal, when they were expecting something more like $60B. |