Sunday 15 July 2018

WeWork, WeLive, WeGrow: the future will be flexible

In just eight years, WeWork has expanded to 20 countries. The company will open its first office in Dublin at Iveagh Court on Harcourt Road in March.
In just eight years, WeWork has expanded to 20 countries. The company will open its first office in Dublin at Iveagh Court on Harcourt Road in March.
In just eight years, WeWork has expanded to 20 countries. The company will open its first office in Dublin at Iveagh Court on Harcourt Road in March.

David Gelles

On a cold February morning at the Brooklyn Navy Yard, the skeleton of a modern 15-storey building was rising from a muddy construction site along the East River. As long and as tall as a cruise ship, the sleek glass structure loomed above rusty, century-old dry docks, serving notice to the industrial neighbourhood that the new economy was coming.

The project, known as Dock 72, is the brainchild of WeWork, the fast-growing New York start-up valued at a whopping $20bn. In just eight years, WeWork has built a network of 212 shared working spaces around the globe. But WeWork's chief executive and co-founder, Adam Neumann, isn't content to just lease out communal offices. Mr Neumann - a lanky, longhaired 38-year-old Israeli - wants nothing less than to radically transform the way we work, live and play.

When Dock 72 is completed this year, if the aggressive timeline holds, it will represent the fullest expression of Mr Neumann's expansive vision to date. There will be an enormous co-working space, a luxury spa and large offices, for other companies like IBM and Verizon, that are designed and run by WeWork.

There will be a juice bar, a real bar, a gym with a boxing studio, an outdoor basketball court and panoramic vistas of Manhattan. There will be restaurants and maybe even dry-cleaning services and a barbershop.

It will be the kind of place you never have to leave until you need to go to sleep - and if Mr Neumann has his way, you'll sleep at one of the apartments he is renting nearby.

It's an all-encompassing sort of ambition, and Mr Neumann is the brash and idealistic pitchman. Simply by encouraging strangers to share a beer at the office, he argues, WeWork can heal our fractured society.

"How do you change the world?" Mr Neumann asked in a recent interview. "Bring people together. Where is the easiest big place to bring people together? In the work environment."

It may sound simplistic, but around the globe, companies are buying whatever it is that Mr Neumann and his co-founder, Miguel McKelvey, are selling.

WeWork has rapidly expanded to 20 countries, assembled a formidable executive team and attracted some 200,000 members. Big companies like JPMorgan Chase and Siemens are signing on as tenants, and revenues are growing fast, expected to top $2.3bn this year.

WeWork last year bought the iconic Lord & Taylor building on Fifth Avenue in Manhattan, which is being transformed into the company's new headquarters. That deal was made possible in part by a recent $4.4bn investment from SoftBank, the Japanese technology group led by the enigmatic billionaire Masayoshi Son.

Already the company has started WeLive, its residential offering, and Rise, its gym. It acquired Meetup, the social network that facilitates in-person gatherings, and the Flatiron School, a coding academy.

Still to come: WeGrow, the company's for-profit elementary school, set to open in September. WeWork has even invested in plans to create giant wave pools for inland surfing.

A company ostensibly about co-working now employs yoga instructors, architects, teachers, environmental scientists, software engineers, molecular biologists and social psychologists.

Is it all a bit much for a young company still trying to build out its core business?

"I've made that argument," said Bruce Dunlevie, a WeWork board member and partner at the venture capital firm Benchmark. But, he said, "great entrepreneurs like Adam don't listen to guys like me."

As WeWork expands in all directions, it faces persistent questions about its rich valuation and the durability of its business model.

Critics argue that the company does little more than corporate real estate arbitrage - leasing a space, spiffing it up, then subleasing it out to other tenants.

The company owns hardly any properties, giving it precious few hard assets. Its growth projections strike many as unattainable, and it has missed expectations before. A number of upstarts loom as potential competitors, seeking to replicate WeWork's success. And many WeWork tenants are unproven start-ups that could quickly fold.

IWG, a publicly traded co-working company that has more members and more real estate than WeWork, is valued at just $2bn. Yet Mr Neumann has convinced investors that WeWork is worth 10 times that figure.

"Adam's explanation for the valuation of WeWork speaks for itself," said Chris Kelly, co-founder and president of Convene, a company that offers flexible event spaces and is backed by major real estate firms.

"This is not an Excel spreadsheet calculation. He believes there's an energy behind the brand, and he's gotten people to invest at that valuation. He has not tried to explain it in traditional financial terms."

Indeed, to assess WeWork by conventional metrics is to miss the point, according to Mr Neumann. WeWork isn't really a real estate company. It's a state of consciousness, he argues, a generation of interconnected emotionally-intelligent entrepreneurs. And Mr Neumann, with his combination of inspiration and chutzpah, wants to transform not just the way we work and live, but the very world we live in.

It's an audacious, perhaps delusional plan for a company that made its mark by building communal desks and providing refreshments. And so far, it seems to be working.

Mr Son, WeWork's largest investor, is betting that the company will grow exponentially in the years to come, making his multibillion-dollar investment a veritable bargain.

"Make it 10 times bigger than your original plan," Mr Son told Forbes late last year. "If you think in that manner, the valuation is cheap. It can be worth a few hundred billion dollars."

(New York Times)

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