WeWork, the largest co-working space in the world, has been getting a lot of negative press lately, from SoftBank substantially lowering its planned investment to its rebranding to the "We Company", to the reveal that its CEO has been leasing his own real estate to WeWork to make a profit.
Particularly the last headline has caused a lot of anger toward the multi-billion dollar startup, chiefly targeted at WeWork's message of being a "physical social network" and "a place you join as an individual, 'me', but where you become part of a greater 'we'" (from its mission). Meanwhile its actions make it out to be the typical profit-hungry capitalistic enterprise that it claims it's not, fully embodied by its CEO.
The feeling is well summed up by the top comment on Hacker News regarding the CEO's landlordship:
The entire image and “vibe” of this guy / his team is supposed to be an egalitarian re-invention of the status quo. The kibbutz story. The “community adjusted EBITDA.” The rebranding to “We.” But this sort of real estate self-dealing isn’t a We move, it’s a Me move. And thus, we find ourselves facing a bigger issue that is far more troubling if you’re a shareholder or employee (and somewhat enjoyable if you’re a competitor): the emperor has no clothes and the CEO is full of shit. He is self-serving and isn’t optimizing for the benefit of those around him.
This isn’t the We Company. It’s the Me Company. That’s not very innovative. That doesn’t foster greater productivity. And eventually, a lot of tenants aren’t going to pay for it, because it seems a lot of them really think they’re paying to be part of a progressive, futuristic environment. If their smartest and most progressive employees start telling them they don’t want to visit the office, they’re going to get rid of that office. Companies’ desire to please their knowledge workers — what originally drove WeWork’s success — thus ends up killing it.
Did people truly make decisions to lease offices or invest in a company because of its marketing rhetoric? That sounds like a far larger problem.
If you buy a product or invest in a company purely based on its brand image, and you discover a large discrepancy between that image and reality, that's your fault -- not the company's fault.
When you open a can of Coca-Cola, and instead of drinking happiness you drink a cola beverage, do you throw your hands up in the air and exclaim "they've been lying to us this whole time?!"
When you buy a Red Bull yet see no literal wings on your back, do you fire up the legal team? (In some cases, apparently you do.)
Lofty marketing is meant to make companies appeal to broad audiences, and differentiate them from their "average" competitors. It's the icing on the cake, to make the cake look better than other cakes. But it's just icing; you're supposed to focus on the actual cake. If you buy a cake because you want to eat cake, but only focus on its appearance instead of tasting it, it's not the cake's fault if you're disappointed.
WeWork's marketing message may certainly be the Silicon Valley lofty "we're changing the world with office space", and "we're not just a real estate company, we're a tech company", and in some grand ideal that may be true. But that only represents a small fraction of what they actually are as a company, and what they have and will become.1
Unlike Zume, which markets itself as revolutionary robot-powered pizza but truly is just normal pizza, the difference is...
WeWork actually sells an innovative, competitive, valuable product.
I know because Bitmatica's office is in a WeWork in San Francisco. And for disclosure's sake, that's the only connection I have with the company -- I happen to be a tenant, so I understand their product. That's all.
WeWork is a real estate business. Anything more than that and you've been deluded. But it's a darn good one, and by far the best turnkey office solution I've ever seen. And I've seen dozens.
"The We Company" also has other products such as WeLive, and investors look at the competitive growth potential of the entire package, but any savvy investor should put their valuation somewhere between "a pretty competitive co-working company" and "changing the world". Is that worth $40 billion? Who knows. But I've yet to see a product as compelling as WeWork. And that seems to get commonly overlooked. So I would like to defend what I believe to be a vastly superior offering.
What makes it great?
WeWork, as far as I can tell, was the first co-working space to focus on private offices for companies, not shared workspaces. Before WeWork, co-working spaces offered large tables with power and Wi-Fi. What WeWork realized is that MacBook-wielding freelancers only made up a small percentage of the market, whereas there is a massive market for start-ups, innovation labs, and satellite offices looking for a turnkey office solution. In this sense, WeWork really isn't a traditional co-working space -- it's an office provider.
Having a private office within a co-working like environment provides a ton of upside with very little downside: shared facilities such as conference rooms, phone booths, kitchen, bathrooms, outdoor space in some cases, showers, bike rooms, lactation rooms (legally required now in some jurisdictions) and the list goes on. These are all amenities that companies and offices of all sizes appreciate and in some cases require, but are cost-prohibitive the smaller you get. The scale of a co-working space makes this possible.
WeWork offices actually look nice. I'll go out and say it. WeWork was the first co-working space that actually cared about what the office environment looked like. You may pretend that this doesn't matter, and you have no problem working in a windowless basement, and that may be true for you. But one day, it won't be true for your future employees or clients. WeWork's interior design set the standard for shared office aesthetics -- wallpaper, plants, fixtures, it's actually an inviting place to come to work. Maybe your local co-working company also invested in office decoration, but there's only one of those, whereas...
WeWork's network is unbeatable. WeWork has 502 locations in 23 countries. How many locations does your co-working space or office provider have? Perhaps you never travel, so this may not matter, but the ability to land in any major city on Earth and have a guaranteed place to work is invaluable. Need a conference room for a client meeting in London? Need a phone booth for a call in Mexico City? Just want a space to work out of for the day with guaranteed gigabit Internet, power, water, coffee, and snacks, all in a very convenient location? (Side note, the WeWork built-out team pays very close attention to the physical locations of their offices.) It only costs you a conference credit or two, included with your physical membership, booked through the app, which in real-time activates your key card that not only opens the internal doors inside the WeWork location, but works for the building's ground level physical security such as turnstyles and elevators. That level of integration is insane.
Back to interior design, it's not just the aesthetics that are innovative, it's their consistency. Every single WeWork in the world looks virtually identical. This may seem eerie at first, but its consistency is wonderful. You know exactly where the printer is and how it works. You know exactly where the cups go. The conference rooms and TVs work identically. The guest registration system works the same. All WeWorks have a few local features and/or quirks, but fundamentally, this consistency for those that have more than one office removes friction. It's not game-changing, but the sum of these frictionless experiences starts to mirror what makes the iPhone not just another smartphone.
The frictionless experience starts with leasing an office. The WeWork product, as I mentioned earlier, is the most turnkey office you can buy. You put the deposit and rent on a credit card, and within days you have an office. Chairs, tables, lamps, filing cabinets, Internet, HVAC, plumbing, janitorial, facilities, security, package handling, conference rooms, it's all there. And it just works. Other companies are starting to catch on, but WeWork's fully-baked private office product set the gold standard. It's the office equivalent of signing up for Stripe. There were dozens of payment providers before Stripe, but nobody truly understood the pain of credit card processing before Stripe came along. If you're a startup, do you really want to deal with electrical? Cleaning? Hiring a 9-5 receptionist to check in guests and receive packages? What about events? Do you have an event space with staff to run it? If the Internet goes out, guess who's calling Comcast?
But as many point out, this all-inclusive product is expensive. WeWork at face value is not cheap. It runs about $400-$600 a person depending on your location, where a person is the square footage of a desk and a chair. Per square foot, that's some pricey real estate. But it's unrealistic to compare the cost of a square foot of leased office space with a square foot of a co-working office. Every item above has to be addressed in some way, and your office situation may be more or less cost effective shared versus private, but it's important to compare the total value.
One critical difference is lease length. Most office leases last for five years minimum. Many ten. When we were looking for offices, the majority were ten year leases. WeWork when we signed was entirely month-to-month. I believe now it's a six to twelve month commitment depending on the location. But one year versus ten? Do you know where your company will be in ten years?
There's more, such as the Member Network, the events, the staff, the service discounts, but that's enough for now.
Putting all the marketing aside, WeWork's core product is exceptional. They have put thought into the experience that no other company has, and even today most private office co-working spaces seem like sub-par versions of WeWork. They have expended aggressively, and through innovative real estate deals (notwithstanding the CEO's own conflict of interest) now have a formidable presence on most continents. If you don't believe me, try an office out for a few months. After all, you can cancel pretty quickly.
I don't buy into marketing hype, and nor should you. But I do buy exceptional products, which is why this piece mostly reads like a WeWork advertisement. Because having used their product for almost four years now, I feel like it's an exceptional enough product worth defending. And that, I believe, is much of why WeWork is valued at what it is.
Once you see through the world's rhetoric and evaluate things for what they truly are, they start to make a lot more sense.