Can shared office avoid repeating the cycling industry?
Editor’s note: This article is from WeChat public account “Tencent deep network” (ID: Qqshenwang), author Xiang Xin.
Like Uber changing people’s travel habits, WeWork spent nine years trying to subvert people’s inherent perceptions of commercial real estate and office.
According to the original development of the story, WeWork is a new economic company that is likely to become the second largest IPO after Uber this year. However, the plot did not follow the original plan. It took only six weeks from the most valuable technology company in the United States to encounter Waterloo.
WeWork opened the IPO road at the end of last year. When the prospectus was submitted in August this year, the company could have raised at least $3 billion through the listing. The plan was met by Waterloo, and the valuation and business model was questioned by investors. WeWork’s parent company We Company had to formally announce the withdrawal of the prospectus submitted to the US Securities and Exchange Commission on October 1 to seek a postponement of the IPO.
A negative chain reaction followed.
According to foreign media reports, first CEO Adam Neumann, company vice chairman Michael Gross, real estate investment department co-head Wendy Hilstein, co-founder and chief brand and influence Senior executives such as Libica (the wife of Neumann) announced their departure; subsequently, the initial layoffs of about 2,000 people were released, up to 16%; not only that, in order to cope with financial pressure, WeWork is also considering selling several external The business unit that was acquired.
The latest news shows that this week, WeWork is negotiating a new round of $1 billion in financing with the company’s largest shareholder, Softbank Group, to help WeWork successfully pass the corporate restructuring phase.
Founder Adam Neumann’s successor, new WeWork CEOs Artie Minson and Sebastian Cunningham later said in a statement: “We have decided to postpone the initial public offering, Focus on the core business of fundamentally strong fundamentals. We are committed to serving our members, corporate customers, landlord partners, employees and shareholders as always. We very much hope to operate WeWork as a public company and look forward to Review the public stock market in the future.”
But obviously, in the short term, WeWork still has a lot of levels to overcome.
The rapid expansion from the top 100 Silicon Valley
Time returned to 9 years ago.
The same for the communityInterested in the construction and design of the district, Adam Neumann and Miguel McCawe founded a company called Green Desk, which persuaded the landlord to divide the vacant property into an office office and rent it out.
Green Desk allowed the two to dig into the first bucket of life, Adam Neumann and Miguel Mackay sold shares, held $15 million in financing, and founded WeWork in New York.
At the beginning of 2010, WeWork managed only two properties. In April 2011, WeWork opened its arms to entrepreneurs in New York and then gradually moved to the country and the world.
In 2014, WeWork established 23 locations in 8 cities; by 2015, WeWork’s office space climbed from 55 to 55.
WeWork has maintained a momentum of rapid development. As of March 2016, WeWork has 80 shared offices in 23 cities around the world, located in New York, Boston, Philadelphia, Washington, DC, Miami, Chicago, Austin, Berkeley, San Francisco, Los Angeles, Portland, and more. Cities such as Seattle, as well as London, England, Amsterdam, and Tel Aviv, Israel.
The same year in March, completed by Lenovo Holdings and After the A-round financing led by Hony Capital, WeWork’s valuation reached 16 billion US dollars. Along with the same period, the wind of sharing economy set off a huge storm in the Chinese Internet. WeWork also entered the Chinese market. Shanghai became the first stop for it, and then entered Beijing, Guangzhou, Wuhan and other cities.
In July 2018, WeWork again received a total of $500 million in Series B financing from Yuxin Capital, Temasek Holdings, Softbank Group, Softbank Vision Fund (“Vision Fund”) and Hony Capital.
On November 14, 2018, according to an investor report from Reuters, WeWork received $3 billion in new investment from Japan’s Softbank Group.
Along the way, WeWork has 528 offices in 111 cities in 29 countries and currently has 527,000 members, up from 268,000 at the end of June 2018 and 401,000 at the end of December 2018. 40% of the members are considered corporate customers.
Continuous loss and profitability
The myth created by WeWork did not last long, and the turning point occurred on August 14.On the day, WeWork submitted an IPO prospectus to the US Securities and Exchange Commission, and the mystery that has long lingered on WeWork’s head has long been unveiled.
The prospectus shows that WeWork’s revenue from 2016 to 2018 was $436 million, $886 million and $1.821 billion, respectively. However, similar to most of the sharing economies, the continued growth in revenue is due to losses from the expansion of stores behind the store.
Although WeWork’s largest shareholder, Softbank founder and CEO Sun Zhengyi publicly expressed support for WeWork in an interview, and said that within 10 years, the company will “achieve considerable profits”, but the current losses are still unable Eliminate investor concerns.
The prospectus shows that from 2016 to 2018, WeWork’s net loss continued to expand from $429 million to $1.927 billion. In the first half of 2019, the net loss reached $904 million, an increase of 25.2% over the same period last year.
These figures mean that in the first half of 2019, WeWork would lose about $2 for every dollar of income.
On October 6, Mike Wilson, chief US equity strategist at Morgan Stanley, said that the failure of WeWork’s initial public offering marks the end of an era. Wilson said, “In our view, the days of generous funding for companies that have not achieved profitability are over.”
This means that technology companies and other high-growth software stocks will face difficulties and will put pressure on the overall market. “This is a fierce run, but it’s not a good idea to give a very high valuation of anything, especially for companies that may never be able to generate positive cash flow. The most speculative, most unreasonable The market sector has begun to collapse,” Wilson said.
A shared economic bubble?
WeWork’s model is simple. It is straightforward to find a property in the market, rent it long, then transform it into a shared office space, and then rent it to an individual or start-up company at a higher price.
With the shell of the new economy, WeWork’s valuation reached $47 billion in January this year. According to CB Insights data, at the beginning of this year, Uber was valued at $72 billion, WeWork was valued at $47 billion, Airbnb was valued at $29.3 billion, and domestic Drip travel valuations were $56 billion. It can be seen that the high valuation of WeWork is not unrelated to the prosperity of the shared economic industry.
But if you compare horizontally to another Belgian shared office brand IWG Group (formerly the Regus Business Center, established in 1989), you will find that WeWork’s $470 million valuation is ridiculously high.
As of the first half of 2018, IThe WG Group has established a community of more than 2.5 million members worldwide, with 3,011 office centers in 1,090 towns and cities in 110 countries, providing nearly 500,000 workstations. Regardless of the number of members, the number of countries and cities covered, the number of offices operated, or the global leased area, the IWG Group far exceeds WeWork, but its valuation is only $3.7 billion.
To this end, some investors believe that WeWork is not a technology company, but a real estate company, and should not enjoy such a high valuation.
What WeWork wants to do is to change people’s traditional perceptions of office space through the Internet, but in fact, its business model is still in the old-fashioned framework of signing long-term lease contracts and subletting properties to corporate customers. .
The prospectus shows that the largest share of WeWork’s cost is the operating expenses of office space, most of which comes from rental expenses. WeWork usually signs a 10- to 15-year lease contract with the landlord, and the expenses are distributed in each period. Expenditure. From 2016 to 2018, this part of the operating expenses were 430 million US dollars, 810 million US dollars and 1.5 billion US dollars, accounting for 99.3%, 92.0% and 83.5% of the total revenue.
Therefore, the properties of WeWork Technologies were questioned. Some investors believe that WeWork is not a technology company, but a real estate company, and should not enjoy high valuation.
In September, when it decided to abandon its initial public offering, WeWork’s valuation had fallen to the $10 billion to $12 billion range – a nearly 75% evaporation compared to $47 billion at the beginning of the year.
The breakout of Chinese “disciples”
WeWork in distress is not an isolated case. Regus and HQ Global Workplaces passed the similar basic business model as early as 2000, leased and remodeled, and then provided short-term sublease, which was sought after by investors. They believe that Regus and HQ Global Workplaces can use the office business to create a large service network for growing companies.
But with the bursting of the technology bubble, the demand for shared office services and revenues have fallen sharply. Under the long-term lease and debt, HQ and Regus’ US subsidiaries have applied for bankruptcy protection, and only survived. Regus. This means that the development of shared office is closely related to the industry environment.
Because of the strong Internet genes, shared office companies are not satisfied with the only providers of workstations and office space, and more are hoping to play the role of “resource dockers”, which share the resources of the office itself. Grafting, operation and maintenance, and system services have all presented unprecedented challenges.
One of the important risks is that when the demand breaks due to the bursting of the technology bubble