WeWork's Origin: From Green Desk to Giant
Have you ever wondered how a small coworking space turned into a global phenomenon? What led to the meteoric rise and dramatic fall of one of the most talked-about startups in recent history?
In his book Billion Dollar Loser, Reeves Wiedeman takes us on a journey through WeWork's origin and its transformation into a coworking giant. You'll discover the ambitious vision, rapid growth, and eventual downfall of a company that aimed to revolutionize the way we work and live.
Read on to uncover the fascinating story behind WeWork's rise from a humble Brooklyn startup to a multi-billion dollar enterprise.
The Birth of Wework: From Green Desk to Coworking Giant
Humble Beginnings
The WeWork origin story began in a Dumbo building where Adam Neumann and Miguel McKelvey's separate businesses were housed. Questioning their career paths and the lack of community spirit in New York, they decided to create a shared workspace with an eco-friendly focus. This idea would eventually evolve into WeWork, but it all started with just $5,000 each for startup costs. They furnished the space with items from a well-known Swedish store, giving birth to their first venture: Green Desk.
The success of Green Desk was swift, showcasing the potential of the shared office concept. However, Neumann and McKelvey had grander visions. They wanted to create more than just a standard coworking space. In 2010, with a $15 million investment from Joel Schreiber for a third of the yet-to-be-established company, WeWork was launched with seventeen tenants.
A New Approach to Office Space
WeWork set itself apart by offering flexible leasing arrangements to startups and fostering a community-focused environment. The company quickly expanded from its original site at 154 Grand to occupying entire buildings, including one across from the Empire State Building.
While McKelvey focused on creating environments, Neumann simultaneously nurtured a communal atmosphere and pursued growth. Their business strategy involved securing leases, refurbishing areas with modern aesthetics, and then leasing them at a higher price to generate income.
Rapid Growth and Expansion
WeWork's growth was nothing short of explosive. In just five years, the company's valuation skyrocketed to the billion-dollar mark. Neumann's infectious enthusiasm played a crucial role in this rapid expansion, fostering an environment that motivated employees to commit long hours to their jobs, even though the pay was relatively low.
The company culture at WeWork was marked by a strong commitment that often meant working well past business hours. Employees were drawn by the chance to have equity, shape the company's future, and be part of an exciting venture.
Branching Out Beyond Office Space
As WeWork grew, Neumann's ambitions expanded beyond just providing office space. The company began to diversify into various sectors, aiming to establish itself as a tech company rather than just a player in the real estate market.
WeWork acquired businesses like Meetup and Teem to enhance its synergy with the technology industry. The company also ventured into education with WeGrow and water sports through Wavegarden. However, this rapid diversification often left employees feeling overwhelmed by projects that seemed unrelated to WeWork's core business.
The Welive Experiment
One of Neumann's grandest visions was WeLive, a communal housing model aimed at revolutionizing city living. The plan involved setting up fourteen locations across the country, but only two became operational, both facing challenges in adjusting. Financial specialists at WeWork expressed doubt about the project's success, given the complex challenges of transforming commercial office spaces into living quarters.
The Softbank Influence
WeWork's trajectory changed dramatically with the involvement of Masayoshi Son and SoftBank. In 2017, Son's Vision Fund injected a substantial $4.4 billion into WeWork, viewing it as a company with the potential to dominate the tech industry.
This financial backing enabled WeWork to embark on an even bolder growth strategy. The company rapidly expanded its employee base, escalated spending, and branched out into various industries. WeWork's market value soared, positioning it as the second most valuable privately held startup in the United States.
Neumann's Control and Ambition
Despite the influx of investment funds, Neumann maintained absolute control within WeWork. He secured supervoting shares and implemented governance structures that solidified his position. Neumann even created a leadership structure that incorporated family members in the decision-making process.
With SoftBank's capital, Neumann initiated bold ventures and significant acquisitions. Son's belief in WeWork's potential to achieve a market value of $1 trillion encouraged the firm to channel substantial funds into various initiatives and lavish corporate offices.
The IPO That Never Was
As WeWork prepared for its initial public offering (IPO), cracks began to show. The filing of WeWork's S-1 form revealed significant financial concerns and highlighted Neumann's lavish conduct. Investors grew wary due to the company's reliance on non-traditional financial metrics and aggressive spending tactics.
The disclosure that Neumann had profited from selling his interests in We-related trademarks to the company for $5.9 million intensified doubts about the company's worth and Neumann's leadership capabilities.
The Fall of Neumann
Investor pressure, coupled with WeWork's persistent failure to generate profits and looming financial deficits, ultimately led to Neumann's ousting as CEO. Key investors, including SoftBank and JPMorgan, reevaluated their financial support during a significant economic downturn that threatened insolvency.
In the wake of Neumann's departure, WeWork was forced to implement drastic cost-cutting measures, including staff dismissals, to maintain its economic equilibrium. SoftBank's acquisition of WeWork for $8 billion marked the end of an era and the beginning of major changes in the company's leadership and strategic direction.
From its humble beginnings as Green Desk to its meteoric rise and subsequent fall under Adam Neumann's leadership, WeWork's journey serves as a cautionary tale of ambition, rapid growth, and the pitfalls of prioritizing expansion over sustainable business practices.