WeWork: How It has Made Co-Working Spaces Cool?

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When it comes to co-working space, WeWork dominates. The 9-year old startup is valued at $47 billion and falls only behind Uber and Airbnb.

Though WeWork’s is a real estate company at its core, it has embraced tech and revolutionized the way we have been seeing a real-estate company.

The New York-headquartered company has expanded its wings in 115 cities across the globe with 651 office spaces. Though most of the cities are in the United States, the company is aggressively expanding in hot startup bases including India, China, and Southeast Asian countries.

But how did the American real estate company is considered among the top tech startups?

Well, to understand that, we need to look into WeWork’s business model.

The disrupter

Like all the startups, WeWork focused to solve an existing problem and became a disrupter. The company primarily addresses three issues in the workspace industry:

  • Freelancers and small startups could not find a good office space due to budget constraints which often force them to work from home or some other stop-gap solution.
  • Small businesses also struggle to find proper office space and lack of proper budget and resource make it difficult for them to handle the maintenance of the workspace without impacting their business.
  • Enterprise organizations also face constant struggles to cut costs and increase the efficiency of the space.

WeWork positioned itself right in the center of these problems faces by freelancers to large enterprises to offer scalable workspace to all.

How WeWork works?

The US-based startup has found a suitable model to benefit both the tenants and landlords and cut huge profit for itself as well.

WeWork usually leases buildings and spaces from property dealers for a long-term than the usual lease period obtained by the companies directly. The startup then renovates the space and add value-added services before selling out memberships of it.

Wework
A slide from WeWork’s Series D pitch deck

The startup’s offerings range from the so-called hotdesk – a membership with which a freelancer or solo entrepreneur can grab any free desk in the office space – to complete office space for major enterprises called “Headquarters by WeWork.”

The company has added major names in its customers’ list including Microsoft, Facebook, BlackRock, Adidas, Citi, and Salesforce. The company claims that 30 percent of the Fortune 500 companies are its clients.

Apart from that, the US unicorn also offers an incubation lab for the startups called WeWork Labs. According to the company, as many as 1,000 startups have been incubated by under this program by December 2018 and the company is aiming to expand this program to 100 locations by the end of 2019.

WeWork is riding on value-added services like these to lure young entrepreneurs towards its network.

Despite all these traditional real-estate like services, WeWork is much different because of its one service – its data-based service called Powered by We. Under this, the startup positioned itself as an office space consultant, leveraging data, engineering, and design expertise to reconfigure enterprise clients’ existing spaces in a bid to boost productivity.

A look at the numbers

It’s not a secret that WeWork is planning to go for an initial public offering (IPO). And to its benefit, the company has posted some impressive figures in the past years.

The company says it has generated $1.8 billion in 2018, which is up from $886 million in the previous year. Its monthly membership pool also jumped 88 percent – from 186,000 to 401,000.

However, WeWork is still a loss-making machine. It has registered $1.9 billion in losses in 2018 – 103 percent up from 2017.

The company is burning cash to expand all over the world and has doubled its presence in last year alone. It is focusing on Amazon’s famous business model: focus on building out infrastructure and achieving brand ubiquity first, then flip the switch on profitability later.

The New York-headquarters startup has already shown a demo of its potential in the co-working space market by publicizing that its London location at Moor Place generated a profit margin of $2 million in 2017, leaping 450 percent from the previous year.

The crazy valuation

Though WeWork is a real-estate company at its core, it is valued like a tech company. The difference can be seen by comparing it with its market competition IWG. Though the later is significantly larger than WeWork and is profitable, it is valued at only $2 billion whereas WeWork is valued at $47 billion.

WeWork vs IWG’s revenue

The reason is WeWork operates like a tech company and is highly dependent on data. Just like Uber and Airbnb, its focus is to capture markets rather than distributing dividends to its shareholders.

So what’s the future?

WeWork is massively betting on the principles of compounding returns. The startup has tapped a market, in which the demand will hardly go down. However, it is to be seen how the company will tackle if 2008 like recession hit the real estate market gain.