I should first clarify — I’m not happy for those who have lost their livelihood — I wish them a speedy hunt. It’s nearly Thanksgiving, and this year I dwell upon some recent events that I am thankful for. Here’s one.
I just need to point out some of the ridiculous-ness of WeWork (The We Company). Firstly let’s talk numbers.
The expected evaluation before their IPO was set at $47 billion. We see companies with numbers like that more frequently then we should nowadays; I’m not commenting on that. When this value was set the company did not have profit. WeWork rents out space it doesn’t own so the backing of its service is the idea that consumers will pay to rent space from them and that realtors won’t simply remodel a building and lease space themselves; something that people do. Look at it like this, there is a value of $47 billion placed on something that if it completely disappeared tomorrow the effect would be basically negligible.
The reason it failed during the IPO planning was because of the shady founder — not business model. Did you catch that? Years of losing money, basically unbacked borrowing, and a rickety foundation didn’t matter, it was that the founder had licensed “We” (I don’t know…that’s a different problem) and then sold that to the WeWork when he decided that it should now be called “We”. There was other stuff, but it doesn’t really matter. The IPO crashed and the valuation was reset, it’s still hilariously inflated for a company that doesn’t actually have anything (like it doesn’t even have user data!)
The losers are the investors. Ideally. There’s a few who got stuck in the madness, but even at the evaluation of $1 billion, there won’t be a payout. That money will never exist — at least not in whole. I just really like the idea of people who are so caught up in the catchphrases that they ignore the business model or any sign of payout and chuck money. In the end WeWork was just a massive race to dump money where someone else said to do it.
Ok, I’m not going to dwell, this is just a word of caution — don’t drink the start up Kool Aid, it isn’t worth it.