From Coworking Pioneer to America s No. 1 Fool , what has WeWork experienced?

Text|China Business Strategy.

But in a 12-minute meeting, Masayoshi Son, who claimed to be the most accurate in seeing people, made the biggest and most humiliating failure in his life because he looked at the wrong person.

At the end of the show, on November 7, 2023, WeWork, which had long been predicted to go bankrupt, officially filed for bankruptcy protection in New Jersey.

Founded in 2010 and headquartered in New York, WeWork is regarded as the pioneer of the sharing economy and the originator of shared working.

This time, it has become the biggest bubble in the U.S. entrepreneurship and capital markets, even **.

WeWork's business model of renting out office space from property owners on long-term contracts and renting it out to start-ups and SMEs in a decentralized and flexible manner is not much different from the "second landlord" model such as co-working that has matured in the market.

But its founder, Adam Neumann, used the sharing economy and the Internet to transform the last feast of traditional business, packaged the company as a new concept of "shared office" technology, and through a series of crazy operations, in just a few years, it has become a "sharing giant" on a par with Uber and Airbnb, or even higher than the limelight.

At its peak, WeWork had more than 850 stores in 150 cities around the world, with more than 1 million workplaces, more than 450,000 members, revenue of more than 3.2 billion US dollars, and a valuation of 47 billion US dollars (about 340 billion yuan).

But since its failed attempt to hit the IPO in 2019 at a $50 billion valuation, the once-glamorous start-up unicorn has been in trouble: founders out, valuations plummeting, mass layoffs, and continued huge losses with no hope in sight.

In 2021, WeWork, which was mired in internal management chaos and the logic of high valuation, and was deeply dragged down by the epidemic, went public with a first-day market value of less than $8 billion, but its losses and cash losses did not improve.

By June last year, WeWork had lost more than $15 billion since 2016 and had a total debt of $18.7 billion. By early November, WeWork had a total market capitalization of less than $45 million.

From $47 billion to less than $45 million, WeWork's money has been almost gone, people are gone, and many executives, including the CEO, have run away.

Masayoshi Son, who is the biggest supporter of the WeWork story, and his SoftBank Group, were naturally even worse.

Since 2017, SoftBank has invested more than $16 billion in WeWork, almost all of which have been lost. Even a few days before filing for bankruptcy, SoftBank, which had guaranteed a deal for WeWork, was forced to wire $1.5 billion to lenders such as Goldman Sachs.

The collapse of WeWork also ended the investment myth of SoftBank.

The latest financial report shows that SoftBank Group will lose a total of 141 trillion yen (about 68 billion yuan), the investment in WeWork is the most direct fuse and the biggest failure of its huge losses.

SoftBank, which suffered a "stuffy loss", reluctantly said "I am very sorry and learn a lesson", and the boss Son Masayoshi was even more disgraced.

During the period of WeWork's rapid expansion, Son once said to Adam Neumann, "In a battle, it is easier for a madman to win than a smart man, and you are not crazy enough." Many observers believe that it was at the instigation of Son Masayoshi that Adam was unscrupulous and eventually became a **.

Son has also been one of WeWork's strongest supporters for years. In June last year, he admitted at SoftBank's shareholder meeting that "I used to fall in love with WeWork, even though SoftBank's board members warned about this misconception." ”

Today, Son uses self-reflection as a mantra: "This decision was stupid," "The misjudgment of Adam Neumann is the biggest mistake I made, and it makes me feel ashamed," "I'm sorry, we created a monster," and ......

Madness was born in 1979 into a single-parent family in Israel and grew up on a local collective farm.

Adam was impressed by the fact that people lived and collaborated in a shared space. The contact with all kinds of people and things has allowed him to develop the skills of enthusiastically expressing himself and negotiating interests.

Moreover, he quickly went from enthusiasm to flickering, boasting, and even running trains with his mouth full. A driving school instructor once asserted: "You are either in deep trouble, or you have a lot of money." ”

But Adam's reputation as the "originator of shared space" is well deserved. When he was in college in New York, he proposed in class to set up a real estate company that would make money from shared spaces.

Although he didn't put this plan into practice at the time, Adam, who started his own business before finishing college, eventually co-founded a co-working company, Green Desk, and earned his first pot of gold: $500,000.

In the aftermath of the 2008 financial crisis, when large corporations collapsed, commercial buildings were deserted, and desperate landlords and freelance white-collar workers were everywhere, the co-working model blossomed across the country, convinced Adam that the opportunity for coworking was here.

In 2010, Adam saw an opportunity to finally start his dream of shared space, and WeWork was born.

None of the owners were willing to rent the building to an "unreliable" startup, so Adam stalked and talked sweetly, clinging to the owner's communication, and was accidentally introduced by the owner to a "nobleman": Joel Schreiber, a New York real estate developer in his 20s.

After only a few hours of conversation, Schreiber was impressed by Adam's charm and ideas. Then, the madness happened: WeWork, which didn't even have a permanent office space, easily traded one-third of its equity for a $15 million capital injection!

With the backing and the money to pave the way, Adam succeeded in taking the first building and quickly made his dream bigger and bigger.

In February 2010, WeWork's first co-working space opened with its first 17 tenants.

In an interview in 2011, Adam said: "The first decade of the 21st century is the decade of 'i', such as iPhone, iPod, etc. The next 10 years will be the 10 years of 'we'. ”

What really sets WeWork apart is his firm commitment to packaging WeWork as a tech innovation company like Uber and Airbnb, rather than a co-working company that rents and subcontracts.

In Adam's mouth, WeWork's future valuation will be 100 billion US dollars, and he will be an entrepreneur comparable to Steve Jobs.

WeWork's business is a testament to its extraordinary: in 2012, WeWork made millions of dollars in revenue and $1.7 million.

This beautiful report card was quickly taken by Adam to various high-end social or financing bureaus, in exchange for nearly $7 million in new financing, and the story of coworking was also told even more.

Venture capital institutions that smelled WeWork's unusual ambitions came to the door one after another. Benchmark, DAG Capital, etc., followed the investment in turns, and by December 2014, WeWork completed 3$5.5 billion Series D financing, its valuation has reached $5 billion.

In four years, WeWork, with only 24 stores, has become one of the world's top 10 unicorn start-ups, while IWG, a veteran peer with more than 2,000 stores and $2 billion in revenue, is valued at less than half of it.

How can such a valuation be sustained? Adam and the capitalists have a heart: expand, expand, expand. WeWork, which originally talked about cost and efficiency, soon embarked on a wild road regardless of cost.

In order to seize the market, WeWork often takes over buildings at a cost 25% higher than its competitors, while at the same time promising tenants a few months of rent-free service.

The cost is higher, but the income is lower, and naturally the larger the scale, the more losses. By 2016, WeWork had lost 4$300 million, and occupancy rates are also starting to decline.

Adam, who was extremely anxious, had to ask every employee to "tighten his belt" and even free bagels.

In desperation, the man appeared.

In January 2016, Adam heard Son's "Millennium Vision" speech at an entrepreneurship conference hosted by Indian Prime Minister Narendra Modi. He couldn't be more excited, it turned out that WeWork's "Centennial Challenge" wasn't crazy enough!

The first time they met, Adam only took 12 minutes to get Son to identify him as "the next great tech company CEO on the planet", and the last person to feel this way was Jack Ma.

When WeWork handed over the financial **, Son ignored the doubts of SoftBank's due diligence team, but swore that he had to continue to grow bigger, 10 times or 50 times the scale, and WeWork would be the largest office company on the planet, and even a trillion US dollar valuation.

In August 2017, SoftBank's largest investment totaling $4.4 billion brought WeWork's valuation to $20 billion.

Starbucks CEO Howard once warned Adam that he should stop for half a year in the surprise expansion, sort out the sales and leasing business system, improve efficiency, and optimize strategies. On the private jet back from receiving the investment from SoftBank, Adam shared this advice with employees.

Relying on this big money, WeWork embarked on the old road of burning money more frantically to open stores at high costs, low-cost sales and customer acquisition, and also ushered in greater losses.

At the end of 2018, WeWork, which lost nearly $2 billion, faced the big problem of "money in the first place".

But this time, the troubled Son was unable to help, and his confidence began to waver.

Son originally formulated a $20 billion "stoic plan" for WeWork to support its continued spree, but SoftBank executives and Saudi investors strongly opposed the plan, and the company was stillborn.

As a result, WEWORK was left with the last straw and went public.

Winners open two new stores a day, sign dozens of new leases and hire 100 new employees every week. Expand at a high rate at any cost. ”

In May 2019, Adam, who announced the listing of WeWork, was conclusive. He hopes potential investors will be convinced of the reliability of WeWork's $47 billion valuation and beyond.

But the result backfired, and after the release of the WeWork prospectus in August 2019, it was immediately questioned from all sides.

The list of negative content alone is more than 20 pages long: for example, the company continues to lose huge amounts, for example, Adam's wife can decide the company's successor, and for example, WeWork, which has only a few hundred thousand members, most people have never heard of ......

The IPO roadshow was even more miserable, and the slogan "always half full" on the WeWork brand cup was also ridiculed as a 50% occupancy rate.

The "foolish theory" of finance states that as long as you convince the next person to come up with more money, the last round of capital investment will pay off.

Once, in the secondary market, Adam was invincible. When approaching tech investors, he will emphasize that real estate can make money; For traditional financiers, he talks a lot about the technology landscape of WeWork. The investors who were convinced, even if they didn't believe that WeWork would succeed, mostly believed that Adam would find the next person to come up with more money.

No one wants to miss the next Google, Uber.

But when it came to the primary market, at the critical moment when value was truly being evaluated by all investors, Adam's set failed.

When analysts and institutional investors are constantly aggressively asking:

What's the difference between WeWork and IWG, a $4 billion coworking company?

Adam knows in his heart that there is no essential difference between the two, and he can't tell what the difference between the two is in front of these analysts who don't believe in grand narratives and only go to the bottom of the cost, income and benefits.

As a result, he could only extend the PPT explanation time to reduce the opportunity to ask questions. The results were disastrous, of course, with one investment banker lamenting, "Every time Adam speaks, he lowers his valuation by $1 billion." ”

In less than a month, WeWork's valuation shrank to $10 billion, and even SoftBank's stock price fell 10%.

At this point, early investors, Masayoshi Son and WeWork executives all began to feel that WeWork's story could not continue, and Adam was the biggest burden to WeWork.

The other side of Silicon Valley's upstarts is constantly being exposed and presented.

The founder of the world's most valuable science and technology company, who hardly even uses a computer, and behind him is the cruel fact that the company's first CTO is a 16-year-old high school student, and most of the other executives are crony.

The Navy comrade-in-arms is in charge of finances, and he knows that the tequila of ** tastes better and is convenient for investment; Adam's brother-in-law is in charge of the fitness business, his wife's cousin is in charge of the real estate business, and his wife herself is in charge of brand marketing ......

Even more incredible is Adam's own conceit, arrogance, deceit, and spending.

He claims that his life's desire is to live forever, to become the world's first billionaire, and to expand WeWork to Mars, as well as to become Israel's prime minister and "the world's **".

Although WeWork has been losing money, Adam, who seems crazy, knows too well how to make money from the company.

Every time WeWork's valuation soared, Adam was the first to cash in. What's even more surprising is that he actually used a low-interest loan from the company to buy the building, and then sold it to WeWork as the owner**, with an estimated profit of up to 2$500 million.

Even, he just sold a "we" trademark and received $6 million in royalties.

While making money from the company without a bottom line, Adam also took WeWork's employees to lose together: in addition to high salaries and high benefits, WeWork in its heyday had two large-scale global outings every year, chartering cars, air tickets, hotels, and Universal Studios, and inviting well-known singers and bands to take turns on stage, an event, at least $10 million.

When the company lost nearly $900 million, Adam used $63 million to buy a private jet, citing his height and discomfort on commercial flights. But in reality, he used this Gulfstream G650 to travel around the world.

Adam goes out and often sits in a white Mai** and has meetings with people. After the meeting, let Tesla, Escalade and other luxury car teams behind pull each other back to the office.

He also bought six mansions for $90 million, hired nannies, personal assistants and cooks for his wife and five children, and lived like an aristocratic life. "Adam spends his money like water," said a former WeWork executive.

And WeWork's executives are not vegetarians, and all kinds of insider transactions and internal corruption are commonplace in this company. Even for front-line employees on business trips, WeWork's subsidy amount will make them travel all over the city, and they can't find such expensive hotels.

But all of this was ignored or even covered up before WeWork was actually pushed into the capital market: everyone ignored the fact that its business essence is a second landlord, not a so-called platform technology company. It also ignores that even if it is a second landlord, as long as the team is kind and well-managed, it will not suffer such a huge loss.

However, when the truth of all this is revealed and the industry finally realizes that the rise and fall of WeWork is not even a business case, it is more like a Ponzi of a start-up harvester, but the real loser is not Adam, but those who bet on Adam and bet on the next one.

Adam, the creator of this story, is still a big winner until the end of the play.

In 2019, Adam sold 9$700 million **, charged 1$8.5 billion in consulting fees and a $500 million credit facility. In 2021, I got SoftBank 4$800 million in severance pay.

Today, he is still a super-rich man with a net worth of $2.2 billion, and continues the next story: in 2022, Adam's real estate startup Flow, which became a unicorn valued at $1 billion before it even operated, and received the famous venture capital firm Anderson Horowitz, the largest in the history of a round of financing$500 million investment.

Adam's new story for flow is to unite a large number of individual landlords' properties for standardized operations, provide users with a pick-and-move living experience, and at the same time create a community of young people and differentiated services centered on experience.

Basically, it's an American version of "free".

Adam responded contemptuously to WeWork's bankruptcy with a "disappointing" remark, confidently stating that with the right strategy and team, the restructuring would allow WeWork to rise again. It's as if the miserable situation of WeWork has never had anything to do with me.

He even touted Flow, which had no business plan, as a wework that would be a real success in the rental market.

Resources. 1] "The Rapid Rise and Fall of WeWork and Its Founders" by Rivers Weidman.

2] "How did WeWork's Great Defeat come about?" xyy's reading notes.

3] "Bubble Frontiers: Adam Neumann and the WeWork Empire" by Elliot Brown.