We Work is No Longer Working
- We Work will also be abbreviated as WW throughout this article.
We Work was founded in 2010 by the infamous creator Adam Neumann and funded by Masayoshi Son SoftBank CEO and Founder and world’s biggest tech investor; Alibaba, Uber etc is on the brink of an almighty collapse. A series of poor financial decisions, lack of clear vision for the company, questionable management amongst other issues have meant this real estate business shrouded in the cloak of a tech company has altogether lost its way. Here is the story as the coronavirus lockdown continues.
We Work was one of those inventions that we’ve seen in the modern day landscape of business which comes by in a puff of smoke; with all the momentum and magic of many Silicon Valley upstarts. Adam Neumann, had tried his hand at other ventures in the past — one of which included designing clothes for baby with knee-pad’s. The idea did not take off. Years later, he came up with the idea for a company which would rent offices-cum-creative hubs to people who are in need of a place to work. For a price. That was it. That was the big idea.
Upon reflection, it is both easy and difficult to see how people bought into this idea. On the one hand in makes sense; socially and economically for some people who don’t have the time, money or resources to get their own office space but value the co-habitable environment somewhere like WW offers.On the other hand it makes entirely no business sense for anyone with real money to invest in an company like this. Essentially WW is like a Real Estate investment company with ad-hoc dreams of being a social pool of creatives coming together to make their ideas take shape. All while presenting themselves as a tech company…but how? The only thing related to technology that WW offered is the use of their wi-fi whilst renting an office space. It seems maybe from the outset, WW failed to lay out a sustainable, sensible plan for improvement and expansion and things went from bad to worse as the news of Covid-19 took hold and worldwide countries went into lockdown.
WW tenants have been refusing to pay rent and/or terminating their rent agreements in droves, leaving thousands of office blocks with nobody in them and no revenue to keep things going. Occupancy in September 2019, for example was at 79% and by April 2020 it had fallen to 64% (this is only in the USA and does not factor in the other countries they have occupancy in). WW went along with the turning tide of most businesses within this Corona crisis and offered “rent holidays” to their tenants/service users. However, even this could not financially blanket them from what was to happen next.
WW had been counting on a deal with SoftBank. Sandeep Mathrani is the Chief Executive and has long held the view — at least publicly — that WW is something worth investing in, even when reports were coming out about mismanagement of company funds and unprofessional conduct by the former CEO and founder Adam. Still, as of April 2020, WW is suing Softbank’s ‘We.Co’, the parent company of WW as they say Softbank has not kept up their end of the financial deal. Essentially, Adam Neumann stepped down right after WW failed with their IPO plan (this was supposed to be their saving grace as it was to absolve them of many of their financial obligations).
Softbank was supposed to exchange a $3 billion dollar tender, which would have gone someway to keeping WW’s head above water. As current information states; WW is tied down in up to $47 billion dollars in rental commitments. Not only that, but big clients such as Royal Caribbean have pulled out of using the Miami WW offices they were renting. To make matters even more dire, WW had gone into expansion mode last year.
So what’s to happen now and what does this say about the future of a company like WW during this pandemic? Well, its been reported by WW insiders that many of their faithful customers have now simply changed their payment information or have altogether stopped paying rent for their office spaces. WW told the Financial Times that their main priority is to “protect the company’s financial and liquidity positions.” In a Forbes article dated April 2020, they reported on cuts being made to staff; including community managers and real estate professionals. The new CEO of WW has also been described by some staff as running a debt collection agency. He did also confirm that more employee cuts would be necessary. WW have let many staff go and this has left them selling off what was supposed to be their HQ in New York — the Lord and Taylor building — ironically tech titan Amazon were the buyers. They have also come under fire for essentially trying to bribe employees into working through the pandemic by telling them they would make $100 per day if they went against ‘shut down’ orders.
So for the company which burst on the scene with promises of co-working paradise and revolutionary office space, it seems they have completely lost their way — if they ever knew which direction they were really going in the first place. As it stands, Neumannn is suing SoftBank for $3 billion dollars.
