WeWork’s Downfall: Analyzed
By Samarth Singh
On November 6th, 2023, WeWork filed for Chapter 11 Bankruptcy Protection. Just four years ago, it had been one of the most valuable startups in the world. This is the story of the making and breaking of a unicorn.
WeWork, a company providing workspace solutions for offices and corporations, was founded by Adam Neumann and Miguel Mckelvy. After sowing the seeds of their idea during the financial crisis of 2008, they officially launched the company in 2010. The company steadily grew until 2015. By 2013, WeWork had over 350 customers and startup consumers like Fitocracy and HackHands. In 2014, it was "the fastest-growing lessee of new office space in New York”. By February 2015, WeWork was on the list of Fast Company’s 50 Most Innovative Companies.
About a year later, WeWork raised $430 million at a valuation of $16 billion. By October of that same year, WeWork successfully raised $1.7 billion. That same month, they announced plans to open a fourth location in Central Square, Cambridge. In 2017, WeWork made multiple ventures, like opening a luxury fitness health club in Manhattan. It also made investments in other companies, like acquiring Flatiron School, a coding school, and investing in The Wing, a co-working space for women. They also announced that they’ll launch WeGrow in 2018. In December, they opened a location in Singapore. This also coincided with a steady rise in revenue. WeWork’s revenue was $415 million in 2016, and it more than quadrupled to $1.8 billion.
There was a flip side as well. In 2018, WeWork acquired a $60 million jet, which became a symbol of CEO Adam Neumann’s overspending. The company made $2 billion in losses that year.
Despite the hindrances in their path, WeWork continued to grow. In January 2019, WeWork was valued at a whopping $47 billion by SoftBank. The company kept expanding to numerous locations and investing in multiple ventures. However, the public valuation of the company was just $10 billion, which was even less than the $12.8 billion they had raised. The plan of going IPO had to be postponed.
So in all these years, how did WeWork become successful? Even though 2008 saw a crash in the housing market, rent prices grew. Considering that most companies have rent as their biggest expense, WeWork was providing a cost-effective strategy and great workspace, which is why the plan worked… initially.
The pandemic certainly hindered WeWork’s growth. The rising work-from-home culture was a threat to the company. Another factor was their rising losses and debt. Their total expenses amounted to $6.3 billion in 2021, which was much more than their revenue of $2.7 billion. Debt kept piling up. Most of their debt was long-term rent and lease contracts. Many also suggest that the relentless expansion strategy and investments of the company were also a driving factor in its downfall.
Cut to the present, WeWork’s stocks were delisted from the New York Stock Exchange, since its stock prices were below $1 for more than 30 days.
So what should we learn from this?
1. Never let losses pile up.
2. Avoid overspending in the early stages of the business.
3. Make mindful investments.
Though it’s tough to say, WeWork’s story is of how to NOT run a business which – for students in business – is equally helpful.
Sources:
WeWork Stats: Members, Locations, Financials. (2023, November 1). RubyHome.com. https://www.rubyhome.com/blog/wework-stats/#wework-expenses
WeWork Stats: Members, locations, financials. (2023, November 1). RubyHome.com. https://www.rubyhome.com/blog/wework-stats/#wework-revenue
Statista. (2023, April 19). Revenue of WeWork worldwide 2016-2022. https://www.statista.com/statistics/880069/wework-revenue-worldwide/
Wikipedia contributors. (2023, November 29). WeWork. Wikipedia. https://en.wikipedia.org/wiki/WeWork
