Founded in 2010 by Adam Neumann, Rebekah Paltrow Neumann, and Miguel McKelvey, WeWork operates workspace that can be rented out to members for a monthly fee. The company provides entrepreneurs, freelancers, and remote workers meetings rooms, privacy booths, free coffee and networking events.
Earlier this week, WeWork raised new funds and brought the company’s valuation to $21 billion. And last month, CEO Adam Neumann said the startup is now generating $1 billion a year in revenue.
Now operating 156 locations in 15 countries that host 120,000 members, WeWork has exploded over the last seven years. But how has this start-up used the sharing economy to become the success it is today?
The Sharing Economy
The sharing economy can include a lot. The concept is based around people sharing resources, using technology to connect owners and renters. For example, using Uber or Lyft allows one to obtain a ride without actually owning a car. Airbnb lets people find lodging from those who want to rent their apartment, houses or other free spaces.
“Social media is about sharing online. We’ve extended that behavior into the offline world. In the wake of the recession, there’s a slightly different mentality beginning to emerge, which is that access is more powerful that ownership,” said Airbnb co-founder Joe Gebbia.
Sharing resources provides incentives for both the owner and the renter. The owner of an item, such as a car, makes money from an underused asset. The renter, in return, pays a small fee in comparison to what they would need to pay to own and maintain the item itself.
WeWork has grown within the sharing economy. By renting a floor from a landlord and renovating it, the company can rent out space to individuals or companies for a monthly fee.
For $220 per month, a user can access a Hot Desk or any available desk in the common area of a location. For $350 a month, it offers a dedicated desk. For $450 per month, WeWork offers a furnished office space for up to 100 people. As the needs of a company expands, so does WeWork’s membership price.
Renting from WeWork offers incentives besides simply having a desk to use. WeWork handles overhead costs, such as the cost of internet, mail and package handling, printing, cleaning, and more. The company also throws in free coffee and other beverages.
WeWork as an Office Culture
WeWork does more than provide an office space, however; it provides a community. WeWorkers provide weekly networking events, like bagel-and-mimosa parties, that allow members to connect to one another.
WeWork operates workspaces that can help other start-ups grow and find what they need to flourish. Need a software designer for your new start-up? There’s probably someone you can hire in your WeWork community that the company can connect you to.
“Institutions have space that young entrepreneurs could use, but they want to start their own business and cut their own trail. WeWork gives them a home and says, ‘We want you here, we will help you and build you,’” says James B. Lee, the JPMorgan Chase (JPM - Free Report) vice chairman.
But beyond business connections, WeWork offices provide a space for freelancers or remote workers to be around other people. “Other offices are just depressing compared to here,” says Nicole Halmi of Neon, an image-selection platform in the WeWork Tenderloin location in San Francisco.
An IPO in the Near Future?
WeWork has been doing some restructuring of itself lately in possible preparation of an IPO. The company recently revamped its structure to give the start-up a more corporate shape, partitioning itself into four divisions: co-working, co-living, services, and an “enterprise” business that caters to big corporations.
Along with these changes, WeWork has hired more experienced members onto their team. James Woods, former president of Brooklyn Bowl, joined the company as the new head of its co-living line, WeLive. Richard Gomel, a former executive at Starwood Capital Group and Starwood Hotels & Resorts, now heads WeWork’s co-working business.
Both Woods and Gomel began working at WeWork in January this year. Each brings to the young company their previous experience working with larger corporations, helping establish a newer corporate shape.
“One thing we’re not afraid of is going public,” Neumann has said. And yet, while WeWork has talked about having an IPO for at least a year now, Neumann has not given a time frame for a public offering.
While the CEO may say he is unafraid of an IPO, one question that remains is what category will WeWork want to be viewed as: a tech company, a real estate company, or a services company? According to Paltrow Neumann, none of those. WeWork is a community company, she said, a category that fits no other company.
Regardless of what category WeWork will ultimately choose, if the company does decide to go public, this sharing-economy based start-up has expanded rapidly since its beginning in 2010. Some believe that the company remains at risk because their long-term leases could put them in jeopardy if demand were to sharply decrease.
But investors should also know that the company has been operating with positive cash flow since day one of operation. And while just two years ago less than 1% of WeWork’s business was from Fortune 500 companies, that figure is now at 30% and growing. The company’s rising revenues should help the company when it decides to make its public debut.
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