WeWork’s $47

Billion Dream:
The Lavishly Funded Startup That
Could Disrupt Commercial Real Estate 2019
Table of Contents

CONTENTS
How WeWork aims to dominate co-working 6
• WeWork’s rapid growth
• Shedding lease risk
Signing & designing with data 12
• Data speeds new lease agreements
• Architecture & construction
• Enterprise initiatives, Powered by We
Strategic initiatives 21
• Services & expanding core WeWork
• Extending the WeWork brand
• Global expansion
Investors, leadership, & competitors 31
• Valuation & funding history
• Investors
• Leadership
• Competitors
Concluding thoughts 42

WeWork’s $47 Billion Dream 2

Intro

With $6.5B in equity funding, WeWork

is expanding aggressively at home and
abroad and pursuing diverse investments
that have raised eyebrows. But its real-
estate-as-a-service offering and trove of
data on optimal office design could make
the company’s value prop far more than a
marketing ploy.
WeWork is a real estate company valued like a tech company.

At least, that’s the rap on WeWork from critics who think it can’t
support its $47B valuation in private markets.

Backed by Japanese tech and telecom giant SoftBank Group,

WeWork specializes in rent arbitrage — leasing and developing
properties at one price, then turning around and renting them
out at much higher prices. Its recent run-up in funding — raising
some $4B in 2018 alone — has given the company the firepower to
expand quickly without worrying too much about fundamentals.

Companies traded in public markets that follow the same

business model trade at much lower sales multiples than WeWork.
Detractors say WeWork has earned its valuation by putting hipster
touches on formerly drab spaces and positioning itself as a
startup incubator, then charging sky-high rent.

WeWork’s $47 Billion Dream 3

On top of that, critics point to WeWork’s investments in seeming
distractions — like its WeGrow elementary school and a wave
pool company — as more examples of a tech company with
overreaching ambitions. Furthermore, its recent rebrand to The We
Company sets the stage for expansion into more sectors including
banking, housing, and even sailing.

But WeWork’s shift to safer real estate commitments and its

emphasis on longer-term renters and enterprise clients suggest
the company could have legs.

WeWork claims it’s amassing a trove of data on ideal office

locations and layouts, and using software to determine everything
from ideal desk layout to optimal conference room size.

The company is leveraging this data not only to improve its own
locations, but also to become an outsourced facilities manager,
at a time when big enterprises are trying to shed real estate
management from their portfolios. WeWork has already secured
IBM and Verizon for its Powered by We offices in Dock 72, a high-
profile commercial property in Brooklyn.

WeWork is also pursuing new lease agreements that could help

it shed some of its biggest risks, and purchasing high-profile
properties outright, giving it much more visibility and real assets.
However, recently the company has come under fire for renting
properties owned by CEO Adam Neumann, prompting concerns
about conflicts of interest.

WeWork’s $47 Billion Dream 4

In this report, we’ll show you how WeWork is:

• Shedding risk by shifting from long-term leases

on its properties to real estate deals with much
less risky commitments.

• Using its data and tech advantage to create a

blueprint for optimal office design and superior
worker productivity that can’t be easily replicated
by other real estate companies.

• Turning itself into a real estate services company

targeting enterprises.

Below, we analyze WeWork’s strategy and the health of its

business to better understand whether it is another overvalued
unicorn, or an innovative company that has taken an existing
business — commercial real estate — and updated and scaled it
for the tech age.

WeWork’s $47 Billion Dream 5

How WeWork aims to
dominate co-working

Since opening the first WeWork location in New York in 2010,

co-founders Adam Neumann and Miguel McKelvey have grown
the company into a national and global brand.

The company’s corporate marketing centers strongly on an ethos

of entrepreneurialism. Slogans cover the walls of rented WeWork
office spaces, urging workers to “do what you love” and “create
your life’s work.” The company’s executives position WeWork not
as an office provider, but a community.

But underneath this aspirational culture is a fundamental business

truth. The company makes money primarily through rent arbitrage:
charging its members more than it has to pay its landlords.

The principal means of accomplishing this is by packing a lot of

people into its locations.

In WeWork’s buildings, the average square footage per person

hovers around 50 square feet. This compares to 250 sq ft for
commercial offices industry-wide. Despite this small footprint,
each member generates an average annual revenue of $6,641.

WeWork has touted frequent engagement with other co-working

colleagues as a perk of working within a creative community, and
less a reality of just how crowded its workplaces are.

WeWork’s $47 Billion Dream 6

At an event celebrating WeWork in 2014, Steven Roth, the chairman
and founder of Vornado Realty Trust (one of WeWork’s landlords),
toasted WeWork’s CEO, saying,

“Adam always says, ‘No schmucks and no

assh*les,’ but the definition of a schmuck
is someone who rents a property at .5x
and then turns around and rents it at
1.5x.”
Neumann reportedly held up two fingers, indicating he actually
charges members double.

WEWORK’S RAPID GROWTH

Despite its high membership costs and crowding, WeWork has

successfully grown its membership base, positioning itself as a
home to new-economy business activity.

Through a combination of amenities, partnership agreements,

and, of course, office design, WeWork has provided a compelling
“starter kit” to entrepreneurs and small companies seeking a place
to work.

WeWork’s $47 Billion Dream 7

In May 2017, Adam Neumann reported that WeWork employed
2,200 people, 800 of whom were based in New York City. A Forbes
article published just 5 months later reported that the company’s
headcount had increased to 2,900, and today a simple search on
LinkedIn shows more than 8,000 employees.

In the beginning of February 2018, WeWork welcomed its

200,000th member, compared to 130,000 members in May 2017,
representing 54% membership growth in 9 months.

With a huge funding jump (largely driven by SoftBank investments)

last year, WeWork has been able to significantly scale up square
footage, which has in turn provided capacity for correspondent
membership growth.

The company adds between 500,000 to 1,000,000 square feet

of new space every month. As of May of 2017, the company
managed 180 locations. Today, WeWork manages more than
500 locations worldwide.

Notably, the company can add space so quickly due to its

construction chops and operational efficiency. After a location
has been scouted and vetted, and a lease or co-management
agreement is in place, the company can accept tenants in as few
as 4 months, and on average does so within 9 months.

In 2017, WeWork’s top line revenue reportedly surpassed $900M.

For 2018, the company reportedly had a full-year run rate of
$2.3B in revenue.

WeWork’s $47 Billion Dream 8

SHEDDING LEASE RISK

While WeWork may seem like it’s found a magic formula in real
estate, its model is actually quite risky. The long-term leases it
signs with landlords can last 10 – 15 years and require WeWork
to pay hundreds of millions of dollars in future rent, even during
economic downturns and down cycles in the real estate market
when the company may struggle to fill its buildings.

Over the course of a decade-long lease, there may be phases

when small businesses and entrepreneurs find WeWork to be
unaffordable, or competitors with lower rent obligations are able
to provide a similar offering for less money to the customer.

In this regard, WeWork’s big selling point of office space flexibility

is also one of the greatest threats to the long-term stability of its
business. Members can pick up and leave if they want to, leaving
WeWork on the hook.

The company has taken steps to reduce its overhead risk by

focusing on the four strategic measures below:

• WeWork is targeting more enterprise clients for its office

space and expanding into third-party office management
via its Powered by We solution. To date, around 29% of
WeWork’s clients are enterprises, with some locating in
WeWork buildings and others locating in real estate tailor-
made by WeWork’s construction, design, and Powered by
We management tools.

• WeWork is shifting from leases to co-management deals.

In this scenario, landlords might pay for the renovation and
buildout of offices and/or split membership profits 50/50,
similar to the management agreement popularized by the hotel
industry. Neumann says WeWork has followed this strategy
nearly 100% of the time in markets like India and Israel.

WeWork’s $47 Billion Dream 9

 • WeWork has begun purchasing properties. The company
formed a real estate investment fund called WeWork Property
Advisors in partnership with the Rhone Group. The fund was
reportedly used to purchase the former Lord & Taylor building
in New York City for $850M, and negotiated the complete
purchase of a 12-building campus in London’s Devonshire
Square from the Blackstone Group for a reported $826M.

• The company is moving towards longer lease terms for its

members. WeWork has restructured the incentives of its
broker referral program to reward brokers who place members
for a year or more instead of month-to-month, according to
The Information.

It’s worth pointing out that according to research conducted by

Emergent Research, the co-working industry more broadly is also
changing, moving away from individual entrepreneurs and towards
small businesses and companies employing fewer than 100 people.

WeWork’s $47 Billion Dream 10

Many analysts have been preoccupied with the risks faced by
WeWork, particularly in the context of a potential economic
downturn. On paper, WeWork has plenty to be concerned about.

The company’s business model of securing longer-term leases

before renting the space to emerging companies appears to be
at greater risk during periods of economic contraction. Rising
interest rates, stagnating prices in the commercial real estate
market, and the likelihood of another prolonged downturn or
outright recession are all significant threats to WeWork as a
commercial real estate business.

In practice, however, WeWork is in a much stronger position

than its detractors have bargained for. WeWork’s footprint has
increased significantly in recent years, particularly in perennially
hot real estate markets such as London and New York City.

Critics have argued that an economic downturn could spell

disaster for the rapidly expanding company, but they have failed
to account for the breadth of WeWork’s portfolio and its ubiquity
in international cities.

WeWork currently manages more than more than 5.2M square feet
of commercial real estate in New York City alone. This puts the
company in a unique bargaining position. Although it may not be
healthy for the economics of the business, it’s hard to imagine that
WeWork would be allowed to rapidly fail without some external help.

With so much space under its management, if WeWork were to fail,

its sudden departure could cause commercial real estate prices in
key markets such as London and New York to plunge. This would
be more problematic for investors and other interested parties —
like the government — than helping prop up the company.

WeWork’s $47 Billion Dream 11

Signing & designing with data

DATA SPEEDS NEW LEASE AGREEMENTS

Aaron Fritsch, WeWork’s Head of Product Systems, has said that
the “single biggest blocker to our ability to expand is plainly and
simply how many leases we can sign.”

Given the importance of a fast-paced global expansion, WeWork

has a calculated way of scouting its locations for buildings.

WeWork addresses the bottleneck in location vetting by leveraging

data on a target neighborhood’s business composition. In a
partnership with Factual, a location data provider, WeWork rates
locations based on proximity to amenities and businesses, including
coffee shops, shopping, restaurants, bars, hotels, and gyms.

Factual claims its partnership with WeWork drove a 95% increase

in WeWork locations in a 12-month period between 2016 and 2017.

WeWork’s $47 Billion Dream 12

Interestingly, the proximity of other WeWorks is also a factor.
In cities where there are numerous WeWork locations, each
additional location serves to drive down membership churn.
Artie Minson, WeWork’s former COO and current President,
has noted, “in cities where WeWork opened more locations,
membership cancellations declined.”

While the vast majority of WeWork’s membership plans

assign its members to a location, it does let members switch
between locations.

ARCHITECTURE & CONSTRUCTION

Once WeWork signs a lease and begins building out its office to
maximize revenues and office culture, technology takes an even
bigger role.

The company’s acquisitions of architecture technology firm Case

Inc. and of construction management platform FieldLens to form
its Physical Products team have been essential to improving the
design and build out phase.

Before being acquired by WeWork, Case was a technology

consultancy for the architecture industry. Its team specializes
in building information modeling (BIM), in which buildings are
scanned and shown in 3D to provide insight into the time and cost
of projects. WeWork acquired the company in August 2015.

In June 2017, WeWork acquired FieldLens. FieldLens offers

a platform for communication between stakeholders in the
construction of buildings. Its technology allows project managers,
foremen, architects, owners, and supers to manage construction
sites in real time on their phones, documenting conversations and
tracking and assigning issues.

WeWork’s $47 Billion Dream 13

WeWork has integrated FieldLens into its building management
lifecycle, including post-construction management.

WeWork’s goal is to maximize space usage while also providing

ample common space, meeting rooms, and natural light. The
company measures the usage of its offices so each new location is
informed by data from prior offices.

Using Case’s core technology, one of the first things WeWork

does after signing a lease is 3D scan and map a space. The
process, which takes an hour per floor, lets the physical products
team capture square footage, window mullions, door sizes, slab
flatness/thickness, and ductwork and piping.

Small decisions in space usage can lead to a large financial return.

According to David Fano, WeWork’s chief growth officer, “these
old buildings might have drawings, but they might be off by a foot
or two. If that happens, a desk might not fit, and that changes our
performance; we make revenue projections on that.”

Fano argues the BIM process has increased space efficiency

between 15 and 20% while saving 10% of building cost. After all,
just one extra desk can add up to $80,000 in sales over 10 years,
according to Forbes.

Fano also likes to point out that WeWork “is in a unique position as
one of the only true end-to-end solutions that is involved in every
phase of a building’s life cycle — from identifying, leasing, and
designing to building and managing.”

WeWork’s $47 Billion Dream 14

The below graphics shows a BIM plan script mapping frames and
assemblies. Notably, WeWork tests different layouts and office
sizes, using information from existing locations to predict where
members will gather in a new location, how many phones should
be installed, etc.

One of the ways WeWork achieves maximum efficiency in planning

is through its use of machine learning. To decide how many
meeting rooms to construct, researchers at WeWork created a
neural net that collects information on its existing buildings’
layouts and meeting room usage.

Based on knowledge of its building layouts and meeting rooms

utilization, the company can predict meeting room usage for a
layout that has yet to be constructed.

WeWork’s $47 Billion Dream 15

In a test of the neural net system, the program estimated room
usage 40% more accurately than WeWork’s human designers did.
The graphs below show the number of hours a meeting room was
utilized vs. its predicted hours, with the neural net achieving far
more linear correlation.

According to Nicole Phelan, the design researcher who wrote

WeWork’s blog post on its neural net, “The most powerful
implication of this study is that before we begin construction, our
teams can plan a space that fits the needs of the members that
will one day occupy it. Using machine learning to uncover patterns
in the interactions between people and space is information that
can make better design and programming decisions.”

The end result is floorplans that are packed with a mix of private
offices, meeting rooms, single-person rooms, open desks, and
common areas.

WeWork’s $47 Billion Dream 16

The more buildings WeWork opens, the more data it collects, and
the more its process improves — providing a strategic advantage
over other co-working startups and incumbents.

This technology, combined with increasing buying power from

constructing at scale, lowered the cost of adding a new desk
to $9,504 in September of 2017, from $14,144 a year prior,
representing 33% savings.

This data advantage in building and managing office space is one

of the major selling points to enterprise customers.

ENTERPRISE INITIATIVES, POWERED BY WE

To folks in the venture capital industry, the prospect of getting
a slice of the commercial real estate industry via an office
management technology platform play is attractive. What’s more,
major headwinds are blowing in the company’s favor.

Corporations across the globe are searching for ways to lower

their total square footage to cut costs. In addition, a rule mandated
by the US Financial Accounting Standards Board set to go into
effect in January 2019 requires public companies to add real
estate lease obligations as a liability to their books.

WeWork’s $47 Billion Dream 17

The rule is likely to make companies with large leased footprints
appear significantly more leveraged than their reporting
currently reflects, and thus will spur companies to lower their
real estate footprints.

But workspace design isn’t just about tax efficiency and

cost savings. Workplace design is increasingly correlated to
measurements of employee health and productivity. Subsequently,
companies are installing measurement tools to ensure office spaces
are well-ventilated, receive enough natural light, are not noisy, and
are optimized for other aspects of productivity and well-being.

Some buildings are being retrofitted with HVAC systems that

automatically respond to high CO2 and pollutant levels in the
air, preventing employees from becoming drowsy. Renowned
architecture firms like Zaha Hadid Architects are installing wall
sensors like the one below to measure and monitor offices,
producing “evidence-based design.”

“Buildings are literally becoming giant computers,” Joshua Emig,

WeWork’s product director, told Fast Company.

WeWork’s $47 Billion Dream 18

WeWork’s building design team knows how to maximize square
footage and amenities so that employees do not feel crammed.
From a cost-savings perspective, WeWork estimates this saves
enterprise clients between 25% to 50% in operating expenses,
according to The Atlantic.

Sensors and other measurement tools like facial recognition

software let WeWork track how its office space is used, down to
data as granular as how members adjust their desks and what parts
of the office see the highest foot traffic. Eventually, these tools might
even be able to track how focused members are in meetings.

WeWork designs its own spaces for enterprise clients and

redesigns enterprises’ existing office space. Corporations that
use the Powered by We solution are offered WeWork office
management software to help book conference rooms, host
guests, etc.

A community manager also sits within the space, to assist as

needed. Fast Company reports that its enterprise solutions are
designed for companies with at least 1,000 employees taking up
50,000 – 60,000 square feet.

Doug Chambers, vice president and global head of client solutions,

told Wired that clients “want to know how their space is being
utilized, how they cut down on that space in places where it’s not
being utilized efficiently, and at the same time get that cultural
community aspect happening inside of their buildings.”

The below graphic includes some of the notable corporates that

are using WeWork for office space.

WeWork’s $47 Billion Dream 19

WeWork’s acquisition of Unomy, an Israeli enterprise sales tool
that lets salespeople track leads, aligns strategically with its goal
to increase enterprise customers. Unomy had previously raised
from AltaIR Capital, JANVEST Technologies, Leta Capital, and
Microsoft Accelerator.

WeWork’s early 2018 acquisition of marketing services company

Conductor also shows a focus on enterprise clients. Conductor
offers search engine optimization (SEO) services to companies
intent on increasing their profile and visibility on the web. WeWork
president and CFO Artie Minson described the acquisition as “an
opportunity to offer another product and service our member
companies can use to grow their business.”

That said, Conductor will also operate as a separate business

for WeWork with the intent to “cross-sell their brands.” Minson
emphasized that Conductor’s existing client base offers an
opportunity to engage with and sell to large enterprises.

More recently, in September 2018, WeWork acquired Teem, a

meeting management platform. While the company will continue
to operate independently, it will also be incorporated into WeWork’s
Powered By We offering.

WeWork’s $47 Billion Dream 20

Strategic initiatives

Armed with heaps of capital from its $6.5B in equity funding,

WeWork is rapidly expanding across the world, adding new
locations and amenities in a bid to scale its membership count
and diversify its brand.

The company has added amenities and service offerings to its

core customers (individuals and companies alike) via M&A and
partnerships. It is also developing new types of WeWork brands,
including dormitory housing and fitness facilities (some more
promising than others).

WeWork president and CFO Artie Minson described WeWork’s

investment scope as including companies that “make WeWork
stronger or can make our member companies stronger,” according
to the WSJ.

Chief growth officer David Fano is optimistic about the company’s

M&A future, saying that WeWork is actively looking to “buy, build,
[and] partner,” and noting that “at the pace we’re looking to scale
and the expertise we’re looking to bring on, I would imagine we’ll
be looking at companies that could potentially come on board.”

This is increasingly true given its new plan to expand as

The We Company.

WeWork’s $47 Billion Dream 21

SERVICES & EXPANDING CORE WEWORK
Services Store

WeWork’s services store offers members discounts on software

and office services, including basics like Microsoft Office, Slack,
and InVision. The store can be accessed with the lowest WeWork
membership package, which lets customers pay as they go for
co-working space. The store underscores the company’s intent to
position itself as an office services provider.

Flatiron School

WeWork’s acquisition of the Flatiron School, a coding academy,

offers its members an educational amenity. Flatiron School had to
close a number of its coding boot camps prior to the acquisition.
Its courses and programs are being integrated into WeWork
locations and online.

2U

WeWork partnered with 2U in 2018 to further enhance the its menu

of amenities. 2U is an education technology company that offers
customers online courses from top universities and colleges.

The partnership terms include $5M in scholarships paid for by 2U

to WeWork members over 3 years. Additionally, 2U will be licensed
Flatiron School’s Learn.co technology.

SoFi

WeWork’s partnership with fintech startup SoFi is a service offered

within the WeWork Services Store. WeWork members in the United
States receive a 0.125% rate discount on student loan refinancing
or Parents PLUS loans.

WeWork’s $47 Billion Dream 22

Meetup

The company’s acquisition of Meetup, a platform that connects

groups of people with similar interests, ties in with WeWork’s core
offering of networking space. Since 2013, more than 100,000 have
attended a meetup at a WeWork.

Techstars

WeWork’s partnership with Techstars gives the global accelerator

office space and access to WeWork services in Toronto, Kansas
City, Boston, and New York City. Techstars and alumni are offered
discounted membership.

WeWork CFO Artie Minson commented on the partnership:

“Techstars entrepreneurs represent

some of the world’s best innovators on
the front lines of the industries of the
future. By welcoming more of this next
generation of creators into the WeWork
community, our members — everyone
from entrepreneurs, freelancers, and
small businesses to middle-market and
Fortune 500 corporations — will have new
opportunities to connect and collaborate.”

WeWork’s $47 Billion Dream 23

EXTENDING THE WEWORK BRAND
WeWork’s rebranding effort to become The We Company initially
will focus on three business units: WeWork, the co-working
unit; WeLive, its residential arm; and WeGrow, which includes
an elementary school and coding academy.

The company also shared its long-term vision from 2009,

which incorporates travel, social life, and health into the
WeWork ecosystem.

Below, we take a look at some of the ways that WeWork is

expanding its reach.

WeLive

WeLive is WeWork’s vision for membership-based housing. Like

WeWork’s office, WeLive offers dorm-style apartments that can
be rented on a month-to-month basis. TV, internet, concierge,
housekeeping, access to community events, refreshments, and
communal kitchens are all included in the pricing.

WeWork’s $47 Billion Dream 24

Unlike WeWork’s office locations, WeLive has not seen much
growth. The company currently has two WeLive locations, well
short of its goal to expand to 68 locations.

Private studios start at $3,050 per month in New York City

and $1,500 per month in Washington DC, while four-bedroom
apartments start at $7,600 in NYC and $3,700 per month in DC.

Rise by We

In October 2017, WeWork announced the opening of its spa and

gym, Rise by We. The facility, currently only offered at one location
in New York City, is open to WeWork members, with a non-WeWork
members fee starting at $100/month for access to four studio
classes. WeWork intends to build out similar gym/spa offerings in
other locations.

The addition of exercise facilities seems like a well-timed decision,

as fitness companies like Equinox are blurring the lines between
recreational spaces and hotels, with plans in the works to launch
an Equinox hotel in New York City’s Hudson Yards development
in 2019.

WeGrow

One month after its announcement of Rise by We, WeWork

announced plans to start a private elementary school
called WeGrow.

The WeGrow school opened in the Chelsea neighborhood of New

York City in September 2018. At launch, 46 children were enrolled
in the school’s classes ranging from pre-K to 4th grade. Tuition
costs between $36,000 and $42,000.

The school’s mission is centered around “a conscious

entrepreneurial approach to education.” Students are also able
to connect with WeWork members for mentorship in career fields
of interest. The initiative has drawn quite a bit of press — and a
fair amount of skepticism.

WeWork’s $47 Billion Dream 25

WeWork Labs

WeWork Labs is a partnership program with local accelerators and

incubators that assists small companies with “space, community,
and programming” for a fee (not an equity stake). Currently, the
program is available in Manhattan, Brooklyn, Washington DC,
Seattle, and Dallas, as well as 14 other cities around the world.

WeWork’s tertiary businesses make up one if its greatest potential

competitive advantages. WeWork Labs in particular has become
increasingly important to the company, and seems poised to make
further inroads in an already crowded market.

WeWork has doubled down on its burgeoning accelerator program.

In November 2018, the company announced it had hired Prabhdeep
Singh, former head of enterprise at Uber Eats, as the global head
of operations for WeWork Labs. Singh’s appointment is a clear
indication that Labs will continue to be a primary focus for WeWork,
which could be a strong driver of growth for the company.

“If you go to New York or Silicon Valley, there’s already 100

incubators or accelerators,” Singh told TechCrunch. “If you go
to the middle of the country, or China, or go to a place like São
Paulo where we have four spaces already, this is really filling a
market need.”

Part of what makes WeWork Labs compelling is that it does not

accept equity from the startups participating in its incubator
program. Instead it earns revenues off of renting out discounted
office space, following its main business model.

WeWork’s $47 Billion Dream 26

GLOBAL EXPANSION
WeWork is quickly expanding in the US and abroad, with more than
550 office locations worldwide and counting.

The US is still home to most WeWork locations

WeWork has focused on the United States, with 212 locations

nationwide as of January 18, 2019. The company’s US locations
are largely concentrated within New York City, which is home to 59
of the 212 offices. WeWork also has 19 locations in Los Angeles,
13 in Washington DC, and 12 in San Francisco.

WeWork’s $47 Billion Dream 27

We analyzed the cost of membership throughout the US to see
how prices stack up in each city, based on the city-wide average
of WeWork’s starting membership fees for a “hot desk” (an
unassigned seat somewhere within a common area) as well as
starting prices for a private office at a WeWork. As of January
2019, the average monthly price for a hot desk in NYC was $463,
and the average monthly price of a private office was $1018.

New York City and San Francisco lead as the most expensive in
the US, while Austin, Boston, and Chicago round out the top 5.

WeWork recently announced it plans to open an additional

campus location for its Flatiron School brand of intensive coding
academies in Denver, Colorado, a city that has seen dramatic
investment in its technology sector in recent years.

The company is also investing in additional commercial space

in Denver. In November 2018, WeWork signed two new leases:
one at the Circa Building in the city’s LoHi neighborhood, and
one at Revolution 360, a five-story office and retail building in
development in RiNo. Both locations are approximately 60,000
square feet.

WeWork signed a third Denver lease in January 2019. The

company will occupy three floors, adding up to 61,064 square
feet, in Denver’s Civic Center Plaza. The space will reportedly be
available in Q3’19 and will accommodate 1,000 desks.

London is a focus point for the company

Looking beyond the US, London has the second most WeWork
locations after New York City. The average starting cost of
membership in London is 25% higher than New York City.

WeWork has certainly made London a central strategic focus.

WeWork has become one of the largest office space tenant in

WeWork’s $47 Billion Dream 28

central London, second only to the government offices of the
United Kingdom, according to the Financial Times.

Moreover, based on filings made by WeWork’s UK units, the

company owes a minimum of $1.1B of future rent in London,
some $318M of which will be paid out in the next 5 years.

WeWork and two other companies purchased a 12-building

warehouse campus in Devonshire Square from the Blackstone
Group in April 2018. The buildings were originally owned by the
East India Company. The property was purchased for $826M,
according to Bloomberg — and WeWork reportedly now owns 10%.

Expansion in emerging markets

WeWork is also expanding in emerging markets with burgeoning

tech scenes, especially China and India. We took a look at average
prices in cities in these countries to see how they compare to
other markets.

China’s country-wide average of $757 for a private desk aligns

with major US cities like Chicago or Los Angeles, but when you
remove Hong Kong — with a city-wide average of $975 for a
private office and $455 for a hot desk — averages in locations like
Beijing and Shanghai fall significantly, dropping down to $648 for
a private office and $341 for a hot desk.

WeWork’s office in the China Overseas International Center, Shanghai

WeWork’s $47 Billion Dream 29

This has not deterred WeWork from expanding within Shanghai,
likely because margins in the city are still favorable for WeWork,
in addition to considerable expansion potential. WeWork has 35
locations in the city, and in 2017 it leased the largest Class-A office
in Shanghai, a 290,000 square foot building in Huangpu District.
(Class-A is highly prestigious office space.)

Compared to China, India has significantly lower membership fees,

with a $358 country-wide average for a private office, and $145 for
a hot desk.

To boost expansion in Southeast Asia, WeWork also purchased co-

working startup Spacemob in August 2017. The Singapore-based
company had previously raised $5.5M from Vertex Ventures SE
Asia, Alpha JWC Ventures, and Temasek Holdings. The acquisition
also brought on Spacemob’s founder and CEO Turochas Fuad to
manage its expansion through Southeast Asia.

WeWork’s former CFO and managing director of WeWork Asia,

Christian Lee sees co-management and Powered by We as a major
driver to expansion in the region. “Landlords in Asia are coming to
us and asking for help or a cultural upgrade,” Lee told TechCrunch.
“It’s one of the biggest opportunities in Asia — we take everything
we learned as a package and bring it into a landlord building or
company building.”

WeWork’s $47 Billion Dream 30

Investors, leadership, & competitors

VALUATION & FUNDING HISTORY

Since its founding, WeWork has raised a mountain of money in
the private market, with $6.5B in total equity funding.

At the time of its $40M Series B financing in May 2013, WeWork

had reached a $318M valuation. In February 2014, the company
raised a $157M Series C and reached a $1.6B “unicorn” valuation.

Since then, each successive round has added billions to its

valuation, which, following a number of large rounds from SoftBank
Group, has most recently ballooned to an astounding $47B.

Much if not all of WeWork’s valuation is based on its historical

and forecasted revenue growth. Compared to comparable
publicly traded companies like IWG, WeWork’s revenue growth
is far higher. (For more on WeWork’s valuation, check out our
valuation analysis.)

WeWork’s $47 Billion Dream 31

In November 2018, WeWork’s largest investor SoftBank announced
that it was investing a further $3B into the real-estate company,
valuing WeWork at approximately $42B. SoftBank took an
interesting approach to this round of funding, opting to structure the
round as a warrant that gives the investor a great deal of flexibility.

Although it’s practically inconceivable that WeWork might be

acquired in the near future, SoftBank would be in an envious
position if any company did make an offer, or if SoftBank itself
decided to acquire the company. Structuring this round of funding
as a warrant also allows SoftBank to retain much of its bargaining
power if WeWork were to file an IPO, a much likelier (though still
somewhat distant) prospect.

SoftBank announced another $2B investment in WeWork in

January 2019 — much lower than the initially planned $20B.
SoftBank was forced to revise its investment after stock market
troubles pushed its stock down 20%.

Aside from cementing its power over the rapidly growing real-
estate company, SoftBank’s latest investment in WeWork is a
strong signal that it will continue to support the company for the
foreseeable future. This will likely embolden WeWork to continue
investing in its tangential businesses, as its recent rebrand to The
We Company suggests.

SoftBank’s continued investment in WeWork is also highly

strategic. One of WeWork’s largest competitors, Chinese company
Ucommune, raised $200M in November 2018 as part of its Series
D round. Analysts expect the company will use the funding
to continue its series of strategic acquisitions to shore up its
presence in the Chinese domestic real estate market and other key
markets in Southeast Asia.

Ucommune, which is currently valued at $3B, may lack WeWork’s

muscle, but it’s clear that the company has considerable
ambitions and plans to apply further pressure on WeWork in
competitive markets.

WeWork’s $47 Billion Dream 32

INVESTORS
WeWork’s investor composition weighs disproportionately
towards larger, institutional money managers like mutual funds,
endowments, and banks. This includes the Harvard Management
Company, JP Morgan Chase, Goldman Sachs, and Fidelity
Investments, as well as traditional venture firms like Benchmark.

The company is also backed by some notable Chinese investors,

including Legend Holdings, parent company to Lenovo, and Jin
Jiang International, with ties to the Chinese government.

However, WeWork’s most influential investor is surely SoftBank

Group. In 2017, SoftBank Group closed $93B to form the SoftBank
Vision Fund, aimed at buying significant equity in market-leading
technology companies.

WeWork’s $47 Billion Dream 33

“I told Adam not to be proud that WeWork
was growing organically without a large
sales force or spending big marketing
dollars. Make it ten times bigger than your
original plan.”
— MASAYOSHI SON, CEO, SOFTBANK GROUP

WeWork was one of the Vision Fund’s first investments. The terms
of SoftBank’s deal were allegedly sketched out by Neumann and
Masayoshi Son, SoftBank’s CEO, in the backseat of Son’s car as
he departed from a mere 15-minute visit to WeWork’s offices.
The terms set out a $3B investment into WeWork — a mix of
equity buyouts ($1.3B) and new capital ($1.7B) — with additional
investments made to new Asian entities WeWork Japan, WeWork
China, and WeWork Pacific.

Based on WeWork’s recent geographic expansion, it would seem

Neumann and his team are putting SoftBank’s money to use.

As SoftBank continues to deploy its Vision Fund, it’s worth keeping

an eye on the office locations of Mr. Son’s portfolio companies.
The WSJ reported that Son has suggested he would urge portfolio
companies to find office space within WeWork locations, and
SoftBank’s subsidiary Sprint is a WeWork enterprise client.

WeWork’s $47 Billion Dream 34

LEADERSHIP
We put together a blueprint of the company’s top ranks. While
WeWork’s leadership structure is fuzzy, here are the executives
who either directly report to CEO Adam Neumann, or have his ear.

WeWork’s $47 Billion Dream 35

NEWS SENTIMENT
WeWork has seen a significant amount of fluctuation in news
sentiment in recent years. Although sentiment is generally trending
up, the company has seen a recent sharp downturn as stories have
come out about a drop in SoftBank’s expected investment and
potential conflicts of interest for CEO Adam Neumann.

Note: we calculate positive stories as 1, negative stories as -1,

and neutral stories as 0.

WeWork’s $47 Billion Dream 36

COMPETITORS
Private startups are cropping up to compete

There were around 19,000 co-working locations around the

world as of September 2018. While none are as well-capitalized
as WeWork, the company has nonetheless been aggressive
in weeding out competition, poaching members with offers of
months of free membership.

Knotel is one example. The New York City-based company has

raised $155M from investors including Bloomberg Beta, 500
Startups, and Rocket Internet, among others. In 2017, Knotel and
two other companies accused WeWork of spying on its operations,
sending employees to pose as potential customers.

San Francisco-based RocketSpace is a well-capitalized office

space company designed to help startups grow, offering offices
and accelerator services. The company notably also has enterprise
clients. Founded in 2011, it raised $336M in 2016 in a corporate
minority round from HNA Group, a Chinese conglomerate.

Convene provides space for corporate events, offering meeting

and conference rooms with production support, amenities,
and technology. Convene manages amenities for the Durst
Organization in One World Trade Center, among other locations.

Other co-working companies have more specific focus areas.

Neuehouse, for example, focuses on “solopreneurs” and teams of
less than 10, particularly in the film, fashion, and design industries.
The company has raised $71M to date.

The Wing offers an all-women social, co-working, and networking

club. WeWork participated in a $32M Series B to the startup in
Q4’17. The Wing’s first location in the Flatiron neighborhood in
New York opened in 2016, followed by its SoHo location in 2017.

WeWork’s $47 Billion Dream 37

Today, it has 5 open locations spread across NYC, Washington
DC, and San Francisco. More spaces are set to open in West
Hollywood, London, Boston, Chicago, Toronto, and Seattle between
spring 2019 and the end of 2020.

Some companies, such as Croissant and Spacious, have carved

out spaces in other unique ways. Croissant grants members
access to co-working offices around New York City, San Francisco,
Los Angeles, Chicago, and Washington DC. Spacious, which raised
a $9M Series A in 2018, partners with restaurants in New York City
during no-service hours.

As WeWork expands into Asia, a few players have emerged as

notable competitors. Beijing-based Ucommune (fka URWork, before
being sued by WeWork) has raised $768M from Sequoia Capital
China, among others, at a valuation of $3B. As of August 2017,
Ucommune had 7,500,000 square feet and 100 locations in China.

To head off additional competition in the Asian market, WeWork

acquired Chinese co-working startup Naked Hub in April 2018 for
a reported $400M, though specifics of the deal were not disclosed.

Publicly traded real estate companies are also taking note

Major real estate incumbents are angling to make competing

investments with WeWork. In January 2018, Brookfield Asset
Management and Onex Corp, Canada’s largest asset manager and
private equity firm, respectively, bid on IWG Plc, a flexible office
space provider. The $3.7B bid was rejected.

IWG’s $2.9B market cap is roughly one-tenth WeWork’s private

market valuation, despite having 3,000 locations compared to
WeWork’s 550. Its co-working sub-brand Spaces had 200 US
locations a the end of 2018, and plans to more than double that
figure in 2019.

WeWork’s $47 Billion Dream 38

In December 2017, IWG negotiated an agreement with Brookfield
to lease seven floors within the Hudson Yard development — an
indicator of how important Brookfield thinks co-working is to its
own leasing strategy.

The Blackstone Group has also made its foray into the co-working
industry, purchasing a majority stake in The Office Group, a
flexible office space provider at a valuation of roughly $695M.
Blackstone is the largest landlord in the US and one of the largest
landlords in the world, with $250B in gross real estate assets
under management (as of 9/30/18). Blackstone is also a landlord
to WeWork.

Rob Harper, head of US asset management in BX’s real estate

group, said co-working “is certainly something we’re spending a
lot of time focusing on in our office space business.”

“The way towers were built in the 1980s,

they were a monument to the corporation.
Now, if it feels corporate, that’s the kiss of
death.”
— LISA PICARD, PRESIDENT & CEO EQUITY OFFICE
(BLACKSTONE)

WeWork’s $47 Billion Dream 39

Traditional commercial real estate landlords are surely
feeling squeezed.

In the UK, an industry-wide decline in lease lengths occurred

for the first time in six years, and landlords feel obliged to make
changes. One of the UKs largest REITs, British Land Co., has even
started its own co-working brand called Storey.

In addition to putting a stake in the co-working game, landlords are

building out their amenities to compete with the likes of WeWork:
major commercial landlords are aggressively constructing
communal spaces, happy hours, game rooms, and more to make
their buildings more attractive to corporate tenants.

Naturally, some competitors have decided that it is better to work

with WeWork than against it. Major real estate developers like the
Rudin Management Company and Boston Properties have bought
in on WeWork’s value-add to a building.

WeWork’s $47 Billion Dream 40

The companies’ joint building in Brooklyn, Dock 72, is a 675,000
square foot Class-A building. WeWork will occupy 222,000 sq
ft, while 35,000 sq ft of the building will be devoted to amenities
designed by WeWork, including a 13,000 sq ft food hall, a 15,000
sq ft wellness center, lounges, conference rooms, and a rooftop
conference center and event facility, among other amenities.

The building also will have its own app to assist in building
security, conference center booking, food deliveries, and
transportation updates. Powered by We offices for IBM and
Verizon have already been earmarked.

WeWork’s $47 Billion Dream 41

Concluding thoughts

To date, WeWork has proven two things. First, it can quickly expand
at scale, opening between 500K – 1M sqare feet per month. And
second, it can design spatially efficient offices in non-identical
locations, from brand new offices to spaces so old they were once
operated by the East India Company.

Both of these accomplishments rely on defensible strategic

advantages, namely, a control of the complete building lifecycle
and a mastery of data-informed design.

The cost savings WeWork can then pass on to corporate clients

are a massive accomplishment in technical efficiency, as well as a
compelling outsourced service. This makes WeWork’s Powered by
We a significant competitive business — so long as the company can
continue to deliver and improve on its technological capabilities.

WeWork’s enterprise business is vital to its long-term strategy.

If the company continues to add co-management deals that cater
to large corporates, it has a strong shot at living up to its sky-high
valuation. However, if enterprise growth stagnates, and it appears
that companies are using their WeWork partnerships more as a
marketing tool than an office solution, WeWork may stumble.

Moreover, WeWork’s accounting risk is still high. The company’s

short-term risk of default on its lease obligations seems low, but only
given the strength of its balance sheet and deep-pocketed investors.
Driving that risk down will likely require WeWork to limit the numbers
of new locations that are leased, as opposed to co-managed.

With all this in mind, if WeWork can continue to improve its

efficiencies in office design, the highly funded company could
create a new paradigm for enterprise real estate management.

WeWork’s $47 Billion Dream 42

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WeWork’s $47 Billion Dream 43