Angel Networks · Angel investing

WSJ points out WeWork is overvalued. Agree or disagree and what could be the impact for startups?

Whitney MPA Founder & Director at Hello, My Name is KING, Inc.

October 20th, 2017

Yesterday there was a really interesting article published on the WSJ talking about how WeWork has been able to push its valuation over $20B by staying away from labeling their business as a real estate play towards investors.

From reading the article it appears that WeWork is not being valued by its investors as an office rental company. It's made the case that it is a business services marketplace, selling vendors' insurance and HR and legal and servers to as large as swath of the small business sector as it can grab with its fancy offices. It wants to own the app store for enterprise services.

For those of you not familiar with WeWork, they are a company that provides a coworking space for startups and larger companies where there is only a lease that renews on a monthly basis which gives a ton of flexibility if you need to scale up or scale down your operation quickly.

What are your thoughts on this? How could this impact valuations for other startups if it is proven that WeWork is not much more than a real estate play?

Look forward to a healthy discussion.

David M

October 24th, 2017

I looked up the website. know..the first thing I think of when I wake up in the morning is “ I really need to have a cheese tasting to be creative and entrepreneurial.” Always amazes me when companies market the most pointless amenities, like a company dog you can pet or a snack bar. Yes…you are underpaying your employees by $20k a year but free snacks…that makes up for it.

This company advertises as basically a real estate or rent finder but it certainly has the approach of catering to entrepreneurs…connecting again at the free coffee bar or seat you rent for $250 a month ! haa.

I think incubators in the true sense can be highly valuable but We Work is most definitely not one of those. These are realtors in half disguise, which is fine.

The problem is true incubators are few and far between. A $20B valuation that represented WeWork as an entrepreneurial economic activity driver would mean that WW is creating economic activity beyond itself. Some will say “But people are buying and selling their stock and making money..they spend that in the economy.” Yes from one viewpoint. But one would really need to look at the economic impact of their 237 offices throughout the world. I cant imagine any where near $20B as a proper valuation. Not to mention what they do is easily copied. BUT they could emerge as the leader in their space and excel like a LinkedIN.

I just get the impression they are using the entrepreneur cloak to try to come across as something hip and cool when in reality they are mainly a glorified apartment finder for businesses. Having a fancy office does not make one an entrepreneur and attending cheese tastings surely does not. And while collaboration and encouragement of other entrepreneurs can be helpful, if you are paying $250 so you can sit at a table you could sit at for free at an entrepreneur ya probably need to consider researching bootstrapping and the word lean.

One can connect to anyone via the internet so I’m not really seeing the value in that or paying their ridiculous rent for a seat at a table or a fake office that makes an entrepreneur feel like they are successful. Years ago, after Steve Jobs passed away, I watched his memorial service at Apple. I was really moved with Bill Campbell’s speech, the late former Director of the Board for Apple and Jobs right hand man from the early days of Apple. I sent Mr. Campbell an email, mentioned some mutual colleagues in the same circle, and told him I regretted that my path never crossed with Mr. Jobs, but I would like to connect with him as I appreciated his candor and approach. Relationship established. I didn’t need a hip office or other “serial” entrepreneurs running around regurgitating the latest quotes by Guy Kawasaki.

I know of some of the heads of these “entrepreneur spaces.” They are self proclaimed serial entrepreneurs, many of them. (key words self proclaimed). Their daddy or grand daddy had some prominent position and they run around their city pretending they are the go to for all things entrepreneur. Real estate is a form of entrepreneurship, and if they can convince people that a shared space in a clicky “Hip” atmosphere satisfies a “pain” then go for it. They are selling, and people are buying. And it is a community no different than a star bucks coffee shop or a university class room, which is nothing more than a business as well.

BUT whenever I see these kinds of businesses, I want to see real numbers. What are the success stories. How is this business driving success other than its own. What is the long term economic impact of these offices across the country? Without that, “Pixe Dust” is a pretty accurate word usage. The valuation is definitely inflated presently, though perhaps it lives up to it in time. As for it hurting future start ups….not any more or less than any valuation that proves ridiculous and implodes in the long run. Happens all the time.

Frank Cottle Chairman & CEO - Alliance Business Centers Network group of companies

October 24th, 2017

In my view, it's a total real estate play. Look at where they make their's "rent"....

Drew Prescott Solutions Architect - Always the 5th man in small growing teams.

October 24th, 2017

I went into one the other day, nearly empty. It looks great and has the feel and the type of people you would expect. Like someone else said, I think it's a real estate play.

One thing in their advantage is the growth in the freelancer economy.