I could not sleep last night, and half woke up and started scrolling through my phone for an article I had seen.
(Note to self, stop using your phone as your all-around clock.)
This morning at the office, I couldn’t find the article.
I remembered many DON’Ts I’ve been writing about for the past couple of years:
(Also, Arianna Huffington name-checks Travis Kalanick. BINGO.)
As I searched for the article, I almost wondered if I had dreamt it.
Then, I re-found it: How did WeWork’s Adam Neumann turn office space with “community” into a $47 billion company? Not by sharing, by Reeves Wiedman at Intelligencer/NY Magazine.
The article kicks off with everything there is to dislike about so-called startup culture. Read through it, but you’ve seen most of it before.
What stands out is some solid financial journalism. It’s back of the envelope enough to be readable, and I mean that as a solid compliment.
And it states the obvious: the Emperor is buck-naked.
During the dot-com boom, a company called Regus became a stock-market darling by offering similar but much blander flexible offices. In 2000, Fast Company published a story about Regus titled “Office of the Future,” highlighting its efforts to bring “community” to the workplace. But the bubble burst and Regus went bankrupt. The company recovered and rebranded as IWG, but its existence presents another conundrum for WeWork. IWG currently has roughly 3,000 locations and 2.5 million customers worldwide, numbers that dwarf WeWork’s. IWG is profitable and now has a hipper, WeWork-ish offering. It is publicly traded and worth around $3 billion.
But many, too, have begun to wonder what can explain the $44 billion in valuation difference between WeWork and IWG. In a financial disclosure last year, when it was in the process of losing $1.9 billion to fund its growth, WeWork acknowledged, “We have a history of losses, and we may be unable to achieve profitability at a company level.”
Also, I bow down to Wiedeman for dissing “blitzscaling.”
Maybe business/tech media should cut out these star profiles about Visionary Founders, and take a hard look into blitzscaling itself. It doesn’t seem to build companies very effectively. (And — by design! — the process certainly is not efficient.)
However, if WeWork IPOs at anywhere much above $3 billion, what we’ll be seeing is that blitzscaling is starting to look, more and more, like a transparently effective way to create a financial asset.
One that uses the public markets to deliver outsized returns to early investors. In exchange for a crappy company. A company that may, or may not, be sustainable.
Creating a crappy asset in order to meet market demand for returns?
I updated this post on September 29, 2019, adding links and taking it outside the paywall.