I readThe Cult of WebyEliot Brown & Maureen FarrellonSep 26th, 2021


We all kind of observing how the WeWork rocket crashed down to the earth, and burned in the IPO fiasco; notably:

  • WeWork publicly filed its IPO paperwork on August 14 2019, then delayed on September 2019.
  • WeWork paid its CEO, Adam Neumann $5.9M to use We trademark. It got backfired once disclosed in S-1, Adam eventually returned the payment on September 4, 2019.
  • WeWork cut its valuation from $42B to $10B on September 13 2019.
  • Adam Neumann stepped down as CEO on September 24 2019, walked away with $1.7B payout.
  • WeWork new Co-CEOs, Artie Minson and Sebastian Gunningham officially canceled the IPO plans on September 30, 2019.

It is no better words to summarize in the book The Cult of We:

WeWork’s CEO, Adam Neumann, raised too much money, set expectations too high, partied too hard, and, ultimately, flew far too close to the sun.

In the retrospect, WeWork’s business model, buy bulk then sell retail, is not new. Mark Dixon had founded Regus to provide flexible office space in 1989. Thought WeWork was valued fifty times its revenue in 2015, while Regus was valued at less than two times its revenue. The key difference is the storytelling.

Adam Neumann is tall(6 ft 5 in), and good-looking1. Michael Eisenberg, the investor commented Adam one of best salesman he’d ever met. Adam’s amplified energy and determination helped him to secure the seeding investment with only a scrappy business plan.

WeWork never had a clear definition of its core business, its community-centric narrative was mere a hype. But this did not stop Neumann to raise funds from venture capitals, mutual funds, and SoftBank. SoftBanks’s CEO, Masayoshi Son was famous for its king-maker strategy: pour massive capitals for blitzscaling growth in order to capture the market quickly. In their vision, the property management fund, ARK would comprise three pillars, WeWork, property management, and service; each was worth $10T.

There were many red flags about the malfunctioned company:

  • Excessive spending. The cost grew in faster pace than the revenue growth. The projected economics scale did not show due to lack of operation excellence.
  • Lack of scrutiny. Neumann owned majority of voting power, were also the chairman of the board.
  • Nepotism. Many senior leaders came from tight-knitted circles of Neumanns.
  • Conflicted interest. Neumann leased properties he owned partially to WeWork. He hired a dedicated law firm to negotiate pay and other clauses in 2019 SoftBank buyback, which went busted as the wind shifted in the stock market.
  • Hypercriticism. WeWork banned all meat company-wide for environment concerns, then spent $65M on Gulfstream private jet.
  • Lack of focus. The M&A, such as Meetup.com had no clear focus.
  • Flamboyant culture. It was common to circulate alcohol in the office, weeds in the business travel.

Closing thought

The epic failure of WeWork is a canonical example how excessive capitals chased the hockey stick growth disregard the profitability, even validation of the product/market fit.

  1. Adam’s sister, Adi Neumann is a professional model. Adam also considered modelling profession in his early life.