We Company, the flexible office space provider until recently known as WeWork, is set to go public in the weeks ahead. This is one of the most hotly-anticipated IPOs in recent history. It has its critics, but I believe that its founders have created a remarkable company worthy of its $47 billion valuations.
We was founded by Adam Neumann and Miguel McKelvey in 2010. In the ashes of the financial crisis, they saw a golden opportunity within near-empty office buildings. They sub-divided large office blocks into smaller units that were rented to those requiring easily adjustable office space sizes. For this convenience – and the beer on tap – they were able to charge elevated rents.
In essence, they bought in bulk and sold in premium. It’s a simple and brilliant idea.
Leading up to their IPO, it’s popular on chat rooms to criticize We, but the company is truly worthy of the title ‘Unicorn’.
Let’s start with the obvious fact that some people challenge whether the company is worth a valuation multiple of a tech company and whether Adam and Miguel are worthy of a net-worth reaching over $7 billion.
But the co-founders of companies like Uber, Airbnb, and Pinterest, all took relatively simple concepts – finding a ride, booking a place to stay, sharing a recipe or hairstyle of interest, online – and used technology to leverage these ideas into billion-dollar operations that have made them incredibly rich in the process. The proof is in the hundreds of thousands of people lining-up to rent spaces from We.
Of course, the biggest criticism is whether We can stem the red ink and withstand a recession. Yes,
We lost $2 billion in 2018, but people forget that companies like Facebook and Amazon lost breathtaking levels of dollars in their early days. As Reid Hoffman writes in Blitzscaling, this is the new rule of doing business in an age when an idea is the greatest commodity and can be copied by others, until you reach a point of market dominance.
As for a recession, certainly, CFOs of well-known companies that use WeWork as a valve for temporary staff will plan to double-down on WeWork because the flex office use system allows them to better manage cash flow. A recession may provide pain for one-year, but it will quicken the transition to We’s model of agile office structure.
Much has been written lately about Adam Neumann, in preparing for the IPO, having established a new structure that will specifically benefit the founders of the company far more than any other investors. Fortune summarized the scheme, saying: “The upshot is that Neumann and other insiders with direct stakes in the LLC would pay taxes on profits at individual income tax rates, while IPO investors would pay both US taxes on corporate profits and individual taxes on any dividends.”
But can you blame Neumann for wanting to avoid writing such an out-sided check to Uncle Sam? Neumann is already famously giving away money to help causes – over $1billion dollars to charity.
We has been criticized for some of its labor practices of cleaning staff. But it’s the same with Uber and Airbnb that have come under scrutiny from left-leaning commentators for expanding into markets without the consent of local governments.
The We reality is far less concerning than similar shared-services companies, such as Uber which has been blamed for erasing thousands of decent-paying jobs and wiping out the retirement life-savings of drivers who worked for years to purchase a regulated taxi license or medallion. The simple truth is that in our gig economic many pieces of legislation are out of date, and it requires companies working to evolve local laws.
Today the greatest entrepreneurs are rewarded dis-proportionally for their ideas, as technology has the ability to turn people into billionaires almost overnight. These entrepreneurs are using their innovation and wallets to solve the world’s problems, and they should be admired for their entrepreneurial spirit.
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