The We Work Fallout

We Work was symptomatic of venture capital funded companies that tiptoed to the public markets with no profits to feed the beast.

In the case of We Work, the market finally woke up and said, “Hey, you don’t even have a plan to become profitable. Get outta here.”

We Work was further punished for the behavior of its leader, the inimitable Adam Neumann, who was treated to a  hubris-crushing cure that resulted in his departure (though anybody who gets bought out with a more than a billion dollar send off will get no sympathy in the Big Red Car’s book, sorry).

What has now taken root is the quaint notion that companies — even before going to the beauty parlor to get primped for an IPO — are going to have to be within earshot of being profitable.

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We Work — What Did We Learn?

I have been a skeptical voice on We Work since the beginning — meaning since I read their S-1, understood their business model, and learned about Adam Neumann, who I accused of being a toxic force on the company as a leader and a manager.

This was long before the guy got fired. Never liked him. Thought he was a poseur. Real estate as a service, my ass.

What I am not skeptical about is the market for co-working spaces as a real estate product. I think they are good.

In my personal real estate career, we had some vacancy in a suburban mid-rise office building and converted it to what was then a co-working space. We used to use the term “office suites.” It turned out very well for us.

 1. We collected (earned) 2X the market rental after expensing all operating costs. Meaning when we added up the individual small office rentals, subtracted all the costs — we got twice the rent we would have gotten had we rented it to an arms length, independent third party.

 2. We sold the business, as an operating entity subject to a lease, to a third party, Regus.

 3. We got a solid tenant in Regus paying a slightly above market rent and did not have to spend a penny in tenant improvements.

This was back in the 1990s.

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We Work Obituary

I suppose it is obligatory to write an obituary for We Work given that we wrote about the company and its Initial Public Offering several times already.

On the final turn around the track to price and issue its Initial Public Offering stock to the public, the company “postponed” its IPO.

At the same time, they pulled the plug on their founder CEO, Adam Neumann for “high crimes and misdemeanors.” Wait, sorry. Got confused for a second.

Neumann “stepped down” and the lead investor, SoftBank through its Vision Fund, took action to right the sinking ship.

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The Cult of Personality and Adam Neumann of We (We Work)

Since time immemorial, American business has always revered the iconic startup leader whether it was John Davison Rockefeller, Sr — American business icon, considered the wealthiest American of all time, and a generous philanthropist; or, the Steve Jobs, Jeff Bezos, Bill Gates stories. Sam Walton was an iconic, successful businessman.

All have a “larger than life” nature to them. They fall into the category of the iconic American business billionaire. These folks, however, come with a full bag of positive and negative traits.

In the modern startup world, we have folks like Travis Kalanik, formerly of Uber, and, now Adam Neumann, of We (We Work).

What we are confronted with is the “cult of personality” wherein the business becomes synonymous with the leader or founder.

This can be good or bad.

In the case of Sam Walton, it is generally perceived as a positive thing. Folksy Old Sam was a gimme-cap-wearing, pickup-driving, Easy-Rider-rifle-rack-shotgun-owner, bird-hunting, bird-dog-loving man of the people from the heartland.

Walmart HQ never left Bentonville, Arkansas, and Bentonville never left Sam.

Sam Walton and his pickup truck at the beginning:

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