Entrepreneurs and freelancers were enamored with it and so were investors. For a while it seemed like the next big thing.
WeWork, the U.S. company that popularized co-working spaces, shot to fame shortly after launching in New York in 2010. The business model seemed simple enough – lease office space, subdivide it and create hip, modern common areas for members (mostly millenials) to mingle.
It was the antithesis of the 1980s and ’90s office environment, and WeWork co- founder Adam Neumann expanded the concept at a dizzying speed.
Within the first four years, hundreds of locations around the world (including several in Canada) were launched and by 2019 the company was valued at $47 billion – that is, until cracks began to appear.
The story of WeWork’s spectacular rise and fall and its 30-something Israeli-born charismatic leader is the subject of a new documentary, which screened at Toronto’s Hot Docs Film Festival this year. WeWork: Or the Making and Breaking of a $47 Billion Unicorn (directed and executive produced by Academy Award nominated filmmaker Jed Rothstein) takes viewers behind the scenes through interviews with WeWork employees, financial analysts and journalists.
We learn how Neumann, described alternatively as messianic, visionary and ingenious, was handed billions of dollars from eager investors. Enthusiasm was high for finding the next big start-up on the scale of Facebook or Uber.
While Neumann boasted to one media outlet after another of the company’s growing success, former WeWork product manager Joanna Strange said she witnessed “a lot of chaos” and “lack of organization.”
One interesting revelation that all was not well came from a former WeWork member, Justin Zhen. His business would index and crawl public information from the web and when their bots just happened to add WeWork into their list of companies, it found something surprising.
WeWork had portrayed itself as a rapidly growing company and maintained that once people joined as members they tended not to leave. But using data available on the public web, Zhen discovered the opposite – the trend to join and then leave had actually accelerated. He also found that while WeWork called itself a technology company, no one ever used its internal social network.
Zhen’s company wrote a blog post sharing their findings. Yet WeWork kept raising money.
While Neumann was painting a rosy picture of the company’s financial health, Strange said she discovered one of Neumann’s emails that indicated the company was actually hemorrhaging money and as a result had plans for layoffs.
She said she leaked the information to the media, but nothing happened. As WeWork was a private company (not listed on the stock exchange) it was hard for outsiders to verify the true state of affairs.
Scott Galloway, professor of marketing at NYU Stern School of Business, said he believed WeWork started inventing its own financial metrics. He looked at the buildings WeWork had their facilities in and determined that the 200 buildings were worth less than what WeWork office was valued at (WeWork office value of $104.5 million compared to the building value of $54.7 million in 2017). He concluded that WeWork was the most overvalued private company in the world.
The co-author of the Cult of We, Maureen Farrell found it “mind boggling” that as company losses got larger, investors in the private market kept bidding up the price of WeWork (up to $45 billion in 2018).
According to some industry watchers, WeWork was apparently going through $100 million a week and Neumann was running the company as if he had unlimited resources, the film states.
Cracks began to appear when WeWork’s largest investor, Japan’s Masayoshi Son of SoftBank, who had previously given Neumann $4 billion to grow the business, said he would not continue financially supporting WeWork.
Concerns were mounting. Neumann was apparently buying buildings and then asking WeWork to lease them from him, then took $700 million out of company at the very time he was asking the public to put money into it.
The film details how the company’s $47-billion valuation dropped to $10 billion and there were plans to lay off up to 6,000 employees.
By September 2019, news came that Neumann was stepping down as CEO due in large part to the backlash during the initial public offering process.
Some employees interviewed in the film expressed feeling disillusioned. One even sought therapy and said, “a mind trick was played on a lot of us.”
As for Neumann, news reports said he walked away with more than a billion dollars. He and his wife Rebekah live in one of their multiple homes in the New York area.
The documentary is currently only available on Hulu in the U.S.
Diane Slawych is a contributing writer for REM.
