s the We Company the world’s biggest hyped unicorn or the most undervalued company ever?

Let’s Discuss.

WeWork is really a physical network company with multiple software businesses with a real estate component– stay with me on this. Who cares about the immediate cash flow, the impending recession/real estate collapse. If you can harness the power of 600,000+ members and offer more services and suck more dollars out their pocket you don’t need to be better, just here.

WeWork is a place where uber-cool, Millennials, and now full-fledged corporations can park their employees in fashionable and well-designed offices that stimulate interaction and foster community.

WeWork has changed the office leasing game, full stop.

Get ready for the next stage.

“Powered by We Software”

There is so much first order thinking on WeWork, it is all you ever hear. The comments are so superficial and just float on the surface: it’s only “coworking”, it’s trying for a tech valuation, it’s over-hyped in a recession it will crash – these are the same sentiments of people looking at Amazon in 1995, oh it “just sells books.” Now look at Amazon, who would have predicted that, the convergence of tech, shopping, retail, media and cloud services – all healing a painful user experience.

Raise your hand if you prime everything and order by barking into a little black tower. ✋

Let me do a quick tear down of a strategy: All Amazon does is acquire a customer and then sell as much to them as they can. They make it sticky, they add value, they get you hooked on an ease of use – eliminating all friction in the buying process.

We Company is going to do the same for businesses.

Can you imagine a world where a company could be “Powered by We?”

The We Company can be so much more.

We Companycould be the next Amazon, yes hear me out, don’t hate yet.

“Carpe vinum.” – Grab the Wine, we are going to need it.

WeCompany is a physical solution for the real world with a software layer that is going to lie on top – software built for all for small to medium businesses.

If the physical office space is the skeleton of the business the software will be the muscle, sinew and tendons to move the business forward.  This software will solve the same pain problems for small to medium business and allow them to focus on their core business. Imagine one bundled piece of software to help run a small to medium business.

This is the part where you start screaming at your phone – WeWork isn’t a software company!! Yes, you are right they are not yet! They just created the first step they physically solve the problem of space for these companies. Now they have 600,000 members on which to build their software layer.

Every small to medium business has the same pain points in running the business on a day to day level. They all use a cobbled together solution of various software, vendors, brokers and consultants to stitch together various internal and external processes.

Re-read the above statement 3 times. We Company can help these businesses.

Let that cognitive dissonance soak in.

Expect WeWork to start offering bundled services such as job search, human resources, payroll, skills training, cloud computing, venture capital as a service, healthcare, travel & accommodation, and corporate messaging.

Everyone underestimates the We Company, do so at your own peril – wait until they start expanding into software. Does any successful company just sell one product or service? No, they throw so much shit at the wall to get you to buy more.

“The most successful companies make the core progression—to first dominate a specific niche and then scale to adjacent markets” – Peter Thiel

There maybe someone in charge of strategy/targets at We Company, check these companies out and their valuation.

  • Workday (HR)                      2,100 customers – Market Cap: $43 Billion
  • TriNet (HR)                           8,900 customers – Market Cap: $4.5 Billion
  • Service Now (Cloud)          12,000 customer – Market Cap: $49.3 Billion

Hi, Software Companies – we are coming for you, Love We Company.

Using first-principal thinking, just apply some reasoning from the bottom up. We Company now has a giant customer base around the world. They have a unique insight into how small and medium sized business run and what pain points they face.

Now what other pain points can We Company solve and sell?

Now imagine this suite of software solutions deployed across the 600,000 WeWork members, great this will probably bring in a bunch of top line revenue.

Keep reasoning and apply first-principals.

Now imagine this software solution open to other businesses outside of WeWork members – pretty large total addressable market.

Their software marketplace could achieve network effects for many uses some of which are just vague ideas but starting to form.

There is a global arms race for talent in coding, machine learning, data scientist, robotics and artificial intelligence.

We Company can be at the forefront of training those employees, educating them and finding them jobs in the vast ecosystem of their members.

They acquired Flatiron School (full stack coding), Meetup.com (in-person networking), Managed by Q (office management) and Euclid (workplace insights).  In addition to other software companies, We Company will bundle these and offer them out a software solution to members and non-members. Slowly We will move from a rent-arbitrage business to a software suite.

Imagine a future where We Company tackles the following:

Physical Solutions:

  • Cool Office Space  ✅Solved
  •  Community/DNA  ✅Solved
  • In-person events    ✅Solved

Financial Solutions:

  • Venture Capital      ✅Solved – yet to scale though
  • Payroll                       Coming

Software Solutions:

  • Skills Training          ✅Solved – yet to scale though
  • Healthcare               Coming
  • Software Services  Coming
  • Communication      Coming

Businesses are like Galaxies swirling and forming and changing over time.  Galaxies don’t arrive fully formed they start as cosmic dust bunnies and whirl around for a few billion years.

New businesses are like the same cosmic crap starting to lump together and forming rocks and planets. Right now, We Company is a lump of iron spinning around slowly taking shape.

I digress, but now that the room is spinning let’s do a little thought experiment.

Let’s try some second order thinkingfor once in your life, stay with me here – pretend you have a time machine and go to the future – 1 year, 5 years or 20 years out- what’s We Company going to look like then?

Come on, hop into my DeLorean Marty…

Real Estate Alligator

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Currently in 111 large cities around the world and growing to a target of 280

Everyone is doom and gloom during a recession saying WeWork will collapse. Will it?

Real estate is a weapon and an asset WeWork can leverage several ways.

Let’s use this example, Wework leases 200,000 from you in Chicago they pay you $40 per square foot (psf) today or $8 million a year. Assume it costs $15 psf to operate the building so as the owner are making $25 psf in net income before paying the mortgage. So you as the landlord take out a $54 million mortgage (65% leveraged) against that value of $83 million (Value = $5 million NOI / 6% cap)

The shit the hits the fan the market collapses and rents pummel like it 2007 again now the new market rents are $25 psf.

Now your loan is due or worse it’s time to renegotiate the lease. Should you renegotiate or spend a few million re-tenanting the building and sit empty for a year? The new lower market rent doesn’t give you a enough to pay your loan costs.

Uh Oh – WeWork has you by the short hairs. ???

We-Fucked-up: it’s Latin for no way out of this mess.

That’s how you make money in real estate – you buy when no one else is and there is blood in the street.

Expect WeWork to own 20% of these locations or 50+ Prime Class A office buildings worldwide in the best global cities.  This could be 10-30 million square of space, making We one of the largest landlords in the world.

Landlords who lease to WeWork don’t realize it yet in a down-market they don’t own the buildings, WeWork does.

It is a stealthy real estate alligator, lurking in the shallow water just waiting to snap at the right time. ?

Growing a Business, Network Effects, DNA and Culture

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It’s hard to start a business – just the mechanics, renting space, getting employees, building out infrastructure and slinging whatever you are creating.

Reid Hoffman says a startup is like jumping off a cliff and building a plane on the way down. WeWork doesn’t change that experience, nothing will, it’s always a challenge, but WeWork will give you access to better tools and more wingspan, but flap god damn it, FLAP!!!

There are all these cool features of WeWork no one talks about but are insanely helpful. They have a giant internal directory – a network- you post a need for marketing services, SEO or legal and ?immediately you can get qualified people answering you and offering their services at great prices – worldwide – all member of WeWork. There is a sense of trust or implied “don’t fuck this person over” in the network because you are in a type of club. How do you do that currently? You mine your network and hope to get a qualified person. You post on LinkedIn and hope someone answers. All in-efficient ways. Imagine WeWork opening this network to the public – It’s UpWork + LinkedIn in one place. It’s a job board to find new opportunities, it’s a contract work venue and a way to make new contacts.

DNA, the incredible software that runs us, is lacking in most businesses. Most companies are just shitty aggregations of people with competing vectors moving in different directions trying to service some legacy clients.

WeWork is like CRISPR for business – you hang around and your company can get DNA inserted into it, you can rally around a motto – hustle harder– assemble, test, flap!, FLAP HARDER!

You can meet interesting people, run ideas by them, test a hypothesis, start a beta, get insight or find a mentor.  These iterations are soft interactions, lightly coordinated, available to all.  The speed, the nexus of interactions and attitude form the amino acids of young company DNA.

Every Monday at 57thStreet and Lexington Ave WeWork serves bagels for the entire floor and my friend who is standing in line meets a woman is raising money for what will be a billion-dollar company.  You aren’t going to do that at Regus or anywhere else. WeWork creates a physical venue where you can interact.

I met some really great people at WeWork, smart, engaging and hustling to grow their businesses. The energy was great, it was productive and uplifting. You can barf at that last statement but anyone in business knows positive energy is what gets you through the tough days. Einstein said it best: Everything is energy and that’s all there is to it.   Or Maybe it’s Pixie dust that gives WeWork that vibe, either way WeWork has it by the boatloads.

Venture Capital Elephant

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WeWork will be Y Combinator on steroids and will up-end the venture capital space on how startups get funded.  WeWork will be a elephant of in the Venture Capital sector and eventually all the current VCs will be flies buzzing around piles of elephant shit as WeWork dominates this eco-system.

The venture capital model will be dead in five years, say goodbye to: pitching a VC over coffee, “building a relationship” with a VC fund, the slow death of “let’s revisit this next year”, following every nonsense koan VC tweet – all bad moves akin to drinking scotch and smoking cigarettes during business hours. One day we all will look back on this and cringe.

The new model of Venture Capital distribution will be fast, responsive, helpful, resourceful and in direct proximity to the entrepreneur.

Welcome to WeLabs.

The majority of global startups will be in WeWork, when they need capital they will be able to walk down a hallway and pitch the Overlord of Capital – WeWork. Why should some twenty something founder pitch a 50 year-old VC who doesn’t even use datasets in his analysis, his main source of good ideas is riding the slipstream of bigger VC like Sequoia or Draper or hyping the latest “____ as-a-service” lingo.

WeWork can place more bets on a global scale on “return the fund” opportunities. The big VCs, Sequoia and Khosla have $4-8 Billion funds, and will be miniscule when WeWork could ramp up to a $30-$50 Billion fund.  WeWord can set up Seeds Funds, A Rounds, B Rounds and keep scaling as their portfolio companies grow.  The VCs have no value proposition but “we have capital.”  Where is an entrepreneur going to: a group with just “capital” or WeWork where you can plug into a giant ecosystem and find talent, space, clients, capital and support.

Where there is a smart entrepreneur in Brussels, Mexico City or Mumbai they all can connect and collaborate at a WeWork in Austin– and get funded. WeWork can analyze the global startup space better, see more opportunities and ride big trend waves all using in-house data. Now imagine when Softbank plugs into that matrix of startups as they gestate and WeWork gives birth to mini-unicorns. Yup.  ?VCs

Education, Children and Future Skills

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WeWork has already taken the pain out of opening and running an office, which is the equivalent of crawling through a Shawshank style pipe of shit.

I think they can do that for education in a revolutionary way. There is no hiding the fact that the education system today doesn’t prepare students for the real world, it’s a factory based on a 100 year-old teaching curriculum.

When was the last time you used trigonometry in your career or needed to know which land Cortez invaded, was it Mexico or Idaho? Who gives a shit?

The school system is one size fits all system designed to teach to the median. Every square peg is to be hammered into a round hole.  WeWork understands this is broken and will offer a different vision on how to educate students and get them on a path to a career.

Let’s get smart on WeGrow.

But wait, STOP!  What does WeWork know about education?

Here is what they do know the current offerings are horrible. If you live in NYC you compete to get your child into a school that costs $50,000/year so they get the privilege of playing with blocks or gluing cotton balls on a piece of paper and calling it a fish. Forget about the public schools– not going there. If you live anywhere else in the US you do something similar but the costs are slightly lower. We all see there is not much inflation in consumer goods because it’s all hiding in education!

Sit back, relax and close your eyes and imagine a work where you are bringing your children from you home to your WeWork office and you are dropping them off a their WeGrow school at the base of the building. Imagine a world where it’s 20-40% cheaper than private school, the quality of education is better and the skills they learn are appropriate for the future job market. Are you telling me you aren’t going to send your children there?

It’s a gangster move, fix a shitty real estate experience, then fix a shitty school experience, house them in one building and drop your kids off as you head to the office. The tuition cost is under private school and BOOM! Suck up more consumer dollars.

The urban Millennials will have kids – eventually, maybe later in life if they ever figure out the high cost of urban living (let’s leave WeLive discussion to another post for now).

WeGrow will be one giant interconnected global education system. Imagine you want to go to London with your family for a business opportunity that will last two years, eventually you are coming back to NYC. But in the meantime, you want to plug seamless into a school – where are you going to go? ?WeGrow

I’m predicting WeGrow will become a global 1 Million student education system. Estimate 100 big cities with 1,000 students per location. Pricing around $30,000/year per student or $30 Billion run-rate business.

Corporate Structure, Adam and Slinging a Superior Product

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For fuck’s sake I wish every reporter who saw the S-1 would stop posting the We Company shareholder chart and complaining about his wife or relatives who works there.

Have you ever tried working with your spouse? Yea I thought so. They should get a Nobel prize for holding that shit together. ?

Everyone online is complaining about Adam’s borrowing habits, his line of credit, might as well complain about what type of hair gel he uses and is he Bounty paper or Scott paper towel type of guy.

Shut. The. Fuck. Up.

When Adam takes a dump in the morning, he leaves more good ideas behind than an average mortal has in their lifetime. This guy has a VISION and he is riding giant global trends that will push him to even higher heights – WeWork Moon, Mars perhaps?

Adam is the Frank Lucas of American Gangsters, he is focused on one big thing, building out his distribution network, giving you little sneak peeks on his future moves but not laying it out too much, just posting up on various interesting street corners. He has a fanatical approach to getting his customers hooked on his superior product.  He is going global into steamy jungles, cutting out middleman and eventually he is going to own the whole damn business.

I’m not a ‘Business-Man’!
I’m a Business… man!
Let me handle my business, damn!
– Jay-Z

Did you really think Adam is stopping at just co-working??

Let’s get Woke…..

Here

Now on this planet….

At this very moment ????

They have a strongest castle, sitting up there in the tall tower with a neon sign blinking “hustle hardest” and sipping cucumber infused water, they can see 360 degrees around and all around them is One Fucking Big Moat.

OFBM – One Fucking Big Moat

??️ ⚔️

Moats the greatest protection a company has. The We Company moat is massive, just replicating a portfolio of their scale is a giant capital suck.

The best distillation of why no one will cross the We Company moat for a long time is capital, this is an incredibly capital-intensive business. There will always be some people barbarian at the outer rim of the moat but no will seriously be able to get across and scale a wall.

Let’s assume someone tried to cross the moat and spend the capital to grow a large scale co-working company, they still have to wrestle with the We brand recognition and We economies of scale.

Let’s assume you want to try to catch up. Then what you are competing on? Price?

The We Company value proposition will get even better.

Right now, everyone is all jumbled up together in coworking, media guys next to tech startup, beverage brand on one side and an SEO optimizer on one side.

Get ready for the next wave of coworking as it niches down by sectors, imagine entire buildings devoted to artificial intelligence, machine learning, marketing, data-mining, health-tech, cyber security, private equity, defense or fintech. They already invested in a woman only coworking company so follow the trends, ask yourself what are other future scenarios that could form here. This is easy concept for WeWork to think through, to market, turn on and lease up.  Just start with one or two floors in a building and blow it out as a hub for fintech, pop a WeLab rep in a cube and off they go. Prospective fintech disruptors tour the space of course they are going to lease, you need capital, great! How about we set you up with Bank of America to test your fintech beta. Cue central casting Bank of America guy sitting there in his suit looking for good ideas. All of corporate America is concerned someone is going flip their business upside down so go they will all go in-house find the next best ideas.

The nexus of new ideas, rapid execution and wide distribution will get tighter, the spaces between each will shrink quickly and the We Company value proposition will increase even higher.  The Big fish follow the little fish. The value becomes even greater to large corporations that want to tap into that pool of ideas, growth and differential thinking.

Niche coworking is like adding alligators to a moat!

How is a competing co-working company going to handle that? Offer space at $2 per square foot cheaper or fresher lemonade with a twist of ginger? Throw in daily Millennial bait – avocado toast and maybe they will relocate?

Global Forces, Jobs & Future of Work

If global demographics had a television show it would be XXXX. Across the word people are moving to cities, by 2050 it’s predicted 68% of the population will lives in cities. By 2030, the world is projected to have 43 megacities with more than 10 million inhabitants, most of them in developing regions.

The cities will have tech jobs, coding jobs and everything in-between. Companies in all these major cities will need office space, scalable solutions to find, train and house their employees.

The jobs of tomorrow will be different than what exists today, in a way each company will have to become a technology company, able to analyze data sets, see patterns, extrapolate potential solutions and develop processes.

These global forces and big trends will continue to push the We Company proposition higher. They are in a unique position to service the needs of urban global companies.

In Summary

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In Summary, Hamlet said it best “Weknow what we are, but know not what Wemay be” – the future is bright and shiny for the We Company. I’m sure they are working on ideas to expand into many sectors and disrupt a variety of crappy experiences. Some ideas will suck and die and some will take flight.  The WeSail idea sounded horrible but maybe there is a WeSmoke idea coming…hmmm. They are slowly building one giant global vacuum to suck up cash by relieving pain and offering a better experience for businesses.

Full Disclosure, just because I have always wanted to write that in a semi-ironic way.

I have no idea whether what I am predicting will happen or not, I don’t work for We Company and have never been employed there and never got laid while working out there.

After reading this entire post your brains are probably like scrambled eggs and you need to take a piss. Or you are pissing in your scrambled eggs.

Hopefully you are confused now and in that state of being where new ideas are smashing into your old assumptions and you are investing mental effort in figuring out the mashup.

I set out to inspire, present and launch into your brain a different vision of the future of WeCompany.

To show you a potential future reality.

Could We Company actual become a tech company?

As you step out my DeLorean let me leave you with a parting slap in the face.  I have had the unique experience of being in a WeWork and at a competitor and experienced it first hand, which is more than I can say for all the haters – err I mean writers out there who are ripping info from an S-1 and re-barfing what they digested from some second-rate tech blogs.

Only time will tell who was right and who was wrong and in the meantime in the words of the immortal Biggie Smalls:

“Even when I was wrong, I got my point across.”

 

No alt text provided for this image

 

Stan Conway

stan@founders-cap.com

PS You made to the end of the post. Congrats and Thanks for reading!

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