WeWork owner The We Company, valued at $47 billion in its January funding round, is expected to unveil its finances to the public as it gears up for an initial public offering. It’s a huge moment for the coworking industry, given WeWork’s explosive growth and massive valuation.
Competitors and investors in the coworking space will be combing through WeWork’s S-1 filing once it hits to understand more about the company, and they told us exactly what they would be looking for. WeWork has already released limited financial information — it lost nearly $2 billion last year — so the question will be if there’s any clear path to profitability.
Venky Ganesan, partner, Menlo Ventures
“I’m going to look at the churn rate of their contracts, how often are people staying and leaving, the size of their customer base, and the density of how they’re packing people in. The WeWork model relies on density … I think the WeWork model is not based on 200 to 250 square feet per person, but 100 square feet per person.
“[I’m] trying to look for how many big cities there are, and city-by-city staffing information … Can the WeWork model go from big cities and tech hubs to the suburbs? What is their non-lease revenue? Eventually for WeWork to make this all work, they’ll need to charge something more than their lease.”
Ganesan, whose venture-capital firm has funded Breather, called WeWork’s latest advance toward public markets a watershed moment.
“Commercial real estate will be changed forever.”
Zach Aarons, cofounder of the real-estate venture-capital firm MetaProp and WeWork investor
“WeWork has recently made a big push to the enterprise side of the business. You’d want to look at how is that revenue trending as it relates to the more traditional business model … If the offering is successful, it’s going to be a great indicator for the industry as a whole. I think you would expect more of them from smaller competitors, whether that’s going to be Industrious or whomever is next.”
WeWork is trying to ink more deals with Fortune 500 companies, rather than sell coworking memberships — a higher-risk business — to people and startups. WeWork has said it wants to grow what it calls “enterprise memberships” with companies including Microsoft, BlackRock, Salesforce, and Adidas.
WeWork started targeting these companies just over two years ago, in a push led by Michael Gross, the company’s vice chairman. About 40% of WeWork’s memberships fit that category in the first quarter of the year, compared with 21% in the first quarter of 2017.
Yaron Kopel, founder of the flexible-meeting-space provider Meet in Place
“I’m looking for occupancy and real-estate deals made with different landlords … More and more landlords are open and thinking of the potential” of flexible office options, he said.
“It’s really interesting to see and follow all this data. WeWork is the first innovative real-estate company that’s going to IPO. I’m sure more will follow in the future.”
Ryan Simonetti, cofounder and CEO of the space provider Convene
“We’re most interested in seeing how the public-equity markets value the business. What are the metrics that they’re looking at? … What are the key metrics that really drive value?”
Simonetti’s Brookfield-backed company, Convene, focuses more on meeting and event spaces, with about 20% of the space going to workplace outsourcing.
He said WeWork going public would mark “a huge moment for the entire real-estate industry,” validating the change from traditional long-term office leases to new ways of offering space.
Jamie Hodari, cofounder and CEO of the office-space provider Industrious
“I’m personally very excited about the fact that they’re IPO-ing … the fact that robust metrics about the industry will be available will help customers better understand the dynamics of our industry, what good looks like, what’s sustainable, what’s not sustainable.
“Even a year or two ago, people were saying ‘Is this a trend, is this not a trend? Are they just selling ping-pong tables or beer on tap?'”
Hodari will be focusing his attention on WeWork’s basic economics. He’s mostly interested in comparing “lease liabilities and overall unit performance” over time. Industrious has moved their model toward partnerships with landlords and away from traditional leases.
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