Five years ago, the sharing economy was a concept. Today, it is a gigantic industry that’s fast growing. A few pioneers have become household names, they are WeWork, Airbnb and Uber. The valuations of three darlings have already reached $84 billion in total: WeWork($10B), Airbnb($24B) and Uber($50B). And guess what, their names can be abbreviated into: WAU! (WOW!), astonishing!
Today, I’ll share some numbers and thoughts about WeWork!
Wework, founded in 2010 by Adam Neumann, is a New York based provider of shared office space to small companies and technology startups. Here is WeWork’s funding history(according to CB Insights data):
The latest round of financing was $400 million at a $10 billion valuation, doubling the valuation in just 6 months. As of last December, WeWork was valued at $5 billion. The current valuation equals100 times its operating income, whereas many office landlords trade at about 20 times earnings. Currently WeWork operates at 35 locations in the US (with 16 in New York), and 7 locations overseas. According to WeWork, it is planning to expand to 60 locations this year, effectively meaning that after the expansion, each of these locations is“worth” about $170 million. How come? Are they just renting. High? Low? Or Average?
News said that “Fidelity Management & Research Co. and existing investors have pumped $400 million of capital into WeWork Companies Inc.”. I particularly like the verb “PUMP“, showing how eager investors were to put money into WeWork.
WeWork plays a game of arbitrage: it rents office space at one price, and then leases it out to smaller companies that pay much higher rates. So the key to growth is the growing number of small companies, mainly startups. In today’s economy, the company is doing quite well, but what if the economy goes bad? Will the demand go down because companies closedown? Or will the demand go up when more people get laid off and start companies or become freelancers?
Please leave a comment if you have some thoughts about WeWork’s valuation.
Alumvest 