What are the 'five lessons' from WeWork, which has experienced rare successes and failures in history?


Phillip Pessar

Founded in 2010, WeWork has grown rapidly with a New York-based business that provides coworking spaces for entrepreneurs and freelancers, with a corporate value of $ 47 billion in 2019. It has reached 100 million yen). However, in the same year, a problem such as fraudulent accounting was discovered and the listing application was withdrawn, and after the corporate restructuring with the support of the largest shareholder Softbank Group, the company was listed in October 2021 two years later, but the corporate value was achieved. Is only about 9 billion dollars (about 1 trillion yen). Francesco Perticarari, who became a WeWork employee in 2019, explains the 'five lessons' from WeWork, which played the epic ups and downs rarely seen in history.

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From its founding in 2010 to the time of writing the article, WeWork has been ups and downs like a roller coaster. Many people failed to list in 2019 and fraudulent accounting came to light, and WeWork, which recorded a profit and loss of 2.98 billion dollars (about 340 billion yen) in the first half of 2021, `` a big failure You might say, 'but it's still less than half of its heyday, but it's still worth $ 9 billion.

Perticarari, who actually worked at WeWork, was recommended by a friend a few months ago to a book called 'Billion Dollar Loser ' that featured former WeWork CEO Adam Neumann. .. It seems that the content of the book was to clarify the facts of Mr. Newman who wielded power in a company called WeWork and went in the wrong direction, but as he read it, Mr. Perticarari became a neutral stance, WeWork and Newman. He states that he had the idea that some of the things he achieved were worthy of respect.

So Perticarari cites the following five lessons learned from WeWork:

◆ 1: Accept uncertainty and failure
Mr. Newman ran a children's clothing company called Krawlers before WeWork, and he worked to the limit to concentrate on the business, but unfortunately Krawlers failed. WeWork co-founder

Miguel McKelby also said he had some success in launching a website for learning English, but he didn't have a bigger vision and remained a profitable SME. matter. Unable to inspire creativity, McKelby sells his stake and decides to start a new business with Newman, who he meets soon.

In 2008, the two decided to enter the real estate sector and partnered with a landlord to launch a company called Green Desk, which turns empty tenants into coworking spaces, with some success. However, after that, they thought that it would not be possible to grow into a $ 1 billion business in this direction, and they sold GreenDesk, and WeWork based on the profit from the sale and the funds raised from investors. Was founded. Perticarari pointed out that the success of Green Desk gave the two people experience and confidence, and at one point created WeWork with a $ 47 billion corporate value.

According to a study by Ali Tamaseb, author of the book Super Founders , which focuses on the founders of large companies, the founders who have had little success with the startups they launched earlier are: The probability that the valuation will reach $ 1 billion at the next startup was three times higher than the person who founded the startup for the first time. Tamaseb doesn't know how many startups will be successful, but he argues that it's important to keep building the business until you're lucky.

Starting up a startup can be a daunting task, and it's difficult to accept the uncertainties of success or failure and the risk of failure. But Perticarari says Newman and McKelby were able to make a big success at WeWork by accepting this uncertainty and moving forward. In addition, Mr. Newman has won a big victory by having a strong intention in the fund raising round, and in 2013, he was funded by Goldman Sachs at a valuation of 220 million dollars (about 22 billion yen). There was an offer to offer it, but Mr. Newman declined the offer and continued to work, eventually succeeding in earning a valuation of $ 440 million.

◆ 2: A grand vision and willingness to fight hard toward it
From the very beginning of WeWork, Newman and colleagues have positioned the company as more than just an office rental business. WeWork does not set a price per area for rental, nor does it target companies that are customers of traditional rental offices, but as a coworking space with design and flexible rental conditions. It was branded. In addition, he said that he instilled a sense that the coworking space was a kind of 'place for activities and clubs', welcomed freelance and startup entrepreneurs as tenants, and started calling tenants 'members'. matter.

Unlike traditional office rentals and coworking spaces, Newman's attempts to build a grand business as 'building a physical social network' have a strong appeal to investors, customers and staff. was. As a result, WeWork was able to raise funds from companies that invest mainly in Silicon Valley IT companies, even though it was a form of real estate management company, Perticarari said. ..

◆ 3: Self-confidence and mission-led attitude
Early WeWork, like many other startups, wasn't able to pay its employees a satisfying salary. Nonetheless, those who were attracted to WeWork, who have a strong sense of purpose and an exciting path, quit the company and joined WeWork. Perticarari points out that much of the sense of purpose that attracted people to WeWork was shaped by Newman's inspirational language, confident attitude, and excellent storytelling abilities.

In addition to simply talking about a grand vision, Newman and his colleagues said that in the early days of WeWork, they stayed in the office for a long time and worked for themselves, forming a hard-working corporate culture that worked long hours for the company. matter. 'Billion Dollar Loser' describes this culture as clearly negative, but Perticarari says, 'In reality, startups are hard work.' And while the diligence of the founder doesn't lead to a successful startup, Newman and his colleagues hold regular meetings and social events to create an environment where employees work as devotedly as they do. I heard you made it.

◆ 4: Create a competitive advantage with Blitz scaling

Blitzscaling is a coined word coined by Reid Hoffman, author of Blitzscaling, which means 'prioritize speed over efficiency in uncertain situations.' The idea is that if we grow rapidly in new markets with the idea of blitz scaling, we will be able to gain an overwhelming advantage in the market before our slow-growing competitors become a threat.

WeWork wanted blitz scaling from the very beginning, or from the time it proved its concept at Green Desk, Perticarari said. Therefore, by setting up a base in New York from the early stage when funds were scarce, increasing the reliability of WeWork, and actively soliciting investment, we acquired capital of 7 million dollars (about 700 million yen) in just two years. As a result, he has gained an advantage that is unmatched by competitors that develop coworking spaces. He also explained to investors about new coworking spaces that are rarely discussed, and succeeded in making himself a 'fast-growing coworking space operator.'

In addition, WeWork has introduced systems and rules to enable rapid and rapid expansion in order to escape from the early stages supported by Mr. Newman's charisma and hard work. As a result, WeWork has succeeded in setting up coworking spaces in various large cities on the planet.

◆ Not only 'too little' but also 'too much' is harmful
So far, Perticarari has mentioned several reasons why WeWork has grown so fast, but not all of WeWork think it was good. In some respects, it chose the right path for startup growth, with the benefits of widespread coworking space and revitalization of the field as a whole, but it was clearly wrong.

One of WeWork's mistakes is that 'management has lost sight of reality as it grows faster.' As WeWork has grown, we have begun to develop technologies that have no clear purpose, or to acquire companies that do not fit into WeWork's business. Perticarari points out that getting too much cash has confused the founders and led to unrealistic expectations.

In addition, Newman's ego began to grow, causing problems with parties, drugs, alcohol, etc., and Starbucks Howard Schultz advised to solve structural business problems and stop the rapid expansion. Even so, Mr. Newman ignored this. In addition, the work environment of relentlessly dismissing unproductive staff has become detrimental, leading to the creation of unique indicators to cover the increase in losses, which ultimately led to the failure to list in 2019.

Mr. Newman was dismissed from WeWork in 2019, but appeared in public in November 2021 for the first time in about two years. Looking back at the time in an online performance, 'I felt that the style I was leading (with the participation and reputation of well-known investors) was the right style at the time.' 'I think that was the moment when I couldn't concentrate on the core of my business and why it exists,' he said.

in Note, Posted by log1h_ik