What WeWork Overcame to Be Worth $10 Billion

What WeWork Overcame to Be Worth $10 Billion

For the WeWork co-founders, alignment on values–both their own and the company’s–comes before everything else.



WeWork co-founders Miguel McKelvey (left) and Adam Neumann have worked together since 2008.
CREDIT: Courtesy Company



Seven years ago in Brooklyn, New York, Adam Neumann owned a baby-clothing company. In the same building, Miguel McKelvey worked as an architect for Jordan Parnass Digital Architecture. One of his big projects was designing stores for American Apparel. McKelvey had co-founded a social network called English, Baby! for people learning English as a second language.

As the entrepreneurs became friends, they discussed the vacancies in their building. They wondered: Would their landlord let them repurpose and resell vacant space as co-working digs? The landlord gave them the chance–at another of his Brooklyn buildings. And so–three years before the first WeWork opened–the co-founders ran what amounted to a rough draft of it, called Green Desk.

After one year, they sold it to their landlord for “a few million,” according to multiple reports. With lessons learned–and money earned–from that experience, Neumann and McKelvey launched WeWork, which–in four years–has raised $969 million in funding at a $10 billion valuation. Investors include JPMorgan Chase, Harvard Management, and Benchmark Capital.

The company, which employs more than 800 people and boasts more than 35,000 members, has 56 locations in 12 major American cities, as well as London, Amsterdam, and Tel Aviv. WeWork does not disclose revenue, but documents obtained by The Information and cited by The New York Times peg the figure at $75 million last year, with $4.2 million in profits. (Neumann tells Inc. those numbers are not accurate.)

Regardless, what’s staggering about WeWork is the sheer range of its clientele. It’s not just tech entrepreneurs and sole proprietors. Merck, American Express, and Microsoft have joined in the past three years. Mark Gallagher, senior market manager for Silicon Valley Bank, says the bank joined for more “serendipitous” encounters with prospects and clients. “It’s about how are we utilizing space to the best effect that meets our corporate and cultural goals as well as our clients’,” he told Fortune.

What separates WeWork from other co-working spaces? The co-founders say it’s the size, talents, and energy of its global community. “If you look at our app for one hour–without touching it, just reading it–you could look at your city, your country, the whole world, and see people minute by minute posting their specific needs–for a developer, a co-founder, whatever,” says Neumann, 36. “And you’d see eight-to-10 immediate [responses] coming in, all with high-quality references. You can become multinational by the press of a button.”

There are other perks, too: Instead of springing for your own payment-processing system, health care, or cloud storage, you can obtain any of them through WeWork at a lower cost, since WeWork’s community–as a ginormous, well-heeled whole–is giving the vendors the economies of scale they require.

With each space it designs, WeWork aims to stimulate the informal interactions that stir innovation. It was one lesson McKelvey and Neumann learned while running Green Desk: The magic of co-working spaces stems from the cultivation of the community. It’s why WeWork uses the phrase “platform for creators” to describe its purpose. “Empowering people to pursue their journeys. That’s our first mission,” says McKelvey, 41. “Put people into an environment where they can do that, and that creates the energy. People want to tap into that.”

WeWork has become a growth platform for its two creators too. Once a week, they meet privately with a mentor–someone they won’t name–to discuss their personal development. The lessons have come fast and furious. For example, WeWork’s rapid expansion has been a refresher course in cash-flow discipline. Specifically, its Bryant Park (New York City) and Golden Gate (San Francisco) buildings “were not well maintained before we came in,” says Neumann. Since then, the company has been even more exacting about due diligence, creating greater cushions in estimates and scheduling.

More recently, the co-founders learned about the burdens of a ballyhooed, $10 billion valuation. This summer, Commercial Building Maintenance Corporation, the contract service WeWork used to clean its buildings, fired cleaners who tried to unionize. When WeWork hired some but not all of those fired cleaners, there were protests outside WeWork’s New York City locations. A series of New York Times articles questioned the company’s community values.

By October, WeWork had reached an agreement that a local S.E.I.U. president called “unprecedented” in its generosity. It amounted to the addition of 150 full-time employees, with WeWork bringing its housekeeping functions in-house and hiring as many of the laid-off workers as possible.

“We always have to be able to learn–and communicate about it,” says Neumann. “It’s always on our minds. We need to act. Not just speak.”



July 1, 2016 / by / in , , , , , , ,

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