But that's not the critique being leveled at WeWork here; the critique is, WeWork can't in the long run be profitable at these rates. In a lot of their spaces --- maybe all of them? --- they're overstaffed. They're premium-everything (I wanted the couches from the first floor at WeWork West Loop and asked where they got them; they were custom-designed!). Free beer on every floor (this turns out not to be a win, but it's still part of their cost basis). Most importantly: they site these things in marquee locations that they have to be paying a mint to lease.
I'm happy to take full advantage of the largesse of Investor Storytime Economics, but unless you're Amazon, the music has to stop playing at some point. WeWork is not Amazon.
It's literally been a problem for several years. The company even acknowledged the problem on Twitter at one point, but didn't bother fixing it.[1] It shouldn't be that complicated to provide non-rancid milk for the coffee. Even in my home fridge milk lasts two weeks after being opened, and that's several degrees warmer than it would be if milk were the only thing being stored in it.
I used to work at a VC funded company that had a $10,000 custom couch (which sucked, totally uncomfortable, the custom dollars went into the shape/making it fit) and prolly 10x that spent on custom lighting fixtures (also terrible, ridiculously dim for a work space, but looked nice). In a super high rent urban area. I assume they make up the difference with glass walls and giant open spaces. This is (unfortunately) how offices are built these days.
It's so much better than traditional offices that it'd be a shame to lose it. Hopefully there's a sustainable business model.
What would you say are the pros/cons of moving to your new office?
The West Loop WeWork is nice because it's about a 3 minute walk from the redline subway to the front door. That matters during winter -- Chicago winters blow. So I was wondering if you managed to get a spot close to public transit too. (And if so, how'd it end up ~cheaper than WeWork? Prime locations tend to come at a premium.)
I should be clear: it's hard to compete with WeWork for the 4 people we have in this office (I think we pay slightly less here than we'd pay for 4x WeWork berths) --- but having our own office is a phenomenally better deal as we hire more people, since we'll be paying the same amount of money in rent but can easily park another 10 people in this space comfortably.
So I should clarify that I think WeWork is an amazing deal for very small companies and, in particular, for solo worker locations. Part of the problem with WeWork is that it's precipitously less of a good deal as your company grows.
So are the plastic chairs you get at Walmart. This is a fixed cost. Custom design them once, order a million of them and leverage economies of scale.
> Free beer
Beer by the pallet is $2.30 a can, rent is around $2200. Even if you drink 2 cans a day, its still only about $350 a month in costs. Even if it's a loss, it's a good loss leader and the economies of scale will eventually work out. Their potential for profit is when people start saying, WeWork, feed us! and they charge such and such to manage the whole food delivery and make a nice premium on that, and whatever other services you guys would want.
With WeWork, though, the sweet spot is for companies that are in between the solo entrepreneur (or the 2-3 friends) and about say 20-25 people. There is a good value for the hot desk or reserved desk for individuals.
At least in the locations I'm familiar with, once the number of people in a company gets too big then costs per square foot soar above regular office real estate in the same area. We found that having a meeting for 3-4 people couldn't happen on a whim, you had to book a room and if none were available you had to delay the meeting. Also, our meetings could never run long because inevitably someone else had booked the room afterwards and needed us out.
A lot of small things that might matter for some sorts of companies never really gave us much value like printer and copier services. While there's no true paperless office, the amount of printed stuff we generated (not counting marketing materials, which went to a graphic print service anyway) was negligible.
(Sounds kind of miserable, being an open office and such. But again, almost nobody uses the phone booths, so you're always free to peace out and shut yourself in for ~2h to power through a task.)
No idea how much it costs though, so you're probably right that the numbers might not make sense.
Every company I've worked for (none of which were WeWerk) has had this issue.
This is good for people who enjoy WeWork's product, since there are (and will be more) competitors that offer a similar experience for less money.
But it's bad for WeWork's valuation - and that's the core thing being brought up. WeWork's valuation is based on the idea that they can charge a premium for their product (relative to more traditional office rentals or other coworking providers), and/or that they can sell significant ancillary services on top of the base rental fees.
I don't think either of those expectations have played out, and IMO there are lots of reasons to believe that they won't play out at all.
WeWork isn't the only one - SV is full of startups that expected to exist in a premium marketplace that isn't as sensitive to price competition, but found themselves instead running a well-executed, but extremely commoditized product.
Not sure if this is the case for all of their locations, but the doors (and walls) were made of glass at the WeWork we rented from in Seattle, which meant there was zero soundproofing and I was constantly hearing conversations from the people in adjacent offices. It was incredibly distracting and we only lasted a month before returning back to our home office.
I dunno, maybe I'm just too picky. I don't want a community or all of that. I just want a place that isn't where I live that's quiet, has Internet access and bathrooms, and the rent doesn't have a comma in the dollar amount.
6PM for ending a work day is silly IMO and I emailed our office managers who took the issue to the city manager. Still no change (they asked us to pay $120/hr to keep climate management on outside of 6PM).
Also $2200 is on the high end for four people. You can probably talk them down to $2k or less.
You'd be surprised how valuable it is to have a pot of coffee ready to go all the time, next to a mini fridge that's always stocked with half and half. Sweetner's on the counter. It ends up taking like 30 seconds to grab coffee.
The janitors are surprisingly cool people, and they're fastidious about making sure the trash is taken out, doing the dishes (yes, you get a kitchen + fridge!), and making sure everything is stocked.
It's so effective to pool resources like that. Everyone gets those benefits just by being in the same place. And it's remarkable how un-cramped it all feels. Your office even has beautiful floor to ceiling windows that gives you a nice view of downtown and sunsets.
s/Your office/some offices
My company currently has an office in the middle of the floor of a WeWork building, it's cramped for 4 people, and the only "views" I have are of the walls of neighboring buildings in the windows that I can see through ~4 other offices and are ~80-100ft away (but, times are a bit tough right now and I think we're getting a pretty good deal for an NYC WeWork office).
In general though, WeWork is pretty solid; their coffee is acceptable, and the beer is usually pretty good.
Try this stuff: http://www.nestle.co.uk/brands/coffee/superpremium/azera
Just mix with hot water, it's surprisingly good.
It was nice, especially since I was an employee, not the company renting the space, but the only real benefit was there would be occasional free meals and not having to leave the building to go to the occasional meetup.com style meetup that happened there.
I'm guessing the price per square foot isn't that amazing compared to what you could get at other places, though.
Yikes. The doors on our booths are a killer feature. The booth becomes mostly soundproof when it's closed.
That doesn't scale though. If everyone who worked in a WeWork space wanted to occupy an empty room with a door that closes you'd discover pretty quickly what a hot commodity the are. And that can change entirely out of your control - I've worked at a relatively empty WeWork, only for a large company to come in and take over a lot of space on my floor. Suddenly all the fantastic facilities aren't available any more.
All in all, WeWork is fine, but not in any way worth the money.
Not exactly a $19B moat IMO.
You get free beer, free coffee, bathrooms, an office, meeting rooms, phone booths with doors that close that you can also go work in whenever you want to be isolated, you can be there 24 hours a day, you have a keycard that works at all hours, and best of all, you're surrounded by startups and companies doing the same things as you. Meaning you can chat up your neighbors and meet some interesting people. Chance encounters like that are rare at a traditional office. People also throw events on the upper floors all the time, which gets you free lunch at a minimum.
The above experience costs $2,200/mo to get you an office with plenty of room for four people.
I don't know. I hope they never go out of business. It's the best environment I've ever been in.
Did I mention you're surrounded by empty rooms with doors that close? I mean hello, you get a door! It closes!
When you have the option to go work someplace with a door that shuts, it removes all the stress of not having it, even if you never actually use it.