I worked for a startup that was based on the east coast but trying to build their presence on the west coast. We looked into a lot of options including visiting several WeWork offices to look into having a virtual office or a mailing address at the very least.
We wanted to use WeWork but it was too expensive to be practical for us, and we ended up getting a deal with a local coworking space. I imagine this was the case for most startups looking to start an office out of WeWork.
So I'm inclined to agree with you that the demand was there, but the execution was poor.
For small businesses, there is overhead in signing a long term lease
That's not how most people use WeWork. 40% in my building (they have 2 floors) are long-term leases from big companies. I don't have anything but anecdotal evidence for my next statement, but I have a lot of data points: the rest are primarily remote workers for non-small businesses.
Of course, there are startups that use WeWork and others. I don't think they're the majority.
I don't think WeWork was doomed from the start. I think their execution was sloppy. I think they made some short-sighted financing decisions which they are paying for now. I think they have a long uphill battle, but I do think that there is something of value that they are providing.