Advertisement

The incredible downfall of WeWork is about to be a TV miniseries - but what actually happened?

Photo credit: Courtesy
Photo credit: Courtesy

When it launched back in 2010, WeWork was heralded as the future of our working lives. It was the buzzword for a generation of freelancers, start-up founders and mobile entrepreneurs who traded in their furious coffee-shop laptop sessions for sleek co-working spaces and networking with free beer on tap.

At its height, it had locations in nearly every continent on the globe, was valued at $47 billion and was planning almost literal world domination, with scope to expand into gyms, homes and even schools. Yet by the end of 2019, it was almost bankrupt and its charismatic CEO and founder, Adam Neumann, had stepped down.

The drama behind WeWork’s staggering demise is now the plot of an Apple TV miniseries, WeCrashed, out this March starring Jared Leto as Neumann and Anne Hathaway as his wife, Rebekah. But what actually happened?

Photo credit: Courtesy
Photo credit: Courtesy

What is WeWork?

In 2010, WeWork was co-founded by Israeli businessman Adam Neumann and his American counterpart Miguel McKelvey. The idea was inspired by the high level of empty office spaces following the 2008 credit crisis and the number of freelancers and start-up founders that crisis engendered. It was a novel, and welcome, idea – that you could rent a desk for as long or as little as you needed, and mingle with other freelance workers or start-up founders. By the following year, the company had created WeWork labs, created especially for these young businesses. It gave them, not only desk space and meeting rooms to operate from, but promised support for their fledgling days. The labs, they said, would nurture new companies and help them grow.

By 2014, WeWork had 51 locations in the US, Europe and Israel and the brand announced plans to expand to every continent on the globe (with the exception of Antarctica) by 2017. In 2016, it was worth a staggering $10 billion and was dubbed one of the most innovative companies in the world. In financial markets it was known as ‘a unicorn’, meaning a rare, once-in-a-lifetime investment. This hype worked well. By the end of 2016, WeWork announced it had raised more than $1.7 billion in private capital.

The cult of ‘We’

The hype was probably part of WeWork’s demise. What was essentially a commercial real-estate company, insisted on marketing itself as a tech company and this affected the way investors invested (more on which later). Much like Facebook or Google, it made bold claims to want to ‘change the world’ and called its office spaces ‘physical social networks’ as opposed to, well, offices. They essentially wrapped a fairly standard offering – desk space – in the guise of a cultural revolution.

This began to show early. Neumann pitched WeWork as a movement and ran his company accordingly. The ‘We’ company had mass away days – essentially festivals, where drugs and alcohol were allegedly actively encouraged – and had a mandatory work-hard, party-hard culture, where after-work drinking (remember the beer on tap?) was essential for employees. Neumann then bought the rights to the word ‘We’ and stuck it on everything – merchandise, gyms, co-living spaces, even schools. The idea was that you could, if you bought into it all, essentially live out every aspect of your life in a ‘We’ space. Many began to suspect that WeWork – once a co-working space – was fast becoming something resembling a cult.

Photo credit: VCG - Getty Images
Photo credit: VCG - Getty Images

Who is Adam Neumann?

At these ‘We’ festivals, at tech events and summits, Neumann would speak. He was the Steve Jobs of WeWork; a revered figure who was billed as a genius. With his long hair and enigmatic way of speaking, many saw him as Godlike and, the more cultish WeWork felt, the more this comparison stuck.

The truth was, while Neumann’s charisma had initially lured in billions of dollars of investment, his wild and unusual behaviour soon began to concern investors. He was allegedly frequently smoking weed and is rumoured to have illegally transported marijuana across international borders on the private gulf-stream jet he bought for the company with $60million of investor money. Complaints began to roll in about his erratic management style and his increasingly outlandish claims that he wanted to live forever, put a WeWork on Mars and become ‘president of the world’.

By September 2019, SoftBank – WeWork’s main investor – insisted that Neumann step down as CEO. They claimed to no longer trust his leadership.

Photo credit: Taylor Hill - Getty Images
Photo credit: Taylor Hill - Getty Images

What went wrong?

So, what exactly happened? Why don’t we have a President Neumann and a WeWork on Mars?

Remember when we said it was all about how WeWork was marketed? Well here is where it really had an impact. Despite broadcasting themselves as the next tech firm to shake up our lives, WeWork was actually an old school real-estate firm, which meant the huge cash injections they received didn’t go as far as they would in the tech firms they were modelling themselves on, as they had all the IRL overheads of old-school landlords.

This wasn’t just a gap between what they thought they were and what they actually were. Their business plan was starting to crumble as they were doing something called leasing long and sub-letting short. While you could rent a desk for as long or, crucially, as little as you liked, WeWork had to pay the whole rent for the space regardless - meaning the company began to bleed cash.

Meanwhile, where that cash was coming from was also becoming a problem. Following the very public death of journalist Jamal Kashoggi at the hands of the Saudi government, the fact that one of WeWork’s main investors was, in fact, the House of Saud, became hugely controversial for a company that propagated a liberal, free-thinking future. Neumann himself was also becoming an issue; selling stock for his own benefit and leasing out his own buildings to WeWork, making him, at one point, both landlord and tenant. Many began to feel that the only aspect of WeWork that was profitable, was Neumann himself.

Photo credit: Michael Kovac - Getty Images
Photo credit: Michael Kovac - Getty Images

The fallout

It all began to crumble in 2019, when the company began an IPO, which would have made them a public company. Before the IPO began, they were valued at $47 billion, but once proper attention was paid to their financials, it was discovered that WeWork was actually only worth $10 billion. It was disclosed that – in 2018 alone – the company had lost $2 billion. It had gone from astronomical heights to near bankruptcy in six weeks. The fantasy of WeWork then began to unravel, with several lawsuits hitting the company that year – most of which centred on race and gender discrimination and sexual harassment.

So, what did they do? Neumann started by selling his hugely controversial private jet. Next, the company shed the equally controversial 20 family and friends of the founder – including Neumann’s wife Rebecca – who worked at WeWork. Then came the job cuts. By November 2019, the company cut 20 per cent of its workforce (about 2,400 jobs). By the end of the year, Neumann was ousted as CEO, and SoftBank – WeWork’s main investor – was in control.

Today, WeWork still exists, but, even before the pandemic hit, it was limping. Many locations have closed, hundreds more jobs have been lost and, by May 2021, it was reported that WeWork had lost a further $2 billion and 70 per cent of its membership.

WeWork has been named one of the most ‘over-valued’ companies in the world and its dramatic demise will now, fittingly, be a TV show. The plans for a real-life ‘We’ revolution may have come to a screeching halt but it seems as though this revolution will, in fact, be televised.

'WeCrashed' is set for release on Apple TV on 18 March.

You Might Also Like