Before WeWork CEO Adam Neumann invites investors to his Chelsea headquarters, he sometimes directs employees to “activate the space,” for example by throwing a party. Then, when the investor arrives, he casually points out the great work atmosphere.
The trick, reported by the Wall Street Journal, is just one of the tools Neumann used to get investors to pump billions into his co-working company, most recently at a $20 billion valuation.
He has dismissed reports that portrayed WeWork as a real estate company, despite the fact that the bulk of its revenue comes from subletting office space.
Some venture capital firms were cautious, but gave him money anyway. “Let’s give him some money and he’ll figure it out,” Benchmark Capital Partners’ Bruce Dunleavie recalled thinking.
Manhattan property owner Joel Schreiber bought a 33-percent stake in the company for $15 million in 2010. “I didn’t negotiate — I said yes,” Mr. Schreiber said. “I loved Adam’s energy.”
Neumann likes to treat visitors to Tequila shots, according to the Journal. In one case, he convinced Jared Kushner to take shots in Philadelphia bar after touring a property.
So far, growth lags behind early projections. WeWork isn’t profitable and occupancy at office locations that have been open for a year or more fell to 90 percent, down from 97 percent last year, according to the company.
Not everyone is buying WeWork’s pitch that it is a lifestyle company, not a real estate business. “WeWork is nothing but Regus with a paint job—it’s newer, cooler,” said Frank Cottle of Alliance Business Centers, adding that the valuation “makes no sense.” [WSJ] — Konrad Putzier