One of the shocks of the week was the fall of one of the world’s shining start-ups WeWork: a company once valued privately at $47 billion.
In less than a year, its share price has tumbled from more than five dollars to a mere handful of cents.
Value down to $300 million.
Customers are cancelling contracts and the company is haemorrhaging cash.
The latest financial results speak of an operation trying to keep its head above water and now valued at about $300 million.
It all started so well. WeWork was a forward looking, innovative, company. It offered shared workspaces for a rising generation of entrepreneurs, or so it said.
The 12 minutes yielded $4.4 billion
In short, it gave you all the benefits of an office – at a fraction of the cost.
Venture capitalists poured in billions.
Legend has it that Japanese super-investor Masayoshi Son promised to hand Wework $4.4 billion after a 12-minute tour of its New York offices.
Working from home hit the business
The COVID lockdown of 2020 put paid to most of this business. In the aftermath, working from home meant fewer and fewer people were prepared to pay to share an office. Those small and medium-sized enterprises who had signed up are cancelling.
There was also a touch of entrepreneur hubris about the co-founder Adam Neumann who once said that WeWork was ‘elevating the world’s consciousness.’
“What does that even mean?” asked Ben Marlow, the chief city commentator of the Daily Telegraph.
“One of the biggest problems with the tech industry culture and the venture capitalists that fund so much of it is the ability of entrepreneurs to convince supposedly sophisticated investors to part with truckloads of cash on the basis of what is essentially little more than repackaging of a fairly mundane, or worse, an entirely unoriginal idea as something profound and life-changing.”
Neumann as the next Elon Musk?
Well said. How many other tech start-ups fall into that category?
Many wax lyrical about fintech – isn’t that a quicker way to do bank transfers?
Many also hailed Neumann as the next Elon Musk.
Yet, you could argue he was merely a landlord charging premium prices for offices with free beer and ping-pong tables.
Venture capitalists should soul search
On top of that, WeWork botched an IPO. A string of other financial red flags should not have been ignored.
As WeWork fights for survival, indeed this is time for the venture capital business to take not only a good look at itself but also a more critical look at the people it gives money to.
