WeWork’s Gamble to Act Like a Boring, Normal Company
The company plans to make over $7 billion in revenue by 2024. But first, it needs to survive.
As of December, WeWork was weeks away from running out of cash, according to Marcelo Claure, the company’s executive chairman. This was less than a year after WeWork’s valuation rose to a high of $47 billion in January 2019, before plummeting to $8 billion in October after a disastrous attempt at an IPO. After the pandemic hit, the valuation dropped again to $2.9 billion in March 2020, as WeWork warned that the pandemic would likely get in the way of the company reaching its 2020 targets.
The whole industry has suffered because of the pandemic. A May 2020 report from Research and Markets projects the global co-working spaces market will “decline from $9.27 billion in 2019 and to $8.24 billion in 2020 at a compound annual growth rate (CAGR) of –12.9%.” Because of this, analysts at DBRS Morningstar were pessimistic about WeWork’s survival.
Before WeWork pulled its IPO, its mission was to “elevate the world’s consciousness.” But with its valuation a shell of its former worth and office culture abandoned, the company suddenly had to pivot to clinging on for dear life.
On June 29, WeWork announced it would be ending its lease at its first location. It was a sign of a new hard-nosed approach to business — an unwillingness to keep unprofitable offices around for sentimentality’s sake. And this July, just seven months after Claure told employees about WeWork’s precarious financials, he reiterated this newfound commitment to financial maturity over pie-in-the-sky growth goals by telling the Financial Times that the company was going to be profitable, and have positive cash flow, in 2021 — one year ahead of schedule. Amazingly, despite its external problems — such as Adam Nuemann’s lawsuit against SoftBank and the ongoing office exodus caused by the pandemic, which could continue to foil the company’s best-laid plans and threaten the entire commercial real estate industry — WeWork seems to be working toward a clear turnaround strategy.
Here’s how WeWork has already begun to pivot away from its original world-domination ambitions toward simply surviving.