We take a look back at the start-up that sought to revolutionise workspace rental and raised billions of dollars before filing for bankruptcy in November 2023. We examine its global success and the downfall that led to its bankruptcy.
Founded with the aim of transforming workspace rental, WeWork attracted the biggest investors. Its success was rapid and led it to develop at breakneck speed, with a leader who was above all looking for growth, despite profitability.
The rise of WeWork
Launched in 2010 in New York by Adam Neumann, WeWork's ambition was to reinvent the traditional workspace. The company's mission was to create shared spaces that encouraged collaboration and flexibility. The start-up wanted to meet the needs of a new generation of independent workers and entrepreneurs. WeWork offered an alternative to conventional offices, with flexible rental contracts, fully equipped spaces and community working environments. In just a few years, the start-up has grown exponentially.
WeWork took advantage of the boom in collaborative working concepts and start-ups. At the same time, working patterns changed, with a significant increase in the number of freelancers and start-ups looking for spaces in which to carry out their activities. WeWork responded to this demand by enabling businesses of all sizes to adapt quickly to their changing space requirements.
Thanks to its concept, which was new at the time, and a rapidly evolving market, WeWork has expanded internationally. The company raised several billion euros from SoftBank, enabling it to accelerate its expansion. At its peak, the company was valued at 47 billion dollars and had more than 800 coworking spaces around the world, according to Usine Digitale.
Dubious management and Covid-19 as executioners
However, the company had bitten off more than it could chew, expanding and planning inordinately. A series of structural and governance problems led to the company's downfall. WeWork operates like a property company, renting out large spaces and subletting them as shared offices. This model developed very quickly, but not all workspaces were profitable for the start-up, which was forced to pay exorbitant rents for certain offices that were not very popular.
What's more, the company's attempt to float on the stock market, with Adam Neumann as CEO, was a resounding failure. Investors, alarmed by the large losses and Neumann's unrealistic management style, withdrew their confidence. On the brink of bankruptcy in 2019, it was the Japanese investor SoftBank, a shareholder in We Work, who saved the company by injecting a further 5 billion dollars, before becoming the majority shareholder. On this occasion, CEO Adam Neumann came under scrutiny for his extravagant lifestyle and unconventional leadership, before being removed from the company.
He became a mere observer, and a minority shareholder. His disastrous management methods almost led to We Work's demise in 2019. This businessman cultivates an image of an atypical entrepreneur, smoking cannabis, with a relaxed look and original working methods. However, his wild antics and far-from-real ambitions have led investors to dethrone him from his role as CEO.
Neumann's management problems included dubious transactions and a lack of understanding of the company's limits in the face of a potential economic crisis.
Then WeWork's valuation plummeted from $47 billion to as little as $10 billion by 2021. The company was eventually floated via a merger with a special purpose acquisition company (SPAC) in October of the same year.
However, the Covid-19 pandemic led to a downward spiral for WeWork, with clients cancelling contracts and a massive shift to teleworking. WeWork was forced to restructure its debts and modify its leases, but these measures were not enough to avoid bankruptcy. The company's long-term lease obligations of $13.3 billion were a burden in the post-Covid environment of dwindling demand for office space.
As a result, the company filed for bankruptcy on 6 November 2023 and its shares were worth just a few cents. The company claims to have lost billions of dollars in the first half of 2023 due to a drop in customers. WeWork is therefore going to close its workspaces in the United States. The billions of dollars invested by SoftBank, the Japanese technology group that owns nearly 70% of the company, to turn it around were not enough. Nevertheless, WeWork still has around 700 workspaces around the world and hopes to relaunch itself once again.