We keep losing. It seems like my hockey team is putting the pressure on me to apologize to this WeWork-affiliated teammate of ours. In the dressing room one of the guys pointed his finger at me, "You're the one responsible for us losing all these games lately." Another teammate, who I considered a longtime friend of mine, shot at me, "This can't continue! If we keep losing we're going to be at the bottom of the heap again."
I told him, "This is my team, I'm the one who created the team and brought everyone together. Even when you guys had no money, who fronted the bill? How many times have I bought you chicken wings? You think I'm going to apologize to a teammate trying to sell me on a scam?" The guy barked at me, "And how the hell do you know it's a goddamn scam? You keep on opening your mouth as if you know everything. All I know is that we keep losing games whereas when the WeWork kid was playing with us he wasn't just putting up all our goals and helping us win, he was making you look good between the pipes. He was blocking all the shots you wouldn't be able to stop."
I told my teammates, "It's going to take time finding a replacement. However this company is really starting to get on my nerves."
First of all, the CEO of the company in an interview stated that he's not concerned about competition. However, it's my understanding that every organization in the world is aware of competition that have the potential of eating away at revenue. Even though WeWork raised the most capital, they are by far the weakest link in the chain of co-working office space. Many co-working office space companies are looking for a fight and a piece of the pie. Many of them have solidified a moat that WeWork will have a challenging time penetrating.
WeWork goes around telling investors that they excluded many costs such as marketing, construction, and design, to bolster how profitable the company is. Truth is, what company in the world excludes fixed costs on the balance sheet? All CEO Neumann responds with is simply waving his hands and saying these costs will disappear over time once the company reaches maturity rather than disclosing the company's full expenses attributable to operations. If the company can not show real costs, how do we know they're truly making a profit?
Why doesn't the CEO of the company show the investing community what the breakdown of their membership costs entail? For example, if the company tells us they have 140,000 members paying $45 monthly, we can use a simple mathematical method to determine how many members they gained and how many these lose versus customers that are paying $500 to $1500 a month who have more of a commitment to their desk, chair, and co-shared ping pong table.
Since the CEO of WeWork doesn't care about his competition, I'll tell him about the competition myself and their animalistic desire to take away his current and future customers. Knotel, a company focused on large clients and large commitments, operates over 1 million square feet across 60 locations including London, New York, Berlin and San Francisco. They have increased revenue by 300% over the past year alone and are on a solid growth trajectory in reaching 2.5 million square feet and $100 million in revenue by year-end. Another competitor is Convene who specializes in designing its own meeting, conference, and flexible workspaces. They boast over $1 billion in revenue from just 50% of enterprise entities that have chosen to use their services. Simonetti of Convene stated, We've kind of positioned ourselves between the best landlords and some of the largest enterprises."
The competition knows their markets and know where the big money is. COO of Servcorp Moufarrige stated, "Co-working doesn't work." His company has offered flexible space services since the last 1970s. He continued, "The latest iteration of it is not that new; it was around pretty extensively during the dot-com boom. And it didn't work then, either." WeWork has to come to terms with the fact that companies in this sector have seen their portion of revenue from co-shared spaces shrink. WeWork has to build 10 co-sharing offices a month in order to sustain their membership pyramid. The original investors know WeWork is burning cash. The IPO was an effort to make some cash back and churn a small profit. However, WeWork has rapidly dumped partnerships with property owners, who will subsequently be the first to dump WeWork shares.
At WeWork, customers who are paying $45 per month are managed by high administrative costs tending to each client. Some customers voiced their concerns over the company's "one-month cancellation notice" policy that requires customers to cancel a month earlier than they expect to avoid the monthly fee. Ultimately, WeWork's "scientific" recruiting formula is to get these deadbeat millennials to pay $500 to $1000 per month in hopes of living out this artificial dream. Additionally, customers are footed with paying a non-refundable one-time setup fee of $100 in order to cover taxes, furniture, and moving fees for WeWork's IKEA-like furniture.
So what other fees are there? You would expect renting out an office space would at least let you print out your work. Not true with WeWork as customers are expected to pay for a myriad of office essentials including conference rooms, black and white printing, color printing, keycard replacement fees, and key replacement fees. But that's okay for these millennials because they get free beer after 3 o'clock.
WeWork's competitors understand the game very well. They want to grow slow and steady while simultaneously adding value for property owners that become their most important partners for growth and customer retention. WeWork members paying $45 a month are the ones pulled into this religious revival characterized by co-sharing spaces that make them feel special. The big boys know how to make Corporate America feel special. WeWork is trying to move into their competitors' market without fully understanding that their own WeWork-branded culture is going against them. Their competitors are tough, it's as simple as that, and in the next few months they will show how tough they truly are.
I've given my hockey team one choice; go ahead and find another goalie. They'll be buying their own food, their own booze, and their own ice time from now on. I told them, "You're going to be eating those Beyond Meat burgers after games."