WeWork the office space start-up has gone bust. Once worth in the region of $47bn, the company’s shares plummeted to near zero in August 2023. By November 2023 the company had filed for bankruptcy.
Once run by controversial CEO Adam Neumann who had pumped the company massively but inadvertently scuppered any possibility of the company’s success. He attempted a failed IPO (Initial Public Offering) complete with registration documents that shed light on numerous conflicts of interest, financial irregularity and self-dealing. Neumann was forced to step down in Sept 2019. The company never recovered.
So what can entrepreneurs learn? Here goes…
Don’t Over Hype
Neumann claimed in the company’s prospectus that, “WeWork would elevate the consciousness of the world.” and promised to donate billions to charity. Of course, on closer inspection investors soon realised that there was little meat on the bones and the IPO was abandoned.
What can entrepreneurs learn? Yes, we get it. You believe in your start-up. But don’t try to over-hype your service to get attention. Yes, it may work at first but eventually, you will be found out. Best to underpromise and deliver more any day.
Don’t Mix Your Personal Stuff with Business
Neumann was eccentric in the way the company’s finances were structured. Bizarrely, he made a number of financial transactions that were not the norm for companies of the size of WeWork.
For instance, Neuman had bought four properties personally that he rented out to WeWork the company for a tidy sum. He also owned the trademark “WeWork” through a holding company that he also owned and charged WeWork for it’s use.
He took out loans from the company for several millions of dollars at below-market interest rates to fund his lavish lifestyle.
What can entrepreneurs learn? When running your start-up it’s important to keep your personal purchases separate from those of the business. Don’t be tempted to do what Neumann did and rent back your assets to the company or retain assets from the company by holding them personally.
Investors will frown on this kind of activity. Consider paying yourself a salary or paying yourself dividends if you want to make big personal purchases.
Be Professional
Although Adam Neumann had stepped down from WeWork for four years by its bankruptcy filing in 2023, the reputational damage had arguably been done way before that date. The infamous Neumann was known for his ‘partyer in chief’ image and his tequila downing, booze-induced late-night meetings.
As the company grew, potential investors became less and less impressed with Neumann’s management style.
What can entrepreneurs learn? Yes, it’s your brainchild and you should have fun as you grow but bear in mind that as the CEO, all eyes are on you!
You Need to Have the Tech
Probably Neumann’s biggest mistake was selling WeWork as a tech company when there simply was not enough tech to allow for that label. Many Investors argued WeWork was just a glorified office rental company.
When the pandemic hit in 2020 and physical spaces had to close due to lockdown, WeWork struggled as they hadn’t invested in technology that was relevant in the ‘new normal’.
Post-pandemic, WeWork again struggled as people stayed clear of co-working spaces and the office and continued to work from home.
What can entrepreneurs learn: In the modern era most traditional business models are dead or dying. If you’re not incorporating technology into your business model to compete it will be almost impossible to compete in future.
Final thoughts
WeWork is yet another story of a start-up founder getting caught up in their massive ego and we’ve seen it before. Sam Bankman Fried and Elizabeth Holmes also made grandiose claims and inevitably it all came to nothing.
Entrepreneurs should be careful not to over-egg the pudding as it might just make you and everyone else sick.
Stay safe!
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