The Cult of We

"Adam Neumann wasn't just selling office space—he was selling a movement."

A revolutionary concept. WeWork started as a simple idea: transform traditional office spaces into vibrant, community-driven workplaces for freelancers, startups, and established companies alike. Adam Neumann and Miguel McKelvey, the co-founders, envisioned a world where work wasn't just a place you go, but a lifestyle you embrace.

Rapid growth and valuation. The company's expansion was breathtaking:

• 2010: First WeWork location opens in New York City

• 2014: Valued at $1.5 billion

• 2017: Valued at $20 billion

• 2019: Peaked at a $47 billion valuation

This explosive growth was fueled by Neumann's charisma, ambitious vision, and ability to convince investors that WeWork was more than just a real estate company—it was a tech company poised to revolutionize the way people work.

"Neumann's penchant for grandiose proclamations and wild parties became as much a part of WeWork's identity as its sleek office spaces."

Cult of personality. Neumann cultivated an almost messianic image, positioning himself as a visionary leader who could solve global problems through WeWork. His management style was marked by:

• Impulsive decision-making

• Lavish spending on company events and personal indulgences

• Blurring of personal and professional boundaries

Controversial practices. Neumann's behavior raised eyebrows and ethical concerns:

• Leasing buildings he owned back to WeWork

• Trademarking the "We" name and selling it back to the company for $5.9 million

• Frequent substance use during work hours and meetings

These practices, while initially overlooked due to the company's rapid growth, would later come under intense scrutiny and contribute to WeWork's downfall.

"WeWork wasn't selling square footage—it was selling a dream."

Crafting a compelling narrative. WeWork's success in attracting investment was largely due to its ability to position itself as more than just a real estate company. The company's narrative focused on:

• Creating a global community

• Revolutionizing the way people work and live

• Leveraging technology to optimize space utilization

Marketing prowess. WeWork's branding efforts were sophisticated and far-reaching:

• Sleek, modern office designs that became instantly recognizable

• High-profile partnerships with celebrities and influencers

• Emphasis on sustainability and social impact

This narrative allowed WeWork to command tech-company valuations despite its fundamentally real estate-based business model. Investors were buying into a vision of the future, not just a traditional office-leasing company.

"Growth at all costs became WeWork's mantra, even as losses mounted."

Aggressive expansion strategy. WeWork's growth was relentless and global:

• Opening new locations at a breakneck pace

• Expanding into new markets and countries rapidly

• Diversifying into areas like education (WeGrow) and co-living (WeLive)

Financial red flags. Despite its growth, WeWork's business model showed significant weaknesses:

• Massive losses: $1.9 billion loss on $1.8 billion revenue in 2018

• High customer acquisition costs

• Long-term lease obligations vs. short-term customer commitments

• Creative accounting practices to mask true financial health

This expansion strategy prioritized growth over profitability, a approach that would ultimately prove unsustainable and contribute to the company's near-collapse.

"Masayoshi Son's backing turned WeWork from a unicorn into a financial behemoth—and ultimately hastened its fall."

SoftBank's massive investment. The Japanese conglomerate, led by Masayoshi Son, became WeWork's largest investor:

• Initial $4.4 billion investment in 2017

• Subsequent investments totaling over $10 billion

Vision Fund's influence. SoftBank's involvement had profound effects on WeWork:

• Encouraged even more rapid expansion

• Pushed for higher valuations

• Created pressure for an IPO to provide returns

The relationship between WeWork and SoftBank was symbiotic but ultimately problematic. SoftBank's deep pockets allowed WeWork to pursue its aggressive growth strategy, but also created unrealistic expectations and valuations that would prove difficult to justify to public market investors.

"WeWork's IPO filing was meant to be a triumphant moment—instead, it exposed the company's flaws for all to see."

IPO fiasco. WeWork's attempt to go public in 2019 quickly turned disastrous:

• S-1 filing revealed massive losses and questionable governance

• Intense media scrutiny of Neumann's behavior and conflicts of interest

• Rapidly declining valuation estimates

Consequences. The failed IPO led to a cascade of events:

• Adam Neumann forced to step down as CEO

• Massive layoffs and cost-cutting measures

• Near-bankruptcy, averted only by SoftBank's bailout

The IPO process exposed WeWork's fundamental weaknesses, forcing a reckoning with its inflated valuation and unsustainable business practices. The company that once aimed to "elevate the world's consciousness" was brought crashing back to earth.

"WeWork's story is a testament to the dangers of prioritizing growth and vision over sound business fundamentals."

Startup lessons:

• Sustainable growth trumps rapid expansion

• Corporate governance matters, even for private companies

• Charisma is not a substitute for a viable business model

Investor takeaways:

• Due diligence is crucial, regardless of hype or FOMO

• Beware of companies that blur the lines between industries

• Founder-centric companies carry unique risks

The WeWork saga serves as a stark reminder of the potential pitfalls in the startup ecosystem. It highlights the need for balanced growth, transparent governance, and a focus on fundamental business metrics. For investors, it underscores the importance of thorough analysis and skepticism, even in the face of seemingly unstoppable momentum.