June 25, 2015
WeWork, the growing co-working office space company with a built-in incubator like flair, is now valued at $10B according to the Wall Street Journal. Last December after a $355M Series E round WeWork was valued at $5B, which it has effectively doubled with the newest round of funding. Just a month prior, in November 2014 WeWork was valued at $1.5B.
In less than one year WeWork’s valuation has increased by $8.5B.
On Wednesday, June 24, WeWork CEO Adam Neumann announced the new valuation after receiving a $400M round led by Fidelity Management & Research Co. and included support from existing investors. According to the WSJ, WeWork did not seek out this round and was turning down other offers, highlighting the markets demand for shared office spaces and real estate.
In a statement to the WSJ, Neumann said “this is an increase in responsibility, an increase in expectations… A higher valuation with more cash invested by investors just means you need to deliver higher returns.”
Disruption or Incubation?
With a $10B valuation, the question now is how WeWork’s growth will affect real estate in the future. Comparing the company’s valuation, availability of square feet (3.5 million), and membership size to others, WeWork is now larger than all but three publicly traded office landlords.
WeWork’s exponential growth is likely a combination of both disruption and incubation. Small startups have the opportunity to utilize their network and resources to advance, and in some cases they will advance into traditional office space. However, as company cultures shift the small rented office space model may also be appealing to large existing organizations not looking to create their own satellite offices.
For example, the DC marketing and creative agency Overachiever Media has used several different co-working spaces and changed as they’ve grown. Initially they utilized the on demand space at Cove, then to UberOffices, and now in their new office at WeWork’s Wonder Bread Factory.
“I chose a co-working space because I felt it offered an opportunity to stay in touch with the ever-growing startup community,” said Overachiever Media CEO Jason Nellis. “We continue to feel that being in co-working spaces is the best way to take the pulse of the small business and nonprofit economies here in DC. In the future, we may end up needing to get our own space for economic reasons. But I feel strongly that we’ll stay in co-working/productive spaces as long as is feasible, both for the community and for the growth opportunities”
Further, Nellis confirmed the importance of WeWork’s network, stating that their first client in the space was the result of a post seeking brand development work.
On the other side of the coin are established organizations. Because co-working spaces are designed for growing startups, it could be a challenge to appeal to companies with larger teams. The branding and creative agency Chief is a good example of this, as they recently moved into a new office in DC’s Dupont Circle. According to Chief Founder Scott Johnson, they specifically moved to their new location to meet the needs of the best potential candidates.
“We have been building offices where people live and want to work,” said Johnson. “For the past 30 years I’ve looked at places where people want to work, and where the people I’m trying to hire live. Your success will hinge on the right people coming to work for you. In the past we had trouble getting people to show up to meetups in Friendship Heights, and that’s only five metro stops away.”
In addition to choosing the right location, Chief specifically picked a location that fosters communication and creativity. “People want a lot of space and room. I want people to have 12 different places to spend their day. That is what co-workers are doing vs the distributed model where everyone can work from home and in their PJs,” said Johnson. However, it is “difficult that situation is difficult for creative people who want to work with creative people. You also don’t have the opportunity to run into people in the halls.”
Like WeWork’s network and space, Johnson also believes that giving back and working with the community is important, WeWork does host events in their space that give free access to information for their members, and Chief is doing the same by providing space to meetups and other organizations. In both instances, it’s about the growing startup movement, which plays a vital role in WeWork’s success.
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