The Lessons For Founders From The WeWork Debacle

WeWork announced this week that they have “a substantial doubt of continuing as a going concern.” This is a pre-bankruptcy announcement. They will likely wind it down and sell off the assets to pay creditors.

WeWork could have been a great, sustainable business with a global footprint, but that wasn’t as cool as being a billion-dollar tech company with big funding and hype. Only they weren’t a tech company.

It appears that WeWork founder Adam Neumann won more prize money than all his investors and employees combined. He’s the chief perpetrator of the WeWork investor scam, in my opinion, and his big funders fueled his flame. Now it’s flaming out.

Here are a few obvious lessons for serious tech founders:

  1. Huge VC funding sometimes does sometimes work to create a very large company very fast that changes the world and eventually becomes very profitable. But big success is the exception, not the rule. It’s a risky game and it doesn’t always end well. Was it worth a try for savvy investors and WeWork leaders to go for it? For them, maybe it was.
  2. WeWork wasn’t a tech business. Some non-software founders complain that VC investors won’t invest in businesses that sell physical things with lower gross margins or provide services as part of the offering. Software companies can invest more to grow and still be profitable. Microsoft’s gross margin is still 68% vs. WeWork at 15%.
  3. “Timing” either helps you or it doesn’t. Successful CEOs don’t usually give much credit to market trends and tailwinds when they ride the wave up. But they do blame “bad timing” when market conditions conspire against them.

    After the big shifts in work and office habits in the last few years, coworking is actually hot but working downtown is not. WeWork will blame the decimation of downtown commercial real estate and other trends. But other big coworking businesses are doing just fine.

  4. “Crazy” and charismatic founders can often change the world and lead us there. But sometimes they are scam artists and cult leaders on a grand scale. It can take years to learn that it was a big scam, especially with big funding and credible endorsements along the way. And it’s only a scam if it doesn’t work out and become a real business, right?
  5. Success is mostly about expectations. WeWork could have been a premium coworking business that got big, popular, and profitable, but it would have had to grow slowly with more practical outside investment. That wasn’t interesting to WeWork founders and their investors.
  6. WeWork investors like Softbank wanted to share in the upside, but they also share in the blame. Investors supported his scam and gave it credibility. And they both tried to foist WeWork off on public investors in their failed IPO attempt.

What lessons are you seeing from the WeWork adventure?


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