IPO not working out so well for WeWork CEO
Company the poster child for bubble in venture capital fundraising
New York — Adam Neumann showed he can capitalise on troubled times a decade ago, tapping into demand for workspace by those forced out of jobs in the aftermath of the financial crisis to grow WeWork into a global brand commanding a $47bn valuation.
Yet his plans to take WeWork’s corporate parent We Company public have backfired, as his company becomes the poster child for a bubble in venture capital fundraising that has pushed some start-ups to unsustainable valuations.
We Company is contemplating slashing its valuation to as low as $10bn from the $47bn billing clinched in a private fundraising round in January backed by Japan’s SoftBank Group, people familiar with the matter said.
The sharp drop comes amid investor criticism of widening losses and Neumann’s firm grip on the company.
Neumann, 40, is under pressure to proceed with the initial public offering (IPO) to raise cash to keep WeWork’s operations going. The New York-based company rents workspace to clients under short-term contracts, even though it pays rent for them itself under long-term leases.
It is by far the biggest crisis Neumann has faced in his career, after arriving in New York at the age of 22 after service in the Israeli military.
He failed in several ventures before selling his first co-working firm, Green Door, for $300,000 with business partner Miguel McKelvey a decade ago. Neumann and McKelvey used the proceeds from that sale to start WeWork, with its first customers coming to the lower Manhattan site just off Chinatown in February 2010, after seeing ads in Craigslist.
Community was a driving force behind the new venture, launched at a time when millions who had lost jobs during the 2008 financial crisis were looking for flexible workspace.
“It quickly became apparent that people were ready for a new approach to work, not just their workspace,” Neumann said in a blog post in 2016, marking the launch in Berlin of WeWork’s 100th site.
Neumann’s parents divorced when he was a boy and he moved 13 times as a child and adolescent, living awhile in Indianapolis where his mother, an oncologist, finished her medical residency. He has called his childhood challenging because of the moves.
They returned to Israel where he lived in the kibbutz Nir Am, near the Gaza Strip, and later served in the Israeli military, which he says taught him to be something greater than himself.
Neumann’s experience on a kibbutz and McKelvey’s growing up in a five-mother commune in Oregon have been cited as a reason the pair hit it off. McKelvey is an architect with the title of chief culture officer at WeWork.
Neumann, now a billionaire as the majority owner of We Company, has said he thought money was the goal in life until he met his wife Rebekah, a cousin of actress Gwyneth Paltrow.
Formerly called chief brand director, Rebekah Neumann is referred to as a co-founder of WeWork. She is also a film maker and introduced Neumann to Kabbalah, a form of Jewish mysticism that has attracted celebrity followers. They have five children.
The early success of the shared workspace validated the global community Neumann envisioned where people can achieve more together than alone, or in the words of the company's famous mantra: “To make a life, not just a living.”
Neumann arrived in New York in 2001 where he lived with his sister Adi, an Israeli model, and started a handful of businesses that failed, including women’s shoes and a line of baby clothes with knee pads called Krawlers.
“When I came to New York I was angry about my history,” Neumann told a luncheon at the New York Stock Exchange in June 2017, adding he learnt that you don’t deserve anything. “I became happy. My past helped make who I am today,” he said.
Neumann, described as key to setting WeWork’s strategic direction and execution priorities in the IPO filing, can come off as a bit zany. In the 2016 blog post he said the future of cities would require a healthy mix of 70% magic and 30% logic.
We Company said in the filing that its mission is to elevate the world’s consciousness and that as a community company it is committed to maximum global impact, a vision Neumann endorses.
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