In 2008, Miguel McKelvey and Adam Neumann started a small company called GreenDesk. The company had a fairly simple mission to provide eco-friendly coworking spaces that individuals and businesses could lease.

The Brooklyn-based workspace-sharing concept attracted enough interest that the founders were able to sell it and use the proceeds to start WeWork.

How Did WeWork Begin?

WeWork started in 2010 by opening a location in New York City SoHo district. Neumann and McKelvey recognized that the recent recession had created a business opportunity for them. Major cities across the country had large amounts of empty real estate left behind by companies that hadn’t survived the recession.

The recession had also forced a lot of professionals into freelance and contract positions. Now that they didn’t have conventional employers, they needed professional office spaces where they could work, meet clients, and conduct other business tasks. WeWork started buying real estate at low prices to meet this evolving need.

WeWork also looked appealing to many startups. At the time, startups knew that they had to control their costs. Otherwise, squeamish funders would leave them and look for other investment opportunities. The recession had left many banks and investors afraid to part with their money. If you didn’t have a solid business plan with a detailed budget, it was nearly impossible to attract investors.

Many startups realized that WeWork’s flexible workspace sharing concept made it possible to keep costs low while giving them the option to expand as needed.

Source: Unsplash

Some of the early lessees that leased WeWork space included companies that managed to become successful, including:

• Fitocracy, a lifestyle and health company that uses gamification to help people meet their wellness goals.
• Pluralsight (which was called HackHands in 2010), an online mentoring program that matches beginning coders with experts in specific topics.
• Whole Whale, a data-driven company that helps organizations leverage analytics to improve social impact.

WeWork wasn’t just for startups and freelancers, though. By 2011, its reputation had reached the ears of decision-makers at PepsiCo, who decided to place a few employees in the SoHo space.

What Sparked The Idea Of Creating WeWork

Neumann and Miguel recognized that changes in the economy would force people and small businesses to evolve. They saw the need for office space. They also saw that commercial real estate prices had fallen significantly during the recession.

They put these observations and realized that they had a major opportunity in front of them. Shared workspaces seemed like an obvious solution that would help startups and freelancers while generating income for WeWork.

What Was WeWork Originally Created For?

WeWork was originally created to meet the diverse needs of startups and freelancers who needed professional office spaces at affordable prices. Many of these individuals and companies didn’t have enough money on hand to commit to a year-long lease.

WeWork gave them access to short-term leases that they could renew. This appealed to a lot of people since it lowered the risk of leasing office space. Freelancers and consultants who had lost their full-time positions during the recession didn’t know whether they would continue as contract workers or find new jobs. Leasing workspaces for three months gave them chances to test the waters and adjust their office environments as their business’s changed.

Many startups and individuals also realized that WeWork’s flexible real estate solutions made it easier for them to save money while conducting business. You could lease a dedicated desk in a shared, open-plan office space for your daily work.

When needed, you could also rent event and conference rooms. As your business grew, you could move into a standard, private office, an office suite with extra amenities, or even a full-floor office space dedicated to your business.

No matter what type of business you wanted to run, WeWork had a professional space that would meet your customized needs. Unlike working from a home office, you also had access to shared amenities, such as copiers, printers, and the option to rent space in other cities.

As a WeWork member working with clients in multiple cities, it often made sense to rent a desk in Chicago, New York, LA, and other cities as more office spaces became available.

Suddenly, small businesses could operate like larger corporations without dedicating huge amounts of money to real estate.

How Did Adam Neumann Start WeWork?

Adam Neumann started WeWork with help from Miguel McKelvey.

The two had formed a small real estate business and sold it for a profit. The profits, along with a major investment from Joel Schrieber, made it possible for Neumann to start WeWork.

How Did WeWork Get Funded Early On?

Adam Neumann and Miguel McKelvey didn’t have any problems attracting early funding for WeWork. It certainly helped that they had already founded, developed, and sold a similar company. They could invest some of their personal proceeds to get the company off the ground.

WeWork quickly attracted the interest of Joel Schrieber, a real estate developer and founder of Waterbridge Capital who played key roles in revitalizing Brooklyn neighborhoods like Greenpoint, Bushwick, and Williamsburg. Schreiber purchased 33 percent of WeWork for $15 million.

By 2014, WeWork had attracted investments from major funders, including Goldman Sachs Group (GS), J.P. Morgan Chase & Co, T. Rowe Price Associates, Benchmark, and Wellington Management.

WeWork used its investments to double its number of offices from 2014 to 2015. By the end of 2015, the company had 51 locations in Europe, the U.S., and Israel. It planned to open locations on every continent except Antarctica.

How WeWork IPO Failed

WeWork grew rapidly and attracted more funding over the next couple of years. Fortune magazine called it a “unicorn” to bet on in 2018. WeWork had a $10 billion valuation at the time, so it made sense for the experts at Fortune to believe in its ongoing success. 

More major funders contributed to WeWork. Legend Holdings and Hony Capital gave the company $430 million in financing. Halfway through 2016, the company had about $1.7 billion in private capital.

WeWork became increasingly aggressive. As it attracted more funding, it started to expand into China, Australia, South America, and southern Africa. As of 2021, the company has 800 locations and has achieved its goal of opening shared workspaces on every inhabited continent.

After nine years of success, WeWork decided to go public. The scrutiny it faced during the IPO process, however, nearly ruined the company.

WeWork submitted its IPO paperwork in August 2019.

Upon review, Softbank, its biggest investor, demanded significant changes. Softbank slashed WeWork’s valuation from $47 billion to $10 billion. It also forced Neumann to resign as CEO (although he received the ultimate golden parachute of $1.7 billion).

WeWork’s valuation continued to dwindle. Before the end of 2019, Softbank gave it a $5 billion valuation. WeWork laid off about 2,400 employees and canceled its IPO plans.

The failure largely came from Neumann’s erratic behavior. He had done some amazingly odd things, such as trademarking the word “We” and making WeWork pay $5.9 million to use the word. His drug and alcohol abuse also came to light, which not only made the company look bad but allegedly may have influenced some of his business decisions.

Not all of the blame falls on Neumann, though. As WeWork gained momentum, investors became more brazen, apparently forgetting the lessons they had learned during the recession. The company grew much too quickly, and funders threw far too much money at it. Exaggerated valuations helped doom the company’s IPO. 

Softbank decided to postpone WeWork’s IPO indefinitely. 

3 Reasons WeWork Got So Big

Despite the problems that WeWork experienced, it’s still a major real estate company with offices all over the world and thousands of clients. How did WeWork manage to get so big despite mismanagement and outrageous valuations?

Neumann and McKelvey Had a Great Idea

Neumann might have developed bad habits as WeWork grew, but he and McKelvey had a great idea when they started WeWork.

With a rapidly changing economy, workers needed professionals workspaces that didn’t require long-term commitments or high costs. WeWork solved those problems by offering diverse solutions.

The low price of real estate during the recession made it even easier for the founders to make their business successful.

Investors Didn’t Want to Miss an Opportunity

As more major investors bought into WeWork, the company drew the attention of other funders. Immediately after the recession, investors and funders guarded their money carefully.

A few years later, they were eager to take advantage of profitable opportunities. WeWork’s high valuation and popularity made it look like the perfect way to make money.

Suddenly, caution didn’t seem as important. Investors forgot to scrutinize every aspect of a company. Instead, they followed the trend and gave WeWork more money than it deserved.

WeWork’s Ambition Pushed it to Grow Rapidly

Neumann made mistakes, but he’s an ambitious person who was serious about growing WeWork as rapidly as possible. He truly wanted to open offices on every continent, a goal that the company has achieved. He also believed that he was offering a service that tech startups needed desperately. He was probably correct.

Unfortunately, it seems that he let all of the money and success inflate his ego, which encouraged him to make questionable business decisions. Eventually, someone was going to discover that WeWork’s valuation was a mirage.

The attempted IPO brought the company’s details to light, forcing the company to lay off employees, fire Neumann, and reconsider its approach to serving clients.

Somewhat amazingly, WeWork managed to survive the IPO disaster. It continues to serve clients around the world.

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