Six years ago, Adam Neumann, an Israeli emigrant who grew up partly on a kibbutz, co-founded WeWork—a quixotic office-sharing company that encouraged independent workers to share spaces, drink single-origin coffee together, and maybe even throw each other some business here and there. Their timing was perfect: WeWork’s inception was synchronized to the ascendance of the sharing economy. Now, the company leases large office spaces, redesigns them into far more attractive units, and rents them out at a price multiple, to entrepreneurs, small companies, and even divisions of large corporations.
Today, WeWork has some 50,000 members across the globe, about 100 international locations, and a private valuation of $16 billion. In the inaugural episode of the Hive documentary series Billion-Dollar Brands, above, Neumann recalls his first meeting with Silicon Valley venture capitalists, talks a bit of smack to his critics, and confesses what keeps him up at night.
Vanity Fair: The sharing economy was in its infancy when you came up with WeWork. How did you go about raising capital from wealthy Silicon Valley investors who might not have naturally foreseen the need for a company hawking shared office space?
Adam Neumann: A partner from Benchmark Capital actually approached us after he noticed that 3 of the 10 companies that he was invested in at the time in New York were working in WeWork buildings. We only had two buildings at the time. So he just did the math and said, “What are the chances,” and then got on the phone with me and said, “Hold tight. I’m going to be there in a few weeks. Please don’t take money from anyone else until you meet me.”
Introducing the Hive, VF.com’s New Tech, Business, and Politics Site
So Bruce Dunlevie, a Benchmark general partner, came to New York and we walked through the first building. By the time we walked through the second building, he said, “This is something that could be interesting for us. But you’re going to have to come out to San Francisco.”
Did you have a billion-dollar pitch ready to go when you got into the room?
Actually, when we eventually got into the room and presented the numbers, [Benchmark general partner] Bill Gurley found a mistake in the model that we had been running with for a year. We had looked at it a thousand times, and didn’t see anything. But it took him seven minutes!
Still, Gurley and Dunlevie invested because they saw the potential to invest in the way the world was changing. And the potential size of the market, which is the largest asset class in the world. Not including enterprise and virtual membership, commercial buildings and residential towers are a $140 trillion market. And if I asked you for the name of one brand that was disrupting this space, I bet you wouldn’t have one name for me.
Critics have noted that you have a fairly simple business model. You rent real estate, give it a cool new design, and then cut it up and rent out the smaller units at a price multiple.
I actually believe our company is one of the most complex to build. Not only do you have a global footprint, but you have a company that needs to operate globally in a physical manner, and not just a digital one. You’re not just operating fulfillment centers.
You mean that there are actual human beings involved?
We have to hire the right people, and have training programs that work. And we have to replicate that across the globe. Every market is a new set of rules, a new building department, new architects. And to actually physically achieve everything we’re doing is a credit to the team, the people we’ve chosen, and the processes that we’ve created over the past six years. And the technology that powers everything we do, from choosing the real estate to how we run it. Without that, you couldn’t scale into this. And it’s also expensive.
You have amassed some $1.4 billion in equity funding. Why do you feel like you have to grow so fast? Some people at your stage would say, Wow, we’ve grown so fast already that now we have to go back and iterate.
Even though we are growing fast, we are not growing as fast as we can. We have two things that limit the speed of our growth. First, and most important, we have to ask ourselves along the way, have we hurt the member experience at all? If the next building you open isn’t as good as the last one, you’re growing too fast. The second thing is, you don’t want to overgrow into negative cash flow.
How many WeWork locations are you opening a month?
About 10, globally, on three different continents. All simultaneously, and with a very small amount of people compared to how others would do it.
When you grow that fast, how do you know you’re making the best decisions for your company?
I believe that if you regularly make the right choice—and it takes practice, it takes effort—the more you make the right choice, the easier it gets. I believe that doing the right thing will not only create the best culture and the best product, but you’ll also make the most money. Even if you’re making decisions that lose you money in the short term.
How do you deal with the bubble talk, both in real estate and in technology?
Whenever I hear it, I put my head even lower; I focus on what our members need by ensuring that today we have the right culture, by ensuring that today our employees are happy. And I think the more you do that, the further you go. We’re still so far from where we want to be. There is still so much potential for us, we are trying to make much of it a reality.
What’s the most useful piece of advice you’ve recently received?
I was at a bris, and the father gave a blessing to the son. He said, “I bless you that life will be difficult enough that you will grow and learn, but not too difficult that you will break.” It was an amazing blessing for a son, and also a great blessing for a business. It needs to be difficult, you need to push the envelope to grow—but not too much that you will break.
What keeps you up at night?
Sometimes, when everyone tells you you’re growing so fast, it could actually go to your head. And my wife, Rebekah, our chief brand officer, reminds me of this a lot. A lot of things had to happen our way for this to work. It wasn’t just us. Remembering that is very important. Because I know that the second you forget that, it will all go away.
