WeWork, which is said to be raising as much as $4 billion at a valuation of more than $20 billion, is still on its way to hitting $1 billion in annual revenue this year — though CEO Adam Neumann said at TechCrunch Disrupt NY 2017 that it’s not quite as simple as betting big on enterprise deals.
Neumann said that enterprise deals, which would help handle office space for larger groups of employees, now account for 30 percent of the company’s new business. But originally synonymous with tiny teams in tiny offices or small startups strewn across a multitude of wide open co-working spaces, WeWork has to tackle the problem of company cultures changing as they mature and figuring out how to host those companies.
“When you bring in enterprise you have to ask, ‘am I changing the environment we’ve created and worked so hard to create?'” Neumann said. “The kind of departments are very similar to our members, the average age is 30 to 35 years old, everyone wants to create life’s work… We’re saying we’re keeping a close eye on it, there’s definitely a cap — no question there’s a cap.”
If WeWork is going to grow into that $20 billion-plus valuation, the company is going to have to figure out how to position itself as a company that has real revenue, with real margins, that justifies a revenue multiple for a private company that signals a fully sustainable company going forward. But like any startup, Neumann said that the company is still focusing on growth and not worrying about striking the kind of profitability the public market might demand for a company like WeWork, which he says needs to be defined as something beyond a real estate or a technology company.
To the possible chagrin of investors and employers looking for liquidity, hitting that profitability might not be coming for the time being, Neumann said. But the pitch as a tech company alongside a real estate company may be a bit easier as he says WeWork has a lot of analysis going on behind the scenes to make sure spaces are optimized. If a space is underused, for example, WeWork can detect that with sensors and figure out how to re-allocate it — something that might not be possible at a larger organization.
“Per choice, when you have a margin, you can choose when to be profitable,” he said. “We like to hover around EBITDA break even and choose where we want to move. Right now we’re in high growth, we don’t see that stopping any time soon.”
For a company like WeWork, people working on startups or smaller companies — or even possibly larger ones — may find themselves questioning their relationships with the company in the event of a downturn. But Neumann said he isn’t too worried about it, saying that the WeWork has tried to build a lasting community that adds value beyond just a workspace. While WeWork is known for workspaces, Neumann and the company have worked to build communities within those workspaces, which makes people in even different companies feel like they are part of something tight-knit (and work even harder as a result).”
“If it’s servicing a real need, that doesn’t go away in a recession,” Neumann said. “If you’re serving a true need, and if you have a loyal group of customers that are falling… As the world goes through a tough time, these customers will stay with you.”