WeWork's chief investor, SoftBank, has not had a very good year, losing billions on the office-sharing "tech company," as well as in other tech investments such as Uber and Slack.
WeWork appears to be in a very bad place, and despite SoftBank's takeover and the ousting of founder Adam Neumann, there is every chance the company may still go under.
In the event that this should happen, here's a look at three realistic competitors in the office-sharing space, and whether they could eventually represent an investment opportunity.
Upon quick inspection of DropDesk's mission statement, one might feel a familiar sense of dread at seeing this office-share company labeling itself as a tech company. Where have we heard that before?
Fear not, however! DropDesk was originally, and still is, a software maker. DropDesk is a coworking management software that powers coworking spaces' daily operations and refers traveling professionals to shared-space partners. Have you ever wondered where Christmas stores come from, and then disappear to, during the holiday period? Most likely the tenant of that building is a DropDesk partner who lets out space during off-periods.
Think of it as an Airbnb for business.
The concept is not quite as risky as WeWork, in the sense that DropDesk does not purchase large amounts of property to rent out to tenants, which is a risky venture at the best of times. DropDesk, however, does not rely on getting the massive capital needed to make large purchases and therefore does not carry the same debt risks.
So far, the company has shown no intention of going public and does not disclose financials, but it may be worth keeping an eye on.
An older company operating the shared-office space since 1989, Regus is a subsidiary of the International Workplace Group and, in essence, does everything that WeWork does. However, the key difference between the two is that IWG recently reported an operating profit of $63 million, while WeWork had an operating loss of $1.37 billion. IWG is also the world's largest flexible workspace provider, with 2,300 business centers in 106 countries.
Regus actually has a history of bankruptcy in the U.S., falling apart in 2003 due to its explosive growth prior to the dot-com bust. Now, however, IWG looks set to benefit from WeWork's ongoing collapse by expanding again.
CEO Mark Dixon stated in an interview in October that the key to finding success in the office-sharing market is to diversify revenue streams. Whereas WeWork was only generating 5% of revenue from its services, such as consultancy and recreational facilities, Regus generates 28% profit from similar services. This shows that the company can ensure revenue streams elsewhere and not just in its core model.
What IWG has done with Regus is create a more affordable office space, focused primarily on the work, without being too glamorous. Most importantly, it has proven that office-share business models can return a profit.
One of the more unusual but interesting office-sharing companies is The Wing -- a San Francisco-based women-only subscription model, with coworking spaces available in Seattle, San Francisco, and New York.
This niche-oriented company has drawn the ire of many who feel its model is "discriminatory," yet there is no denying the big numbers it continues to post. The Wing has five locations and more than 6,000 members so far. To its founders, members, and investors, The Wing is a "safe, affirming professional network" and a "workspace with community-building at its core," -- according to co-founder Audrey Gelman.
Last December, The Wing raised $75 million in a Series C funding round led by Sequoia Capital and Upfront Ventures -- venture capital firms that invested in giants like Airbnb, Instagram, Ulta, and Bird. It was valued at $400 million at the time, which doesn't sound like an outrageous valuation when considering how high WeWork's was ($47 billion). Interestingly, WeWork actually has a 23% stake in The Wing, worth $59 million, but has reportedly been looking to offload this in a bid to raise funds.
There has been no talk of IPO plans for The Wing yet, but if it takes lessons from the failings of WeWork, then it could assert itself as a powerful niche-market leader.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Slack Technologies and Uber. Read the full disclosure policy here.