WeWork India: Disrupting Work Culture
$886 million Sales Revenue and $884 million Losses
INR27 lakh Sales Revenue and INR8 crore Losses
That’s WeWork’s and WeWork India’s 2017 financial headlines, respectively. Yet, global investors continue to invest in this 2010 startup. Business analysts wonder, what makes WeWork’s investors and potential investors to take a leap of faith.
‘Do what you Love’, reads the WeWork tagline, world’s largest co-working space operator that “empowers you to do what you love”. In 2017, this power was bestowed upon Indians too when WeWork Companies Inc. (WeWork), opened its first co-working space in Bengaluru in collaboration with Embassy Property Developments Ltd. (The Embassy Group), one of the leading Indian real estate development firms engaged in office space business.
While the co-working office segment was growing at about 50% over the previous few years – especially in Mumbai, Bengaluru and Delhi-National Capital Region (NCR) – analysts wondered if it was an alternate real-estate bubble ready to burst. The bigger question being, could co-working space business be profitable, with WeWork and many others reporting continued losses? With several Indian companies vying for their sweet spot – with more than 200 players – in co-working space market, how would the competitive pressures alter the business dynamics? Karan Virwani (Karan), Chief WeWork Officer, WeWork India, said, “We see WeWork to be a 100-year company and are not just looking at the five or 10 years.” Would WeWork continue to be an attractive investment destination for global investors? Many, however, welcomed co-working spaces as they were touted to disrupt the work culture for better results with growing acceptance for sharing economy.
Sharing Economy and Co-Working Spaces
Traditionally, ownership was considered to be the obvious way to access and use products. With time, consumers started leasing and sharing products instead of owning them, giving rise to the sharing economy. Among others, co-working was a concept gaining prominence in the fast growing sharing economy. The coming of age of the millennials, the entry of Gen Z into the workforce, the rise of the gig economy alongside heightened entrepreneurial activity, were some of the prominent factors fueling the demand for and growth of co-working spaces..........
The Global Co-Working Industry
In 1999, Brian DeKoven, a game designer, coined the word ‘co-working’, meaning a working style that facilitated collaboration and meetings. In 2005, the world’s first official collaborative workspace, the San Francisco Co-working Space, was launched in San Francisco’s Mission District. By 2008, there were 75 co-working spaces across North America and Europe. By 2011, the concept had started gaining prominence in Asian cities of Mumbai, Singapore and Hong-Kong. Subsequently, it reached the African continent, South Africa in particular.13 Globally, the number of co-working spaces grew by..............
The Indian Co-Working Industry: Providing Turn-Key Solutions
By 2018, India was in the midst of heightened entrepreneurial activity. Government of India’s initiatives such as ‘Make in India’, ‘Digital India’ and ‘Startup India’ fostered the growth of a lot of businesses and entrepreneurs. India was the youngest start-up nation in the world, where 72% of the founders were less than 35 years old and millennials accounted for more than half of its population. The gig economy had been proliferating while corporate enterprises too were transforming the way they worked. This gave rise to the need for....................
WeWork: Heralding a Paradigm Shift in Work Culture
In May 2008, Adam Neumann (Neumann) (Co-founder and Chief Executive Officer, WeWork) and Miguel McKelvey (McKelvey) (Co-founder and Chief Culture Officer, WeWork), started an eco-friendly co-working space in Brooklyn, New York City, called GreenDesk, a precursor of WeWork. While Green Desk took off quickly, Neumann and McKelvey sold the business, shortly. In February 2010, the duo founded WeWork, a co-working facility, in Manhattan, New York City, at a time when...............
The WeWork Culture: Creating Experiences through Space
WeWork’s expertise lay in giving a facelift to the real estate property before opening it to clients as a WeWork facility. It effectively leveraged technology to manage its smart co-working spaces with data collected over the years to structure offices around its workers. For instance, a touchscreen in its New York headquarters could provide real time information about any of the WeWork locations globally, like, how many conference rooms were currently occupied in its London offices. The resultant WeWork co-working spaces...................
WeWork India
The entry of WeWork in India was triggered by Dragon’s Den, a reality TV show where wannabe entrepreneurs pitched their business ideas to investors trying to secure funds. Karan, the elder son of Jitendra Virwani (CMD, The Embassy Group), was in his final year of college when, inspired by the reality TV show, pitched his business idea to his father’s Embassy Group which approved his proposed venture. Karan’s original idea was...............
WeWork India’s Working Model
At WeWork India, the US arm provided.....................A proprietary tool helped source real estate and track deals. The Embassy Group provided .................. negotiating and striking the right real estate deals at the right prices. Karan explained that, “We pay a management fee to WeWork for all the services they provide. There is no profit-sharing…All our buildings are leased properties, including the ones from Embassy…”................
WeWork offered several flexible membership options as detailed below. These were month-on-month arrangements allowing 24/7 access to members (Exhibit XIII)...............
WeWork’s Community Proposition: Disrupting Work Culture in India
WeWork’s community proposition benefited all its members. Independent workers became a part of a larger workforce. Startups could network with leading venture capitalists and large enterprises as part of its 210,000 member community globally, facilitated by the exclusive WeWork app. WeWork had more than 1,000 enterprise members that represented 24% of WeWork’s total membership globally which could help multinational companies expand in India and................
WeWork: Value Creation vs Value Capture
Globally, by 2018, WeWork was valued at $20 billion, touted to be one of the most highly valued private US-tech startups after Airbnb and Uber, with speculations of WeWork (global) achieving a valuation of $35 billion after its next round of funding.
Critics argued that the high valuations of co-working startups like WeWork were a bubble in the making which would burst sooner or later. Karan counter argued that, “I don’t think it’s valid. Everyone will have a justification for it [valuation]. It’s too little if you ask me [for both WeWork and WeWork India]. There is a huge opportunity..............
Future of WeWork’s Business Model: ‘Powered by We’?
There was skepticism about the durability of WeWork’s business model as the company made money by signing long-term leases of up to 15-20 years on office space, and then renting it out on a monthly basis. As WeWork (global) started amidst global financial crisis, when in 2010 rents in New York could be bargained, the company benefitted from holding advantageous lease rates as the economy grew and rents went up. WeWork expanded over the course of a decade when the economy grew steadily. Experts suggested that.................
Assignment Questions
I. Analyze the Indian co-working space market/industry in the backdrop of growing co-working space market/industry globally. Discuss the nature of competition in this market/industry using Michael Porter’s Five Forces Model.
II. ....................
Exhibits
Exhibit I: Hallmarks of a Co-working Environment
Exhibit II: Offerings of Co-working Spaces
Exhibit III: Growth of Co-working Spaces Globally (2005-2018)
Exhibit IV: Global Share of Flexible Workplaces
Exhibit V: Evolution of Office Spaces in India
Exhibit VI: Potential Co-working Market Size in India (2017/18)
Exhibit VII: City-wise Co-working Costs in India
Exhibit VIII: Steep Increase in Co-working Activity in India
Exhibit IX: WeWork Company Information at a Glance
Exhibit X: WeWork’s Revenue Breakdown (FY’17)
Exhibit XI: Select WeWork Offices
Exhibit XII: Select Players in the Indian Co-working Industry
Exhibit XIII: WeWork’s Membership Plans
Exhibit XIV: WeWork Membership Fee Across its 23 Centres in India (in INR/month)
Exhibit XV: Workspace Amenities at WeWork
Exhibit XVI: Office Space Leasing in Eight Key Markets of India (January-March 2018)
Exhibit XVII: Select Enterprise Clients at Some of the Leading Co-working Spaces in India