WeCrashed: What Really Happened to WeWork?
The release of ‘WeCrashed’, a new Apple TV+ miniseries with Anne Hathaway and Jared Leto, once again reignited the conversation about the dramatic rise and fall of “unicorn” start-up WeWork. It also brought to mind the checkered story of the company’s charismatic founder, Adam Neumann, whose larger-than-life personality and savage excesses were at the root of the cult work culture that he wanted to promote.
The story of WeWork’s meteoric rise and fall has been well documented – before ‘WeCrashed’ began airing, there were many stories, such as Wondery’s 2020 podcast ‘WeCrashed’ on which the mini -Apple TV+ series is based, Hulu’s ‘WeWork: or The Making’ and Breaking of a $47 Billion Unicorn’, Eliot Brown and Maureen Farrell’s The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion, or Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork by Reeves Wiedeman.
The story of WeWork’s implosion has always been too alluring for writers and screenwriters to ignore. In business circles, it has also been a popular cautionary tale – a story of transgression fueled by mindless ambition and greed that culminates in disaster.
What is the history of WeWork?
WeWork started out as an American real estate company that provided flexible co-working spaces for tech start-ups. Rising to prominence in the financial boom years after the Great Recession, it targeted millennials as it attempted to provide them with shared office space for working together.
WeWork started as Green Desk in 2008, when Neumann and his business partner, Miguel McKelvey, rented an empty floor of a Brooklyn building and divided it into cubicles for rent. “All those who had been fired from their jobs came. Anyone who didn’t want to be home because they were depressed,” McKelvey told Wiedeman.
The founders quickly replicated their model in Manhattan and San Francisco as the company grew in popularity. Building on its initial successes, the company began “blitzscaling,” acquiring office space in multiple cities and expanding rapidly, thanks to a massive $8 billion injection from SoftBank, which was its biggest investor.
In fact, it was Neumann’s knack for raising billions of dollars in venture capital that fueled the company’s rapid growth. But, as critics have pointed out, Neumann lacked a viable and sustainable business model as it continued to expand with little planning. He tried to turn WeWork into a tech giant and experimented with a LinkedIn-style app for company members. There were also plans to launch WeLive, a dorm-style co-living arrangement, and WeGrow, a private school run by his wife, Rebekah. None of these plans succeeded in the long term.
Despite these failures, WeWork was the most valuable tech startup in the United States, with a stratospheric valuation of $47 billion. It almost epitomized Silicon Valley’s standout example of audacity as Neumann made bold claims that he was in the market not to make money but to “change the world.” And then, in 2019, everything fell apart.
How did WeWork’s remarkable success story fall apart?
In the summer of 2019, after nearly 10 years in business, WeWork filed for an initial public offering (IPO). WeWork’s IPO was the most anticipated public offering of the year – for a company valued at $47 billion, it was meant to be another milestone that sealed its cult status. Instead, what unfolded was a story of remarkable surrender and downfall.
On August 14 of the same year, the company publicly filed documents for the IPO. The filing, called S-1, revealed WeWork’s narrative that it is a great achievement built on unimaginable profits. Story after story of Neumann’s bizarre relationships, mismanagement, and odd behavior came out of the closet and made headlines instantly.
The financial documents also showed WeWork was losing tons of money and its market projections were wildly optimistic.
Within 33 days, the IPO was scuttled and WeWork’s valuation plummeted 70%. After the failed IPO, WeWork was taken over by SoftBank, its biggest investor. Neumann also voted to step down as CEO and relinquished majority control of WeWork stock. He was reportedly offered a $1.7 billion package to leave the company.
What caused the WeWork disaster?
Rapid expansion on the back of an unsustainable business model, dodgy dealings, and erratic Neumann behavior have been cited as reasons for WeWork’s downfall.
In its quest to build “creative office space,” WeWork came up with a dizzying combination of all the cool trends in corporate culture, complete with phone booths and nap rooms. Neon pink signs in its offices read: “DO WHAT YOU LOVE”. Neumann was always keen to “sell an experience”, which made the company a real estate giant, which spanned 800 locations and employed more than 12,000 people.
According to documents first published by Buzzfeed, all of this growth since 2015 was based on a hugely expensive and unprofitable business model. Investment documents show that in 2017, WeWork lost $883 million, despite having revenue of $886 million. The Financial Times revealed that in 2018 the company lost $1.9 billion on $1.8 billion in revenue. Behind the glamor and glitz of a culture selling next-gen work experience to millennials was a sinking ship struggling to stay afloat. The bubble was always going to burst.
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What further complicated matters, and perhaps added to the slippage, were Neumann’s questionable personal relationships. Tall, long-haired, and charismatic, Neumann’s idiosyncrasies are well documented: He drank tequila, smoked weed, and walked barefoot around the office. He seduced investors and developed a sort of cult following in business circles. That was until the bubble burst and the horror stories started dropping.
One such story was that Neumann made millions of dollars by leasing several properties in which he had an equity stake to WeWork, The Wall Street Journal reported. In a prospectus related to a debt offering, WeWork said it had leases with several properties partly owned by Neumann. He added that the company paid more than $12 million in rent to buildings “partially owned by executives” at WeWork between 2016 and 2017.
In the years leading up to the scuttled IPO, Neumann bought at least five homes, including a $10.5 million townhouse in Greenwich Village and a $60 million Gulfstream jet for WeWork. More troubling was the fact that Neumann allegedly took out personal loans from the company at below-market rates to fund his lavish lifestyle. He also bought the brand as “We,” and WeWork paid him $5.9 million to license it.
Even as it tried to play down its losses, the company said in its filing: “We have a history of losses and, especially if we continue to grow at an accelerated rate, we may not be able to reach the profitability at the enterprise level for the foreseeable future.”
Was the company’s “questionable work culture” also to blame?
As WeWork slid toward bankruptcy, one story after another that blamed the company’s “questionable work culture” began to emerge. They described in gruesome detail how, as WeWork was on its way down, Neumann indulged in his trips on a private jet carrying marijuana across international borders and his wife fired employees based on “bad vibes”.
Even as the investments were coming in, Neumann reportedly spent heavily on private expenses — for example, he paid $60 million to buy a private jet — without focusing on immediate business needs. Employees complained of widespread burnout, but he was largely unsympathetic. In his book, Wiedeman writes, “Adam complained that he didn’t think he was getting what he paid for as it was. He told an employee he could save money by finding a roommate.
Additionally, a former WeWork employee has filed a civil lawsuit alleging she was sexually assaulted at corporate events, including the company’s “Summer Camp,” and the human resources department has not reported. did not act on his complaints. She was later fired for “poor performance”.
The Guardian reported that the employee, in an email, later wrote: “The plaintiff’s sexual harassment and assault did not happen in a vacuum. They are the product of part of the titled frat-boy culture that permeates WeWork from top to bottom.
She added that during the job interview, Neumann served shots of tequila and that “corporate leaders and executives put immense pressure on employees to attend after-work events and highly value employee participation in WeWork-sponsored parties.”
Much of “WeCrashed” portrays Neumann as the start-up swindler who cheats his way to the top, attracting huge investment from SoftBank, Benchmark and Goldman Sachs. It also focuses on his relationship with Rebekah, with Hathaway telling her “You’re a supernova” and “I’m the soul of the company”.
But he’s not blind to the company’s toxic work culture. In the third episode, the series shows that WeWork did not have a human resources department for a long time and offered employees stock options instead of an appropriate salary. It also says the company was “a very bad place to work, especially for women.”