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As WeWork Snaps Up Yet Another Software Company, A Look At Its Acquisition Strategy

This week WeWork, also known as The We Company and best known for its global coworking business, is adding another software company to its portfolio of acquisitions. WeWork announced yesterday that it will acquire SpaceIQ, what it calls a “workplace real estate management and operations platform.”

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This deal caught our eye for a few reasons. First, it’s yet another software buy from a company with its roots firmly in the real world. And, WeWork is heading towards an IPO that could land as soon as next month.

So, what’s going on with WeWork and its software buys? Let’s examine the situation.

WeWork Hearts Software

WeWork has made 15 known acquisitions during its life (the company was founded in 2010, for reference). Some of the company’s buys are pedestrian deals. Its $400 million acquisition of China-based coworking company Naked Hub, for example.

Then there are WeWork’s software buys. In addition to the newly-announced SpaceIQ deal, here are some of WeWork’s buys that deal with software or similar stuff:

There are two things to note in the above set of deals. First, there are more than a few. Indeed, WeWork has acquired at least a half-dozen software and software-ish companies to-date. Second, most of those companies hang close to the real estate world. This means that WeWork is building a real-estate focused software arm.

Prepping to write this post this morning, I expected the WeWork software buys to appear more scattered. But, they don’t. Not really. This means that WeWork is doing something a bit less cynical than I expected. But before we get to what the company may be up to with these buys, let’s examine the pace of its acquisitions.

Here’s a chart of WeWork’s known acquisitions since the start of 2018:

So, a slight uptick in recent quarters. The final column in the chart is provisional, naturally, given that the period is only about one-third complete.

Now let’s get back to strategy.

Why Software Matters

That WeWork is buying software companies isn’t a surprise. WeWork is a highly-valued, venture-backed company that wants to keep its worth intact when it goes public in a few months.

However, if you value it using public comps, WeWork is overvalued. This is a problem for the company (it needs to keep raising money to fund its growth) and its investors (who bought slices of the company for high-dollar sums).

To ameliorate the issue, WeWork may be able to partially rebrand as a software company. If it can convince the market that it is more than a real estate firm, it may be able to command a larger revenue multiple, thus making it easier for WeWork to defend its present valuation during an IPO.

But WeWork isn’t cynically buying random software companies in hopes of stringing them together into some sort of public-market-friendly chimera; instead, as we’ve seen above, the company is buying related software companies, possibly building a sort of full-building software stack that it can sell to other real estate companies. It’s buying software companies focused on the same space that its core operations work in.

I would bet you $1 that WeWork is far, far away from having software revenues which comprise a material percentage of its aggregate top line. But if WeWork can paint a growth-y picture of its software business in its IPO documents it will have two avenues to revenue expansion, the more valuable of which would help reprice the less-prized business.

Bring on the S-1.

Update: Forbes’ Alex Konrad pointed out that I’m a bit slow to the point that WeWork’s software buys often point in one direction. Indeed, if you search anywhere on the Internet for WeWork and, say, operating system or platform, you can find lots of material on the matter. I suppose my only redemption here is that at least I wound up thinking the accurate thing in the end. Better that than never.

Illustration: Li-Anne Dias. Chart fettling via Jason D. Rowley.

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