Sonya Mann is a tech reporter at Inc. She scrutinizes the tech industry on a daily basis and loves when startups come up with new business models.
Coworking startup WeWork has acquired eight companies over its lifetime. The cohort of targets doesn’t make a lot of sense at first glance. Maybe that’s a problem for a company with a chip on its shoulder about not being an overfunded real estate play, which is what WeWork’s critics claim it is.
Presumably, WeWork’s strategy feels coherent to the teams crafting it, but the company’s external messaging is, frankly, weird. WeWork’s portfolio of acquisitions is a case-in-point for my puzzlement:
- Case: makers of architectural modeling software.
- Welkio: an office sign-in system for guests.
- Fieldlens: a communication platform for construction projects.
- Spacemob: a Singaporean coworking company.
- Unomy: makers of a CRM for enterprise sales.
- Flatiron School: a code bootcamp in New York City and D.C.
- Meetup: a website for recurring IRL social groups.
- Conductor: makers of SEO and marketing software.
As you can see, the choices go from “that makes sense” to “hmm” in the middle and “wait what” at the bottom. Case, Welkio, Fieldlens, and Spacemob all intuitively complement WeWork’s core business and its operational needs. Even Unomy is not much of a stretch: WeWork’s salespeople manage plenty of large-scale deals and while most companies don’t own their own CRM, creating custom internal tools is a common practice at tech companies.
Flatiron School and Meetup are less immediately explicable. Alongside WeWork’s expansions into services like housing (commune-style, natch), fitness, and elementary schools, it looks like the company wants to own an entire vertically integrated yuppie lifestyle. Rebekah Neumann, CEO and Founder of WeGrow, told Bloomberg “in my book, there’s no reason why children in elementary schools can’t be launching their own businesses.”
Her husband, CEO Adam Neumann, has also made bemusing comments regarding WeWork’s philosophy: “Our valuation and size today are much more based on our energy and spirituality than [they are] on a multiple of revenue.” My guess is that even WeWork employees considered the “energy and spirituality” phrasing to be over-the-top, although I’m purely speculating.
Still, WeWork’s most recent acquisition, Conductor, verges on the baffling. However, Seth Besmertnik, the CEO of Conductor, attempts to justify it.
“Why would a coworking giant buy a company that’s best known for search engine optimization?” Besmertnik told TechCrunch. “We’re going to be building a marketing cloud to go after the enterprise market.”
The only apparent synergy with WeWork’s existing business is that WeWork also has large enterprise customers. Why is a coworking company moving into producing software services?
At this point, lest I sound too critical, I should tell you that I’m a WeWork believer. I don’t exactly know why Masayoshi Son decided that WeWork should have $4.4 billion from SoftBank’s Vision Fund, nor am I privy to the precise metrics that ended up pegging the startup’s valuation at $20 billion. But I do agree with this CB Insights analysis, which explains WeWork’s potential:
- Unlike its incumbent competitors, WeWork is valued based on growth potential rather than current revenue.
- WeWork’s efforts to build out its lifestyle and community offerings differentiate it from traditional coworking office spaces.
No startup is a sure thing, even one as big and well-capitalized as WeWork. New companies with big dreams are inherently risky as investments. But risky is not the same as stupid. In order to convince the rest of the world that its ambition is actually forwarded by its M&A strategy, WeWork could offer some common-sense explanations for how SEO meshes with real estate management.
Note: Post updated to correct Rebekah Neumann’s title.
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