Charting The We Company’s S-1

It’s finally happened, the moment real estate startup founders, remote workers, and arch financial nerds have been waiting for: The We Company (neé WeWork) filed its public S-1 registration with the Securities and Exchange Commission, a key step on the shared desk and managed office space behemoth’s path to becoming a publicly traded company.

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Earlier this morning, Crunchbase News editor in chief Alex Wilhelm covered the headline numbers and posed some questions based on his read of the regulatory filing. As a rejoinder to prior coverage, we thought it might be fun to chart some of the numbers found deeper within the registration document. If charts and graphs are your thing, this is the post for you.

Before diving into those though, let’s start by saying that we’re in awe of the size of The We Company’s haul of venture capital. In absolute units, it’s one of the most capital-laden private companies in the current startup cycle.

The We Company raised nearly $11.8 billion in cumulative debt and equity funding, according to Crunchbase data. Crunchbase data also lists $1 billion in Series A and Series B funding for WeWork China, one of the company’s several regional joint ventures.

SoftBank, its SoftBank Vision Fund, and related entities are the largest financial backers of The We Company, by far. On page 102 of the filing, The We Company states that SoftBank and related entities “have invested or committed to invest in us and our subsidiaries approximately $10.65 billion” in various parts of The We Company over several separate transactions.

SoftBank and related entities invested $1.65 billion across its regional joint ventures in China, Japan, and the greater Asia-Pacific region. It also acquired billions of dollars in company securities through convertible notes, tender offers, and warrants detailed in the filing.

Additionally, SoftBank is a “99.99% equity owner in the Creator Fund,” which WeWork will invest in companies participating in its Creator Awards program. SoftBank committed to invest $160 million between September 2017 and January 2021, and, according to the filing, has deployed $50.7 million of this venture capital fund as of June 30, 2019.

Entities affiliated with Benchmark, which led the company’s Series A round, and J.P. Morgan are the only other institutional investors holding over five percent of the company’s stock.

The We Company implements a dual-class share structure, which affects how the company is governed. Company shares typically grant holders rights to company revenue and the proceeds of a liquidation event, but they often carry voting rights as well. The We Company and its CEO, Adam Neumann, are holders of Class B and Class C shares, which carry twenty times the voting power as the Class A common shares which will be issued to the public and existing investors upon conversion of their preferred shares purchased in the company’s various funding rounds.

This means Neumann will have final say over how the company marshalls its considerable financial resources in pursuit of continued growth.

The We Company’s S-1 filing discloses some metrics which highlight growth and its corporate strategy.

As of the end of Q2 2019, The We Company’s membership tally tops out at 527,000. This figure includes regular WeWork memberships and what the company calls on-demand memberships, “which provide access to shared workstations or private spaces as needed, by the minute, by the hour or by the day.”

It’s not just catering to hot-desking freelancers or small startups seeking a conveniently-located glass cubicle to build out of. The We Company says that 40 percent of its memberships come from organizations with over 500 employees, which it calls its “enterprise” customers. In other words, a growing chunk of WeWork’s membership (and, accordingly, its revenue) comes from corporations that use WeWork spaces as satellite offices for remote teams. The We Company says that 38 percent of companies in the Global Fortune 500 have memberships at its spaces.

Fueled by billions of dollars in venture capital raised in 2016 and 2017, the company rapidly expanded its geographic footprint, opening WeWork locations in new cities around the world and adding spaces in its established markets.

The company reports that over half of its memberships are outside the U.S. 

But this growth comes at a price. The We Company has yet to turn a profit, despite growing its revenues substantially over the past few years. Through the end of Q2, The We Company reported generating $1.535 billion in revenue so far in 2019, but it incurred a net loss of just under $689.7 million. Annualized, the company is on track to sustain a smaller loss than it did in 2018, but not by all that much. 

The We Company states its revenue run-rate is $3.3 billion as of June 30, 2019, and that it has a “committed revenue backlog” of $4 billion. The We Company says it has a number of ways to grow its core business, including expanding its geographic footprint even wider, “enhancing product and service offerings,” and continuing to cultivate and extend its relationships with enterprise clientele.

WeWork, The We Company—whatever you wish to call it—is one of the most-watched unicorns marching toward a public market debut. To be clear, despite all the branding flash and fancy furniture, it still operates like a real estate company and is subject to the economics of that sector. Alex Wilhelm’s back-of-the-envelope math from this morning suggests that its gross margins (or a proxy metric for them) are somewhere around 20 percent for the first half of 2019. Not bad, but also nowhere near the fat profits reaped from more “traditional” venture-backed software businesses.

WeWork’s last private market valuation was $47 billion, which it earned following an additional $1 billion equity investment by SoftBank in January 2019. As it stands, The We Company says it wants to raise $1 billion in its initial public offering. The price of its shares, and the value of the company, are up to Wall Street to decide.

Illustration: Li-Anne Dias