The rise and fall of WeWork, the co-working giant, stands as a testament to the power of visionary, charismatic leadership as well as the dangers of believing in said vision without double-checking if it meshes well with reality.
At its zenith, WeWork was hailed as a disruptor, revolutionizing office space with its innovative concept. Just before its IPO and its fall from grace due to highly questionable financial results, it was valued at $10B.
The company's ability to raise staggering amounts of capital from notable investors such as Softbank’s Vision Fund, JP Morgan Chase, Goldman Sachs, Benchmark Capital, and others was a cornerstone of its success.
Let's analyze the deck the company used to raise $355M in 2014 in order to extract a few useful lessons that you can apply to your own pitches.
1. Emphasis On Innovation and Disruption
Adam Neumann’s vision for transforming the way people work and interact with office spaces was both bold and captivating. He presented WeWork as more than just a real estate venture—it was a community, a lifestyle, and a revolutionary concept. It was aligned with the culture and sense of life of the new generations.
The main storyline of the whole pitch is summarized well in slide 6 - “work is changing”. WeWork's pitch was built on the premise of disrupting the traditional office leasing model. The company positioned itself as a solution for the evolving needs of a changing workforce.
The idea of flexible and aesthetically pleasing co-working spaces appealed to the modern sensibilities of collaboration, networking, and work-life balance. This innovative approach to an age-old industry was compelling to investors looking for the next big thing.
2. Network Effect And Scalability
One of the main reasons tech startups become monopolies in their narrow niches is because they benefit extremely strongly from network effects. The more users there are on the platform, the more valuable the platform becomes. This positive feedback loop drives growth for the first movers on the market while serving as a barrier to entry for newcomers.
This is typical and well-understood for software companies due to their inherent scalability due to extremely low marginal costs. It is, however, much less common in brick-and-mortar businesses for which the costs of growing are much more substantial.
In that context, it’s very impressive how the pitch deck presents WeWork as a startup benefiting from the same effects, despite being mainly a brick-and-mortar business. This is visible on slide 8 - “The WeWork effect”.
As more members joined WeWork spaces, the value of the platform increased for all participants, leading to a self-reinforcing cycle of growth. WeWork's pitch emphasized this scalability potential, portraying the company as a global phenomenon with the ability to reshape how people work across the world.
Investors were enticed by the idea of investing in a company poised for rapid expansion and dominance in its sector. Commercial real estate is a huge industry. If WeWork had the potential to establish itself as a market leader in the same way that software startups do, its upside potential would be more than extreme.
3. Community-Centric Branding
WeWork's branding was not just about office space; it was about fostering a sense of community. The company positioned itself as a place where like-minded individuals and companies could come together to collaborate, network, and grow. This community-centric branding resonated with the desire for meaningful connections in an increasingly digital world. Investors saw the potential for this unique branding to drive member loyalty and differentiation.
This emphasis on community over the physical space is clearly visible on slide 29. If the emphasis was on space, there would be no barrier to entry for competitors and WeWork would be yet another office rental company. With the emphasis on community, however, the brand value rises a great deal, which makes the overall narrative of exponential growth much more compelling.