Is WeWork still expanding in Seattle?
The embattled real estate company's newest space in the city, a 70,000 square foot renovated office building, was set to open in "Fall 2019" in Capitol Hill, right next door to Stranger World Headquarters.
Currently, the building isn't finished, WeWork hasn't moved in, and with each day more scandals about the company surface. The future of WeWork feels tenuous. Stranger staff continues to wonder if our new neighbors (an approximate 1,300 or so of them) will ever join the neighborhood.
But on my way into the office today, three women in front of the hollow WeWork building handed out coffee and donuts. "We're moving in starting in January!" A member of the WeWork community team announced to me. "We're so excited to be part of the neighborhood," she said with a toothy smile. A different member of the team complimented my boots. They never stopped smiling.
The friendliness was surreal, considering the fate of the company.
Earlier this morning, news broke that the startup will lay off 2,400 employees in an attempt to cut costs and "right-size" the company. The layoffs account for nearly 20% of WeWork's employees.
How the company got to these layoffs is one of the most spectacular and dramatic stories in the history of American business.
To understand the company's rapid decline, it's helpful to understand what exactly WeWork does, but that's easier said than done.
The New Yorker has described WeWork's business strategy as “intoxicating” and “vague.” WeWork offers “homey, convivial co-working spaces” that attempt to reimagine the real-estate industry. At its core, WeWork offers desks that workers, and companies, can rent out. But, they fluff it up with sleek designs and amenities, like cozy seating options and kombucha on tap.
Really though, it's not revolutionary. It's just real estate.
This past January, WeWork was lauded as the unicorn of all unicorns. It was valued at an eyebrow-waggling $47 billion. Investors believed WeWork's charismatic CEO Adam Neumann when he declared he would create the first "physical social network." The company suggested they had a cult-like following. "They're coming to us for energy, for culture," Neumann would say, according to WeWork insiders.
The grand vision worked. WeWork was flooded with cheap cash and encouraged to create ridiculous side projects like WeSail (a floating boat-themed WeWork), WeGrow (a private school), WeLive (apartments), and WeBank (you guessed it, a bank).
The Wall Street Journal has long been skeptical of WeWork, calling the company a start-up "funded by pixie dust" in 2017. Two years later, in the fall of 2019, the "pixie dust" assessment proved to be true.
What catalyzed this was WeWork filing its IPO paperwork, which gave the public an inside look at its financials, this past August.
Soon after, Scott Galloway, a professor of marketing at NYU Stern School of Business, published a scathing blog post. It outlined everything that was rotten in We HQ, laying all the red flags bare—its cultish company culture; its inflated metrics; and, wait, why had co-founder and CEO Adam Neumann sold $700 million in stocks?
Maybe if we had paid attention to the lavish and ridiculous ways WeWork was blowing money, like treating eight thousand people to a three-day festival in London with performances by Lorde and a meditation led by Deepak Chopra, we'd have figured out the company's impending doom faster.
In September, WeWork's valuation dropped by over $30 billion (it went from around $47 billion to about $10 billion), Neumann stepped down as CEO (a decision influenced by a $1.7 billion pay-off from SoftBank later dubbed the "golden parachute"). The following week, WeWork delayed its IPO. Galloway published another blog post: “The lines between vision, bullsh*t, and fraud are pretty narrow,” he wrote. “Something is wrong. Something stinks. Something … Just. Doesn’t. Add. Up.”
And then the floodgates opened.
There were headlines about Adam Neumann hot-boxing private jets to Israel while a pregnant woman was on board, "treating" staffers to tequila shots and a performance by a member of Run-DMC after discussing layoffs to save the company, trademarking the word "We" and making WeWork buy it from him for $5.9 million. There were toxic phone booths that had high levels of formaldehyde in them that WeWork allegedly knew about for months before pulling them from offices.
As DigiDay put it, "On a majority of days this past September, there were more stories published about WeWork than there were about the topic of Donald Trump’s possible impeachment." The amount of hyperlinks in this article seems to confirm that evaluation.
Despite this astonishing crash, last month the Port of Seattle announced a partnership with WeWork to create a "maritime start-up accelerator." This happened at a pivotal time for WeWork, when they were desperately seeking good press and a bailout. "WeWork will bring people together," Port Commissioner Fred Felleman told the Seattle Times while discussing the deal. The comment came days after allegations of sexual assault and harassment were leveled against WeWork.
Then, near the end of October, SoftBank, WeWork's biggest investor, stepped in and took control of the company. The company's valuation dropped to $8 billion. The company's valuation continues to drop.
After SoftBank's rescue, WeWork's fate in Seattle seemed rocky, especially once Martin Selig and WeWork dissolved a deal for a 36-story Belltown building in October. Stranger staffers kept an eye on what was happening next door. Everything was quiet.
Back in September, the Seattle Daily Journal of Commerce reported that Microsoft would be a tenant of the new Capitol Hill WeWork. The tech giant was planning on taking up an entire floor.
In mid-October, The Stranger asked Microsoft if they were still planning on renting space in the WeWork, considering the company's spectacular fall—this was around the time Scott Galloway was asking, "At what point does [WeWork's] malfeasance become fraud?" A Microsoft representative told The Stranger the company had "nothing to share on this" at that time. Today, The Stranger reached out to the company about whether they are still planning to move into the building this coming January, and a representative said there's "still nothing to share from Microsoft on this."
This morning, I was surprised to see the WeWork welcome wagon outside our office gifting strangers coffee and donuts. Back at my desk, I read the news of the company's mass layoffs. I scrambled downstairs to follow-up with the WeWork representatives. They were gone. So were the donuts. I tried to call the phone number on WeWork's newsroom page. The number had been disconnected. The normal reach line was an automated phone tree that led nowhere. The online help chat was no help at all.
I guess we'll see you in January, WeWork?
Stranger Digital Editor Chase Burns contributed reporting to this post.