Looks like Goliath investor Softbank may place yet another huge bet on the WeWork. Softbank already put nearly $4.5B into the real estate play that has been rumored to be preparing for a public offering. According to filings, WeWork losses continue to mount as they race to expand the footprint of the co-office business.
I was struck months ago when David Galvan, a longtime friend of LSA and TAI, said to me, in effect, “Maybe instead of being in technology, we should be in real estate like WeWork.” Dave has always been an astute observer. His take was that the co-office model was the big winner in the start-up ecosystem. Seems like Softbank agrees.
What interests me about the seriously high valuation — around $40 billion — is that the WeWork model seems relatively easy to replicate. Sure they’ve built a brand that has become a noun and maybe that alone is the reason for the considerable valuation. But finding vacant office space around the country and the world to develop into co-office space is easy.
WeWork has focused on major metro markets and even major streets. You know, the ones we all recognize instantly — Mission Street in San Francisco, 23rd Street in NY, Michigan Avenue in Chicago, Barton Springs in Austin and so on. Yet they’ve only covered a small portion of the U.S. market. According to this blog post shared space represents only 1% of the total office market. And WeWork does have a large competitor in Regus, which is now almost 30 years old has 3,000 locations in 900 cities and 120 countries. There are other competitors as well.
What is driving this? Perhaps it is as simple as the thirst entrepreneurs, business owners and professionals of all shapes and sizes that want to feel connected to other like-minded individuals. As you scroll through the listings of all these co-office options the common theme is one of community and connection.
As much as technology enables us to be digitally connected, the truth may be that humans still desire interaction with other humans. I saw this up close last week when I attended a gathering of high-performing Managed Service Providers (MSPs) at a Robin Robins event in Las Vegas. When I asked the MSPs why they fly hours to be part of the event, they universally said something along the lines of “the opportunity to connect with other business owners.”
I guess what I am saying is that community and connection are really what’s at play here. WeWork recognized this human need and turned it into a multi-billion dollar business. How is your business providing a platform for customers (consumers or business owners) to connect? If your platform isn’t, maybe you should examine how it can.