Softbank is plowing an additional $1.1 billion into WeWork. This means the office giant now has $4.1 billion in “available cash and unfunded cash commitments.” The company also wrangled its way out of many of the lease obligations everyone was worried about last year. It would be interesting to see some numbers on that, but WeWork’s overall liabilities have been reduced dramatically.
Adam Neumann’s reliance on Softbank forced WeWork to grow at an unreasonable pace and spend money on unnecessary projects and acquisitions in order to appear more tech-like. Neumann enjoyed Softbank’s the all-you-can-eat buffet, but then realized he’s not able to leave.
Softbank pushed WeWork towards a risky strategy. Softbank is also in a position to reign in WeWork’s growth:
The only way out of the Masayoshi Hotel is with Softbank’s help. WeWork is already “stuck” with the billions it raised from its existing investor. Ironically, in order to grow WeWork to its full potential, Softbank will have to refrain from pushing the office company towards startup-like growth and performative investment in tech.
WeWork is already doing many things right. It just needs to keep doing them, more slowly, with a simple story that shows landlords and lenders that buildings perform better with a WeWork in them. Some of this is just a matter of time — with every passing day, demand for space-as-a-service is growing and owners are coming to terms with the fact that the old way of leasing space is obsolete. Luckily, many landlords are greedy, and if they see that WeWork is consistently making money using their assets, they’ll want a piece of it and offer the company management deals or revenue-sharing arrangements instead of asking it to sign leases.
The opportunity for WeWork is to create more partnerships with landlords. The structure of such partnerships is one of the topics we explore in the Future-Proof Office Course. Industrious, perhaps WeWork’s most formidable competitor, has been focused on such partnerships for a few years and made great progress. WeWork’s implosion only made such deals more popular.
While WeWork is getting back on its feet, some of its competitors are aiming for the clouds. As the WSJ reports:
Zoom has thrived during the pandemic by offering virtual conferences as an alternative to office gatherings. Now, a firm in the events and meetings business is launching an alternative to Zoom.
Convene, a startup real-estate firm that provides co-working space and meeting locations inside office buildings, introduced last month a video meeting service that will try to recreate as much as possible the feeling of attending a business conference.
Hosts can hold panel discussions and breakout sessions online. Up to 3,000 attendees can send questions to speakers in real time, see a list of event attendees and start private video chats with colleagues, friends or potential clients.
Convene is working on the assumption that a great event is not just about “space”. Offline, you don’t drop your guests into an empty room and expect them to have a great experience. The same is true online.
Convene’s virtual solution is targeting companies that seek a differentiated experience. It offers help with planning and producing the event, analytics, and hands-on support to ensure the audience is delighted and engaged. More importantly, Convene can help clients create hybrid events: Some guests can attend an actual convene location, while others can join remotely.
Convene’s goal, as I understand it, is not to become the next Zoom. It’s to help its corporate customers maintain the same level of quality in our new, remote era. Once COVID is behind us, hybrid meetings and events will likely grow in popularity.
Convene’s move is not without risk, but it’s a risk worth taking at this point. I’m much more worried about companies that assume everything will go back to normal in a few months. There are some off-the-shelf solutions for virtual meetings that go beyond the simple Zoom room. But these companies do not provide the type of white-glove service that Convene is known for; nor do they offer physical spaces that integrate with their virtual ones.
The company’s promise — “We create your best day at work. Wherever it happens.” — is spot on. Figuring out what that means in practice is a challenge shared by all landlords and operators. It’s good of Convene to address this challenge directly.
Cities for Granted
COVID hit superstar cities such as New York and San Francisco extra hard. As Noah Smith points out, rents have plunged, job listings declined more than in other cities, and wealthier residents have left — for now, or forever.
Smith illustrates how the population of America’s largest cities declined during the second half of the 20th Century. Some cities, such as Detroit and St Louis, never made it back. A similar thing happened in Manchester and Liverpool and, for a while, even in London.
Yes, cities have been around for thousands of years. But as Geoffrey West points out:
Just two hundred years ago the United States was predominantly agricultural, with barely 4 percent of the population living in cities, compared with more than 80 percent today.
And on a global scale, only 15% of the world’s population live in cities even a century ago; and only 30% by 1950.
Too many people take cities for granted. My next piece (Monday, I hope) will explore West’s research on the unique advantages of urban density. And compare them with Marshall McLuhan’s prediction that the world’s largest cities “will disappear like the dinosaur."