WeWork is valued at a whopping US$20 billion, but right now, it’s mostly hype

Photo credit: Eloise Ambursley

This is a Discuss post, where we feature short but insightful opinions from the Asian tech community on startup, entrepreneurship, and tech topics.

With over 50 locations since its 2010 founding, WeWork has become a global co-working giant. This and the company’s growth potential have led some to value it at US$20 billion to US$40 billion.

But a recent report by the Financial Times questions this valuation. Using the same valuation multiple as a peer like IWG (formerly Regus), WeWork’s actual valuation was closer to US$3 billion.

So is the valuation realistic? Or is this just “WeWork hype?”

Editor’s note: Answers have been edited for clarity.

Jianggan Li, founder of Momentum Works

The interesting part in all this is the bet by SoftBank’s Vision Fund. While we are not part of the decision-making process here, there are two possibilities:

1. Vision Fund believes that the large capital will enable WeWork to actually dominate the market.
2. There might be something about Vision Fund’s internal decision-making structure and incentives. This earlier article by the Financial Times reveals quite a bit.

Sharing workspace is a property play. Of course, there could be additional offerings for the same customer base, such as the flats and gyms mentioned. Looking at many other business models (such as shared bikes), conversion rate will be low for additional, vaguely-related offerings. Such additions also only make sense if you have significant market share–if not dominance or monopoly.

This is far-fetched.

The undeniable thing is that WeWork needs a lot of capital just to achieve market dominance. Shared offices are a local business, similar to ride-hailing. To win over the market (and kill off competitors), WeWork needs to control the supply. What are the ways to achieve this?

Let’s discuss