The WeWork founder Adam Newman
In 2008, the American economy was in the midst of the crisis: the mortgage collapse, the bankruptcy of large banks, the fall in the value of companies, rising unemployment. 29-year-old immigrant from Israel Adam Newman, who at that time managed to change a few businesses, saw in it the prospects for his idea: to rent an office, break it down into smaller zones and pass were on the street professionals at an inflated price. It was not just about the sublease Newman wanted to create a community that would unite specialists in various industries and would enable them to work in one place, exchanging experiences.
Contrary to the skepticism of landlords and investors Newman for eight years brought its network of coworking WeWork in the top ten of the highest rated and fastest growing startups in the world and earned her $1.5 billion.
The model of the kibbutz
The future billionaire was born in Israel, in the city of Beersheba. He grew up without a father. Early years Newman played in American Indianapolis, where his mother worked as a doctor, and then the family returned to Israel and settled in kibbutz (agricultural settlement) Nirim, located 2 km from the Gaza strip. Adam’s childhood was difficult, relations with the local kids he was the only visitor, not evolved. In addition, the boy had dyslexia, and to learn he wasn’t interested. Instead of school, which played truant, he preferred Windsurfing. Reaching conscription age, the young man joined the Navy, where, as he later said, got leadership skills. Only in the army he served for five years.
While Newman served in the army, his sister ADI won the title of Miss Teen Israel and moved to new York to pursue a career model. In 2001, Newman followed her and entered the Bernard Baruch College, where he studied entrepreneurship. At the same time he ruled the income sisters.
The first thing that surprised him in new York, was riding in the Elevator with neighbors around the house in complete silence. “Why is no one talking to each other? We live in the same building. How could you with no one to meet you?” — he turned to his sister. The kibbutz where Newman spent his childhood and youth, is an agricultural municipality. The life of the kibbutz built on the principle of collective ownership of property and means of production, equality in work, social services and consumption. All the inhabitants of the kibbutz knows each other, children live in one room, separate from the parents. Newman suggested that the sister competition: who will lead in building more friends in a month. The competition he lost (She was a supermodel,” explained Newman), but by the end of the month, they had buddy on each floor, and the energy of the house has changed,” said Newman.
Competition with sister gave him the idea of the business in the form of rental property, organized on the principle of communal living. He developed a business plan and sent it to the competition in College, but his application has not passed the second round. “I didn’t get a chance to talk about the concept, and the Dean said 23-year-old boy with no experience in real estate, will never be able to earn enough money for the creation of such a business,” he recalled.
Newman at the time left the idea of real estate and engaged in trade of clothing. But his first business manufacturing women’s shoes with collapsible heels (this idea came to him on the catwalk sisters) — failed. Newman then moved on to children’s clothing: first traded overalls with built in knee pads under their own brand Krawlers, and in 2006, together with clothing designer Susan Lazar opened an online children’s clothing store Egg Baby, which still works.
In that time he met his future wife Rebekah Paltrow is a cousin of actress Gwyneth Paltrow, who subsequently became his wife and the mother of his four children. Future wife convinced Newman to leave the children’s clothes and return to real estate.
The idea to make a lease of office spaces divided visited Newman in January 2008, when he had to take a job in his office, to cut costs. A few weeks later Joshua Guttman, the owner of the apartment, which was removed to Newman, and told him that he bought a former warehouse with an area of 5 thousand square feet (465 square meters) and plans to rent it for offices for the price of $1 per 1 square foot (0.3 square meters). But Newman was more interesting option. “Let me take one floor. I will split it into 15 offices and take the [fixed-price] for $1 thousand per month for each. We will earn $15 thousand, you can take $7.5 million to himself, $2.5 million we will pay to the Secretary, and I will get the remaining profit. Guttman liked the idea, and he asked Adam to remove the discount and the remaining floors for the same model.
Obtaining the consent of the owner of the building, Adam shared his idea with his partner Miguel McKelvey, who worked as an architect and developed a project plan for stores American Apparel. By the next morning he came up with the name of the company (GreenDesk), logo and website design, and developed a rough plan for the future.
It was assumed that the space will be decorated in environmental style, and clients will be able not only to operate freely, but to have free coffee. Newman developed the project while doing the Egg Baby, and McKelvey quit his job. The young people were preparing the office to open on their own, but shortly before launch, in the spring of 2008, has worsened the crisis, and Guttman questioned the success of the company. “Guys, I’m not mad at you, but it is unlikely to succeed,” he said then. — In the fall of the economy people will not have to rent offices”. “It’s not just rent. It’s better. People will want to be next to each other, some get laid off, they will develop new businesses, some companies will want to reduce its size in order to save,” — said Newman. He was right.
Classifieds site Craiglist, and word of mouth brought in GreenDesk many tenants — from freelancers and small shops to the blogging platform Gothamist. “Falling faster than the economy, the more we received orders,” said Newman. Soon GreenDesk opened seven offices in Brooklyn and Queens, but the model of co-working did not suit its founders: it was not open common spaces and rooms for programming, which, in their opinion, would serve clients. They believed that the need to invest more money in the design of workspaces and services for customers.
Their partner did not think so, and the result a year after the founding GreenDesk friends sold her to Gattman for $3 million, Of which $300 thousand they received a lump sum and immediately invest it in equipment for the new office in SOHO — seven-storey building with an area of 915 square meters and the remaining periodic installments, in which lived the next two years. To the repair of a new premise Adam decided to connect their Israeli friends. He invited them to stay with him for two weeks and paid for the plane tickets. “They thought that they were going to have fun, but in the end worked round the clock,” recalled Newman. A new coworking space, which is called WeWork, opened doors to customers in February 2009. Just a year after the launch of WeWork got its first profit.
How does WeWork
Office in SOHO opened at a time when business was recovering after the crisis. WeWork proposed to divide the working space to startups, freelancers and small companies who wish to save on rent. In an interview with the Real Deal, he told me that the concept of WeWork came to him in the process of communicating with the Kabbalists with whom he was acquainted Rebecca. He observed role in their community social ties play, and wanted to transfer this principle into the business.
The main idea of the Newman led as the interior design and the services offered by WeWork customers. The design of each office WeWork unique. Newman and McKelvey wanted to get away from the concept of classrooms, believing that it interferes with work and relationships. The client, depending on needs, can rent a workplace in the open-space (be it a Desk, sofa or window sill), a separate soundproof office with all necessary office equipment or meeting room. The cost depends on the type of rental space, the availability of equipment and time of rental. It provides the back office for conducting accounting operations, assistance in obtaining health insurance and other services.
Each of the coworking WeWork has a separate space for teams, meeting rooms, relaxation areas, game rooms, free coffee, tea and even beer. The company allows you to come to co-working with animals. Offices operate around the clock. WeWork regularly arranges for its customers parties or meetings with your business partners, as well as organizes various recreational and educational activities: yoga classes, lectures on new technologies, film screenings, tournaments in ping-pong and so on. WeWork every client gets access to the WeConnect network, which can communicate with other members of the network, to communicate, to find customers or, conversely, performers.
WeWork in numbers
At $1.5 billion estimates the personal fortune of founder and CEO of WeWork Adam Newman, Forbes magazine
At $16 billion , according to estimates, the cost of WeWork
Approximately 500 thousand sq. km. made up the total area of office spaces of the company worldwide
£2,92 billion (or about $4.2 billion) is the market capitalization one of the main competitors WeWork — Regus PLC — on June 2. The total area of its office space is approximately 3.7 million sq. m
$45 is the minimum cost of services of WeWork
Approximately $1.4 billion WeWork has attracted from investors since its founding in 2008
376 offices on all continents, the company plans to open by 2018
Source: company data, WSJ, Bloomberg
According to Forbes, by November 2014 at WeWork was 14 thousand clients, the company now serves more than 50 thousand people. Freelancers, young entrepreneurs and small companies share work space with successful companies like Reddit, Fitocracy, Yelp, AirBnB, NewYork Tech Meetup, a platform Consumr and Business Insider magazine. Among the clients of coworking Corporation PepsiCo, farmhand Merck, American Express payment system. WeWork contract rents space in buildings of such large property owners, as Neil Bender, the portfolio of which is estimated at $1 billion.
In 2011, when WeWork was only one office in SOHO, one of the early investors of the company, the developer of Jack Schreiber, proposed to open a second office in a building near the Empire state building, which belonged to three brothers, immigrants from Iran. The rent was low, but the repair would take about $1 million of such money from the Newman and McKelvey was not. But Schreiber assured that the building can be obtained if to persuade one of the brothers who lives in new York. “We were sitting in the office of WeWork in SOHO, and he was very excited,” said Newman. They McKelvey spoke with the Iranians a few hours and drank half a bottle of whiskey. At the end of the evening, the Iranian left with a signed contract. A month later the first floor of a new co-working space was ready.
In 2012, Newman has opened three offices in new York. “We were both passionate about real estate,” says Newman. — During the crisis there were these empty buildings, and these people were freelancers or founded the company. I knew there was a way to coordinate their actions”.
By the time the company drew the attention of the venture capital Fund Benchmark, which previously invested in eBay, Twitter and Uber. Prior to WeWork, the Foundation worked with real estate, therefore, Benchmark managing partner Bruce dunlevy arrived in new York to understand what this company different from all the others. “It reminded me of eBay of 1997. In both companies there is something what is impossible to understand the first time”, — he said in an interview with Bloomberg.
As told Newman in a recent interview with Vanity Fair magazine, Benchmark was aware of him after he found out that three out of ten companies in new York, in which the Fund invested during the period was based in the WeWork spaces. In 2012, Benchmark decided to invest in the company, and it was valued at $100 million During the next investment round in 2013, when the company put the investment Bank Jefferies, the assessment rose to $450 million In December of 2014, the company has already borrowed $355 billion and received an estimate of $5 billion, and after only six months — $10 billion At the time, according to Fortune, investors, including Benchmark Capital, Harvard Management Co., Fidelity Investments, T. Rowe Price, JP Morgan Chase, Wellington Management, and Goldman Sachs, have invested a total of more than $900 million.
What stake WeWork left themselves the founders, was not disclosed. But in the June 2015 edition of the Real Deal, citing research company PichBook reported that Newman and McKelvey sold to investors at least 37% of the shares of WeWork.
In March 2016, the company raised $780 million from Chinese investors and was valued at $16 billion According to the Wall Street Journal, however, an investment round led by Chinese funds amounted to only $430 million of the Investors were Chinese, and Legend Holdings Hony Capital.
Now 99 WeWork offices in USA, England, Mexico, Canada, France, the Netherlands, Germany, Israel, Hong Kong, China, South Korea. Soon the company plans to enter in India and Australia. As explained by Newman, offices were opened in cities with a high IQ”. According to the magazine the Australian Financial Review on 25 may, the total area of the offices of WeWork is almost 500 thousand sq. m.
By 2018 the company plans to open 376 offices on all continents. In the same year, WeWork expects revenue of $2.9 billion and an operating profit of $942 million, whereas at the end of 2014, WeWork expected to “only” $75 million in revenue and $4.2 million of operating profit.
In 2015, Newman took 16 th place in the ranking of Forbes richest American entrepreneurs under the age of 40 years. In 2016 he first came to the rating of the richest people in the world, taking 1198-th place with a fortune of $1.5 billion, and in the list of the richest natives of Israel, having occupied 11-e a place.
According to Forbes, customers WeWork tolerant of high prices for the company’s services. A month work at your very own table will cost about $350, in a separate office — $650 per person. But when WeWork has launched one of coworking in London’s South end, the high cost of rent has not prevented to provide a filling at 80% before the opening — startups could monthly savings of hundreds of dollars on the Internet, coffee, security, secretaries, printers, and other associated costs.
Some experts fear that WeWork may not survive the fall in property prices. Sam Newman is confident that the demand for coworking with the fall of the market is only growing, he made sure of by running the Green Desk in the Wake of the crisis.