WeWork's $20 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate

With over $4B in funding, WeWork is expanding aggressively at home and abroad and pursuing diverse investments that have raised eyebrows. But its real-estate-as-a-service offering and trove of data on optimal office design could make the company's value prop far more than a marketing ploy. WeWork is a real estate company valued like a tech company. At least, that's the rap on WeWork from critics who think it can't support its $20B valuation in private markets. Backed by Japanese tech and telecom giant SoftBank Group, WeWork specializes in rent arbitrage -- leasing and developing properties at one price, then turning around and renting them out at much higher prices. Its recent run-up in funding -- raising some $4B in 2017 alone -- has given the company the firepower to expand quickly without worrying too much about fundamentals. Companies traded in public markets that follow the same business model trade at much lower sales multiples than WeWork. Detractors say WeWork has earned its valuation by putting hipster touches on formerly drab spaces and positioning itself as a startup incubator, then charging sky-high rent. On top of that, critics point to WeWork's investments in seeming distractions -- like its upcoming WeGrow elementary school and a wave pool company -- as more examples of a tech company with overreaching ambitions. But WeWork's recent shift to safer real estate commitments and its emphasis on longer-term renters and enterprise clients suggest the company could have legs. WeWork claims it's amassing a trove of data on ideal office locations and layouts, and using software to determine everything from ideal desk layout to optimal conference room size. The company is leveraging this data not only to improve its own locations, but also to become an outsourced facilities manager, at a time when big enterprises are trying to shed real estate management from their portfolios.