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WeWork gets into the food business, backing the superfood startup of big wave surfer Laird Hamilton
WeWork CEO Adam Neumann has been described as an avid surfer, one who has been known to grab his board and go, both in the Hamptons in Long Island, where he reportedly owns a home, as well as in Hawaii.
Maybe it’s no surprise, then, that WeWork is now also investing in a so-called superfood company that was created several years ago by big wave surf star Laird Hamilton, who Neumann was apparently surfing alongside just last week. In a video call with Neumann on Monday, a Fast Company reporter noted that Neumann is currently sporting a cast on one of his fingers, having broken it during the outing.
How much WeWork is investing in the startup, Laird Superfood, is not being disclosed, but according to the food company, the money will be used to fuel product development, acquisitions and to hire more employees. A press release that was published without fanfare earlier today also notes that Laird Superfood products will be made available to WeWork members and employees at select locations soon.
Some of those offerings are certainly interesting, including “performance mushrooms” that it says “harnesses the benefits” of Chaga, a fungus believed by some to stimulate the immune system; Cordyceps, another fungus that’s been used for kidney disorders and erectile dysfunction; and Lion’s Mane, yet another fungus believed by some to stimulate nerve growth in the brain.
The company suggests adding one teaspoon of the mushrooms each day to one’s coffee, tea or health shake.
Laird Superfood also sells beet- and turmeric-infused powdered coconut waters, “ultra-caffeinated” coffee and a variety of coffee creamers, including a mint-flavored creamer and a turmeric-flavored number.
It’s for a very specific consumer, in other words — presumably one who really likes turmeric, for example. Then again, what works for Laird Hamilton will undoubtedly work for a lot of people who’ve watched his decades-long career with amazement.
Hamilton seems to be selling what he actually ingests, too. As he told The Guardian last spring of his own diet: “I love espresso. You could give me five shots of espresso, a quarter stick of butter, a quarter stick of coconut oil and other fat, and I’ll drink that. I could go for five or six hours and not be hungry, because I’m burning fat.”
Organic food startups have been raising money left and right in recent years, including from traditional food companies, as well as from venture investors, who’ve poured billions of dollars into healthy snacks and drinks, with mixed results.
For WeWork’s part, the investment isn’t the first that has seemed somewhat far afield for the company. In one of its more surprising bets to date, WeWork invested in a maker of wave pools in 2016. The size of that funding was also undisclosed.
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Daily Crunch: Well Facebook, you did it again
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here:
1. Facebook is the new crapware
Well Facebook, you did it again. Fresh off its latest privacy scandal, the troubled social media giant has inked a deal with Android to pre-install its app on an undisclosed number of phones and make the software permanent. This means you won’t be able to delete Facebook from those phones. Thanks, Facebook.
2. The world’s first foldable phone is real
Chinese company Royole has beaten Samsung to the market and has been showing off a foldable phone/tablet this week at CES. While it’s not the most fluid experience, the device definitely works at adapting to your needs.
3. CES revokes award from female-founded sex tech company
Outcries of a double-standard are pouring out of CES after the Consumer Tech Association revoked an award from a company geared toward women’s sexual health.
4. Everything Google announced at CES 2019
Google went all in on the Assistant this year at CES. The company boasted that the voice-enabled AI will make its way onto a billion devices by the end of the month — up from 400 million last year. But what’s most exciting is the expanded capabilities of Google’s Assistant. Soon you’ll be able to check into flights and translate conversations on the fly with a simple “Hey Google.”
5. Rebranding WeWork won’t work
The company formerly known as WeWork has rebranded to the We Company, but its new strategy has the potential to plunge the company further into debt.
6. Despite promises to stop, US cell carriers are still selling your real-time phone location data
Last year a little-known company called LocationSmart came under fire after leaking location data from AT&T, Verizon, T-Mobile and Sprint users to shady customers. LocationSmart quickly buckled under public scrutiny and promised to stop selling user data, but few focused on another big player in the location tracking business: Zumigo.
7. The best and worst of CES 2019
From monster displays to VR in cars, we’re breaking down the good, the bad and the ugly from CES 2019.
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For SoftBank, no majority stake in WeWork as it scales down talks from a new $16 billion investment to $2 billion
Several weeks after it was reported by the WSJ that two of the biggest investors in SoftBank’s massive Vision Fund vehicle were cool on its planned $16 billion investment in the coworking company WeWork, those plans have changed radically, says the Financial Times.
According to its sources — and confirmed by our own — SoftBank is now in “detailed negotiations” to invest a comparatively modest $2 billion more into WeWork, plans that could be firmed up as soon as the end of this week.
A WeWork spokesperson at the company’s New York headquarters declined to comment.
The development is both surprising and unsurprising. The government-backed funds of Saudi Arabia and Abu Dhabi, which committed $45 billion and $15 billion, respectively, to the Vision Fund, haven’t been been known before to push back against the person pulling its levers, SoftBank CEO Masayoshi Son .
Indeed, given the vast sums of money that the Vision Fund has put to work since being announced in late 2016, it seemed there were few if any checks on Son or the 80-plus people who work for the Vision Fund.
Just some of its many bold bets include, most recently, a $500 million investment in Cambridge Mobile Telematics, an eight-year-old, Boston-area company that previously raised just one round of funding of less than $20 million to build out its technology. The Vision Fund also recently led a $400 million round into Emeryville, Ca.-based Zymergen, which manufacturers molecules for a wide array of industries and already counted SoftBank as an investor.
Still, according to that Journal piece, the two anchor investors were less enthusiastic about a giant new investment in nearly nine-year-old WeWork for numerous reasons, including that they see WeWork as a real estate play and both already have plenty of real estate in their portfolios; that WeWork CEO Adam Neumann would still control the company even while SoftBank was looking to acquire a majority stake; and because SoftBank has already committed $8 billion into WeWork in recent years, including through an agreement last year to invest a fresh $4 billion into the company via a convertible note and a $3 billion warrant that gave it the right to buy additional equity in WeWork.
As it stands, including the $2 billion that WeWork looks to receive from SoftBank imminently, SoftBank will have sunk $10 billion into the company. Perhaps it’s no wonder that the newest $2 billion is not coming from the Vision Fund but from SoftBank directly. (Son sometimes invests off SoftBank’s balance sheet directly, for expediency’s sake and, presumably, in a case such as this one, when there may be pushback from Vision Fund investors.)
Either way, $2 billion more from SoftBank is “hardly a stinging rebuke” of WeWork or its business model, says one person familiar with SoftBank’s thinking. This same source also notes that the $16 billion figure bandied about late last year was “never a lock. There were always numerous options on the table.”
Whether SoftBank regrets what remains a huge bet can only be known in time. A shifting public market certainly seems like reason for worry, given that unprofitable WeWork relies increasingly on freely spending corporate customers for its revenue, including both companies that install their employees at WeWork’s coworking spaces, and those that license the company’s technology and aesthetic to WeWork-ify their own offices.
Unsurprisingly, Neumann, when asked how WeWork would fare in a downturn, told us at a Disrupt event in 2017 that it was positioned perfectly. “Business is a flexible thing,” he’d said at the time. “Space is fixed. Being able to give people that flexibility if a recession comes or when a recession comes is actually going to be a very needed product.”
According to the FT, SoftBank’s earlier plans for WeWork included SoftBank and the Vision Fund paying $10 billion to buy out all outside investors in WeWork. A further $6 billion would have been injected directly into the company, including a $2 billion commitment this year, and a commitment to invest a further $4 billion based on agreed-up performance targets for WeWork in 2020 and 2021.
Our sources say that, as of this writing, the $2 billion being discussed will be split evenly to purchase both primary and secondary shares from earlier investors. We’re also told that the company’s post-money valuation, assuming this newest deal is completed, will be $47 billion, a total that includes $1 billion that Softbank invested in WeWork last year via that convertible note and the $3 billion more than the SoftBank committed last year to invest in the company this year.
WeWork’s losses in the first nine months of 2018 nearly quadrupled from a year earlier to $1.2 billion, says the FT, which says it viewed an investor presentation. The company’s sales meanwhile hit $1.5 billion during the same period.
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The limits of coworking
It feels like there’s a WeWork on every street nowadays. Take a walk through midtown Manhattan (please don’t actually) and it might even seem like there are more WeWorks than office buildings.
Consider this an ongoing discussion about Urban Tech, its intersection with regulation, issues of public service, and other complexities that people have full PHDs on. I’m just a bitter, born-and-bred New Yorker trying to figure out why I’ve been stuck in between subway stops for the last 15 minutes, so please reach out with your take on any of these thoughts: @Arman.Tabatabai@techcrunch.com.
Co-working has permeated cities around the world at an astronomical rate. The rise has been so remarkable that even the headline-dominating SoftBank seems willing to bet the success of its colossal Vision Fund on the shift continuing, having poured billions into WeWork – including a recent $4.4 billion top-up that saw the co-working king’s valuation spike to $45 billion.
And there are no signs of the trend slowing down. With growing frequency, new startups are popping up across cities looking to turn under-utilized brick-and-mortar or commercial space into low-cost co-working options.
It’s a strategy spreading through every type of business from retail – where companies like Workbar have helped retailers offer up portions of their stores – to more niche verticals like parking lots – where companies like Campsyte are transforming empty lots into spaces for outdoor co-working and corporate off-sites. Restaurants and bars might even prove most popular for co-working, with startups like Spacious and KettleSpace turning restaurants that are closed during the day into private co-working space during their off-hours.
Before you know it, a startup will be strapping an Aeron chair to the top of a telephone pole and calling it “WirelessWorking”.
But is there a limit to how far co-working can go? Are all of the storefronts, restaurants and open spaces that line city streets going to be filled with MacBooks, cappuccinos and Moleskine notebooks? That might be too tall a task, even for the movement taking over skyscrapers.
The co-working of everything…
Photo: Vasyl Dolmatov / iStock via Getty Images
So why is everyone trying to turn your favorite neighborhood dinner spot into a part-time WeWork in the first place? Co-working offers a particularly compelling use case for under-utilized space.
First, co-working falls under the same general commercial zoning categories as most independent businesses and very little additional infrastructure – outside of a few extra power outlets and some decent WiFi – is required to turn a space into an effective replacement for the often crowded and distracting coffee shops used by price-sensitive, lean, remote, or nomadic workers that make up a growing portion of the workforce.
Thus, businesses can list their space at little-to-no cost, without having to deal with structural layout changes that are more likely to arise when dealing with pop-up solutions or event rentals.
On the supply side, these co-working networks don’t have to purchase leases or make capital improvements to convert each space, and so they’re able to offer more square footage per member at a much lower rate than traditional co-working spaces. Spacious, for example, charges a monthly membership fee of $99-$129 dollars for access to its network of vetted restaurants, which is cheap compared to a WeWork desk, which can cost anywhere from $300-$800 per month in New York City.
Customers realize more affordable co-working alternatives, while tight-margin businesses facing increasing rents for under-utilized property are able to pool resources into a network and access a completely new revenue stream at very little cost. The value proposition is proving to be seriously convincing in initial cities – Spacious told the New York Times, that so many restaurants were applying to join the network on their own volition that only five percent of total applicants were ultimately getting accepted.
Basically, the business model here checks a lot of the boxes for successful marketplaces: Acquisition and transaction friction is low for both customers and suppliers, with both seeing real value that didn’t exist previously. Unit economics seem strong, and vetting on both sides of the market creates trust and community. Finally, there’s an observable network effect whereby suppliers benefit from higher occupancy as more customers join the network, while customers benefit from added flexibility as more locations join the network.
… Or just the co-working of some things…
Photo: Caiaimage / Robert Daly via Getty Images
So is this the way of the future? The strategy is really compelling, with a creative solution that offers tremendous value to businesses and workers in major cities. But concerns around the scalability of demand make it difficult to picture this phenomenon becoming ubiquitous across cities or something that reaches the scale of a WeWork or large conventional co-working player.
All these companies seem to be competing for a similar demographic, not only with one another, but also with coffee shops, free workspaces, and other flexible co-working options like Croissant, which provides members with access to unused desks and offices in traditional co-working spaces. Like Spacious and KettleSpace, the spaces on Croissant own the property leases and are already built for co-working, so Croissant can still offer comparatively attractive rates.
The offer seems most compelling for someone that is able to work without a stable location and without the amenities offered in traditional co-working or office spaces, and is also price sensitive enough where they would trade those benefits for a lower price. Yet at the same time, they can’t be too price sensitive, where they would prefer working out of free – or close to free – coffee shops instead of paying a monthly membership fee to avoid the frictions that can come with them.
And it seems unclear whether the problem or solution is as poignant outside of high-density cities – let alone outside of high-density areas of high-density cities.
Without density, is the competition for space or traffic in coffee shops and free workspaces still high enough where it’s worth paying a membership fee for? Would the desire for a private working environment, or for a working community, be enough to incentivize membership alone? And in less-dense and more-sprawl oriented cities, members could also face the risk of having to travel significant distances if space isn’t available in nearby locations.
While the emerging workforce is trending towards more remote, agile and nomadic workers that can do more with less, it’s less certain how many will actually fit the profile that opts out of both more costly but stable traditional workspaces, as well as potentially frustrating but free alternatives. And if the lack of density does prove to be an issue, how many of those workers will live in hyper-dense areas, especially if they are price-sensitive and can work and live anywhere?
To be clear, I’m not saying the companies won’t see significant growth – in fact, I think they will. But will the trend of monetizing unused space through co-working come to permeate cities everywhere and do so with meaningful occupancy? Maybe not. That said, there is still a sizable and growing demographic that need these solutions and the value proposition is significant in many major urban areas.
The companies are creating real value, creating more efficient use of wasted space, and fixing a supply-demand issue. And the cultural value of even modestly helping independent businesses keep the lights on seems to outweigh the cultural “damage” some may fear in turning them into part-time co-working spaces.
And lastly, some reading while in transit:
- The Grim Future of Urban Warfare – The Atlantic, Darran Anderson
- New York’s New Wage Law for Uber Drivers is a Lesson for Cities Around the World – MIT Technology Review, Erin Winick
- Can New Home Building Tech Help Solve the Affordability Crisis? – FastCompany, Adele Peters
- Homelessness Rises More Quickly Where Rent Exceeds a Third of Income – Zillow Research, Chris Glynn & Alexander Casey
- Vote on Temescal to Test Core Values – StreetsblogSF, Roger Rudick
- L.A. Approves New Rules for Airbnb-Type Rentals After Years of Debate – Los Angeles Times, Emily Alpert Reyes
- Can France Revive its Industrial Heartland? – FT, Harriet Agnew
- Why Communities Across America Are Pushing to Close Waste Incinerators – CityLab, Rebecca Stoner
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Foxconn or Foxgone? Tariffs, Wisconsin and iPhone fires
First some notes on SoftBank’s rumored expansion into China and its weird fund math, then Foxconn and then quick notes on tech depression, Huawei and more.
TechCrunch is experimenting with new content forms. This is a rough draft of something new — provide your feedback directly to the author (Danny at danny@techcrunch.com) if you like or hate something here.
SoftBank has fund visions (and a Vision Fund) for China? That, and more money
Kane Wu at Reuters reported overnight that SoftBank is looking to open an office and hire an investment team in China, which Wu says will be based in Shanghai. That’s following the fund’s recent global expansion with new targeted offices in Saudi Arabia and India.
When I saw this, I sort of did a double-take: SoftBank doesn’t have a presence in China? The fund has reportedly been seeking investments in some of China’s leading unicorn stars, including controversial face recognition startup SenseTime, and leading edtech startup Zuoyebang (作业帮, which literally translates as “school assignment help”). (Hat-tips to Selina Wang at Bloomberg, who seems to just be sitting in Vision Fund partner meetings). And of course, it dumped a pretty penny into WeWork China, where it was part of a $500 million syndicate, and is a huge investor in Didi.
It’s sort of obvious that SoftBank would expand to China. What will be interesting though is to see how the fund structures itself long-term. As far as I know, the Vision Fund is a singular “fund” that invests worldwide (send me an email if I am wrong on this count). China has a thicket of regulations on funds and companies, which is one of several reasons we see specifically China-focused vehicles (such as Lightspeed and Lightspeed China or Sequoia and Sequoia China). If the Vision Fund continues to be a unified fund, that would be a notable strategy shift that might be cloned by other trans-Pacific funds.
Aside: SoftBank Vision Fund math is complicated
Rajeev Misra, board director of SoftBank Group and CEO of SoftBank Investment Advisors. Photo by Drew Angerer/Getty Images.
When it first closed the Vision Fund, SoftBank explained they had raised just over $93 billion in committed capital or, more precisely, around $93.15-$93.2 billion, according to the initial investor presentations and its annual Form D filings. In those docs, SoftBank said that the fund was financed with $28 billion from SoftBank and $65 billion from third-party investors.
On top of the $93 billion raised for the Vision Fund, SoftBank detailed that it had committed $4.5 billion of its own capital to a separate “Delta Fund,” which was used to alleviate conflicts around SoftBank’s Didi investment. Thus, SoftBank’s total VC funding aggregates to around $97.7 billion.
To add a complication, SoftBank later shifted $1.6 billion of the Vision Fund’s previously disclosed $65 billion in third-party capital over to the Delta Fund. In current disclosures, SoftBank shows $91.7 billion of committed capital for the Vision Fund ($28.1 billion from SoftBank and $63.6 billion from third-party investors). For the Delta Fund, SoftBank shows $6 billion in committed capital ($4.5 billion SoftBank contribution and $1.6 billion from third-party investors).
Here is where it gets even more complicated. In its latest filings, SoftBank also notes that it completed the interim closing of an additional $5 billion for the Vision Fund in mid-October, “intended for the installment of an incentive scheme for operations of SoftBank Vision Fund.” That additional cash would bring Vision Fund’s total committed capital to $96.7 billion, and $102.7 billion together with the Delta Fund.
While it wouldn’t be included in the committed equity capital total, SoftBank is also rumored to be raising a $4 billion credit facility to help finance additional acquisitions.
So, it’s probably best to say that the Vision Fund — as constituted right now — is $97 billion or $96.7 billion with precision, assuming this $5 billion reaches a final close.
SoftBank IPO
We have, of course, covered SoftBank quite obsessively, particularly its debt situation (Part 1, Part 2, Part 3, Part 4 and Part 5). What we haven’t covered more recently are the latest developments in SoftBank’s IPO, which is slated for December 19th and expected to bring in a haul of $21 billion. More to come on that front in the coming days.
Foxconn or Foxgone?
U.S. President Donald Trump and Foxconn Chairman Terry Gou. BRENDAN SMIALOWSKI/AFP/Getty Images
The South China Morning Post reported yesterday that Foxconn is investigating expanding its factories to Vietnam in order to avoid tariffs. Makes sense, and I have some calls this week and next trying to suss out how much hardware supply chains have really changed in response to the trade conflict.
That decision though isn’t just about the trade conflict, but also about the quickly increasing wages of Chinese laborers, as well as political interference from Beijing. The Trump administration’s trade policies are just the excuse Foxconn needs to (at least partially) extricate itself from China, while saving face in the process.
What’s interesting is that Foxconn is also dealing with a massive brush fire in Wisconsin, where it received one of the largest economic development incentives ever offered by an American government, a whopping $3 billion package that was expected to drive manufacturing employment in the state.
Overnight, Republicans in the state legislature passed a bill that would place large restrictions on incoming Democratic governor Tony Evers. Jessie Opoien for the (Madison) Cap Times:
Under the bill, legislators would have increased influence over the Wisconsin Economic Development Corporation, and the WEDC board, not the governor, would appoint the job creation agency’s CEO. However, the governor’s power to appoint a CEO would be restored in September 2019.
That is the agency that provided the Foxconn funding, which has become a political football in Wisconsin politics. Republicans are trying to protect one of the major economic legacies of outgoing governor Scott Walker, as well as what they believe is the future direction of manufacturing work in the state. Democrats smell a boondoggle in the making.
If that wasn’t all, rumored skimpy sales for iPhones is putting enormous pressure on Foxconn’s bottom line. Debby Wu at Bloomberg reported two weeks ago that:
The contract manufacturer aims to cut 20 billion yuan ($2.9 billion) from expenses in 2019 as it faces “a very difficult and competitive year,” according to an internal document obtained by Bloomberg. The company’s spending in the past 12 months is about NT$206 billion ($6.7 billion).
Foxconn is a very dynamic organization that has weathered repeated crises over the years. It is pretty much unique in what it does today: very few other companies can scale up and down hundreds of thousands of workers to meet iPhone and other device demands with such alacrity.
But, the fundamentals of the mobile device market have apparently changed dramatically this year, and Foxconn is likely to be the company most harmed as the assembler of those devices. That could destroy not just the Chinese dream of leading in manufacturing, but also the Vietnam and Wisconsin dreams as well.
Also: If you haven’t read it, this poetry by a Foxconn worker who committed suicide really resonated with me. Foxconn’s suicide problem is well-documented, but we often don’t hear from the individuals themselves.
Quick bites
Which big tech companies are most depressed?
Blind, the anonymous enterprise chatting app that has taken the tech world by storm, published survey results asking tech employees “I believe I am depressed.” Roughly 40 percent of employees responded yes. Interestingly, there wasn’t too much variation between companies. Amazon had the highest rate at 43 percent and Apple had the lowest rate at 30 percent. It’s an informal survey, probably without high scientific validation, but it is a reminder for all of us in the community that mental health and burnout is very real in the startup and tech ecosystems and we should be vigilant in helping each other when times are rough.
More bad news for Huawei as British Telecom bans its equipment
This is one of those stories that we are just going to keep hearing about. After bans in Australia and New Zealand, British Telecom has announced they will not just ban Huawei’s 5G equipment, but also its 3G and 4G equipment. Britain, like Aus/NZ, Canada and the U.S., is part of the Five Eyes intelligence network, and national security officials have been leading the crusade against Huawei infrastructure. What’s interesting is not just the rapidity of the bans, but also that the bans haven’t (from what I have seen) migrated outside the Five Eyes community yet.
Pendo commits to hometown of Raleigh
Raleigh skyline. Photo by James Willamor used under Creative Commons via Flickr.
Pendo is a digital product management platform that has had quite a bit of success with customers and has raised more than $100 million in VC funding, most recently a Series D from Sapphire. The company announced that they have received a grant from home state North Carolina’s economic development department to grow in the Raleigh region. Pendo is committing $34.5 million to its headquarters (with the potential of creating 590 jobs), while the state will offer around $8.8 million in potential reimbursements over the next 12 years.
Given what I wrote yesterday about Wes McKinney leaving NYC and heading to Nashville and the work Chattanooga is doing to aid startups, it’s great to see other hotspots like Raleigh, NC invest to build out their ecosystems in a compelling way.
Todd Olson, CEO of Pendo, explained to me by email that, “Office rents in our downtown are a fraction of the cost of operating in other cities, and the cost of living is appealing to our employees. They can afford to buy a house here. In some markets around the country, that is becoming more difficult. It’s also just a nice place to live and work.”
Creative work is increasingly going to have to find a lower-cost home.
What’s next
I am still obsessing about next-gen semiconductors. If you have thoughts there, give me a ring: danny@techcrunch.com.
Thoughts on articles
The LP Anti-Portfolio – Great short read. Lindel Eakman, former managing director at UTIMCO, the University of Texas/Texas A&M endowment, gives a list of funds that he passed on that he now regrets. Unfortunately, this is pretty rare coming from an LP, albeit a former one. It would be great to get more public discussion on which funds were missed and why by LP investors.
Hopefully more reading time tomorrow.
Reading docket
What I’m reading (or at least, trying to read)
- Huge long list of articles on next-gen semiconductors. More to come shortly.
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Let’s meet in Poland this month
I’ll be heading back to Europe in December to run a pitch-off in Wroclaw, Poland. It’s a bit out of the way, but well worth a visit if only for the sausages.
The event, called In-Ference, is happening on December 17 and you can submit to pitch here. The team will notify you if you have been chosen to pitch. The winner will receive a table at TC Disrupt in San Francisco.
I’m also thinking about an event in Warsaw on the 21st but WeWork didn’t look doable (and I don’t like co-working spaces). If anyone has thoughts on a new venue drop me a line at john@techcrunch.com. Otherwise, I’ll see you in Wroclaw! Wesołych Świat!
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WeWork picks up ANOTHER $3B from SoftBank
WeWork has picked up another $3 billion in financing from SoftBank Corp, not to be confused with SoftBank Vision Fund. The deal comes in the form of a warrant, allowing SoftBank to pay $3 billion for the opportunity to buy shares before September 2019 at a price of $110 or higher, ultimately valuing WeWork at $42 billion minimum.
In August, SoftBank Corp invested $1 billion in WeWork in the form of a convertible note.
According to the Financial Times, SoftBank will pay WeWork $1.5 billion on January 15, 2019 and another $1.5 billion on April 15.
SoftBank is far and away WeWork’s biggest investor, with SoftBank Vision Fund having poured $4.4 billion into the company just last year.
The real estate play out of WeWork is just one facet of the company’s strategy.
More than physical land, WeWork wants to be the central connective tissue for work in general. The company often strikes deals with major service providers at “whole sale” prices by negotiating on behalf of its 300,000 members. Plus, WeWork has developed enterprise products for large corporations, such as Microsoft, who tend to sign longer, more lucrative leases. In fact, these types of deals make up 29 percent of WeWork’s revenue.
The biggest issue is whether or not WeWork can sustain its outrageous growth, which seems to have been the key to its soaring valuation. After all, WeWork hasn’t yet achieved profitability.
Can the vision become a reality? SoftBank seems willing to bet on it.
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Brex has partnered with WeWork, AWS and more for its new rewards program
Brex, the corporate card built for startups, unveiled its new rewards program today.
The billion-dollar company, which announced its $125 million Series C three weeks ago, has partnered with Amazon Web Services, WeWork, Instacart, Google Ads, SendGrid, Salesforce Essentials, Twilio, Zendesk, Caviar, HubSpot, Orrick, Snap, Clerky and DoorDash to give entrepreneurs the ability to accrue and spend points on services and products they use regularly.
Brex is lead by a pair of 22-year-old serial entrepreneurs who are well aware of the costs associated with building a startup. They’ve been carefully crafting Brex’s list of partners over the last year and say their cardholders will earn roughly 20 percent more rewards on Brex than from any competitor program.
“We didn’t want it to be something that everyone else was doing so we thought, what’s different about startups compared to traditional small businesses?” Brex co-founder and chief executive officer Henrique Dubugras told TechCrunch. “The biggest difference is where they spend money. Most credit card reward systems are designed for personal spend but startups spend a lot more on business.”
Companies that use Brex exclusively will receive 7x points on rideshare, 3x on restaurants, 3x on travel, 2x on recurring software and 1x on all other expenses with no cap on points earned. Brex carriers still using other corporate cards will receive just 1x points on all expenses.
Most corporate cards offer similar benefits for travel and restaurant expenses, but Brex is in a league of its own with the rideshare benefits its offering and especially with the recurring software (SalesForce, HubSpot, etc.) benefits.
San Francisco-based Brex has raised about $200 million to date from investors including Greenoaks Capital, DST Global and IVP. At the time of its fundraise, the company told TechCrunch it planned to use its latest capital infusion to build out its rewards program, hire engineers and figure out how to grow the business’s client base beyond only tech startups.
“This is going to allow us to compete even more with Amex, Chase and the big banks,” Dubugras said.
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SoftBank is considering taking a majority stake in WeWork
SoftBank may soon own up to 50 percent of WeWork, a well-funded provider of co-working spaces headquartered in New York, according to a new report from The Wall Street Journal.
SoftBank is reportedly weighing an investment between $15 billion and $20 billion, which would come from its $92 billion Vision Fund, a super-sized venture fund led by Japanese entrepreneur and investor Masayoshi Son.
WeWork declined to comment.
SoftBank already owns some 20 percent of WeWork. The firm invested $4.4 billion in the company in August 2017, $1.4 billion of which was set aside to help WeWork expand in China, Japan and Southeast Asia.
This August, WeWork raised another $1 billion from SoftBank in convertible debt. At the same time, WeWork disclosed financials to a handful of media outlets, sharing that its revenue had doubled to $763.8 million in the first half of 2018 as losses increased to $723 million.
SoftBank, for its part, seems to have a hankering for real estate tech. Not only has it become a key stakeholder in WeWork, but it has deployed significant amounts of capital to Opendoor, Compass, Katerra and others.
Last month, the Vision Fund backed Opendoor, a platform for buying and selling homes, with $400 million. The same day, it led a $400 million round for Compass, valuing the real estate brokerage startup at $4.4 billion. As for Katerra, SoftBank poured $865 million into the construction tech business in January.
WeWork, founded in 2010 by Adam Neumann and Miguel McKelvey, has raised nearly $5 billion in a combination of debt and equity funding to date. It was valued at $20 billion in 2017, though reports earlier this summer estimated its valuation would fall somewhere between $35 billion and $40 billion with additional capital from SoftBank. A $40 billion valuation would make it the second most valuable VC-backed company in the U.S. behind only Uber.
WeWork has more than 268,000 members across 287 locations in 23 countries.
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WeWork taps Lemonade to offer insurance to WeLive members
WeWork has partnered with Lemonade to provide renters insurance to WeLive members.
WeLive is the residential offering from WeWork, offering members a fully-furnished apartment, complete with amenities like housekeeping, mailroom, and on-site laundry, on a flexible rental schedule. In other words, bicoastal workers or generally nomadic individuals can rent a short-term living space without worrying about all the extras.
As part of that package, WeLive is now referring new and existing WeLive members to Lemonade for renters insurance.
WeLive currently has two locations — one in New York and one in D.C. — collectively representing more than 400 units. WeWork says that both units are nearly at capacity. The company has plans to open a third location in Seattle Washington by Spring 2020.
Lemonade, meanwhile, is an up-and-coming insurance startup that is rethinking the centuries-old industry. The company’s first big innovation was the digitization of getting insurance. The company uses a chatbot to lead prospective customers through the process in under a minute.
The second piece of Lemoande’s strategy is rooted in the business model. Unlike incumbent insurance providers, Lemonade takes its profit up-front, raking away a percentage of customers’ monthly payments. The rest, however, is set aside to fulfill claims. Whatever goes unclaimed at the end of the year is donated to the charity of each customer’s choice.
To date, Lemonade has raised a total of $180 million. WeWork, on the other hand, has raised just over $9 billion, with a reported valuation as high as $35 billion.
Of course, part of the reason for that lofty valuation is the fact that WeWork is a real estate behemoth, with Re/Code reporting that the company is Manhattan’s second biggest private office tenant. But beyond sheer square footage, WeWork has spent the past few years filling its arsenal with various service providers for its services store.
With 175,000 members (as of end of 2017, so that number is likely much higher now), WeWork has a considerable userbase with which it can negotiate deals with service providers, from enterprise software makers to… well, insurance providers.
Lemonade is likely just the beginning of WeWork’s stretch into developing a suite of services and partnerships for its residential members.
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