Many of our friends are questioning the real value of WeWork, believing that the US$20 billion valuation is obviously over-hyped. Someone calls it  “the biggest modern scam in the world”.

Well, if SoftBank was willing to put US$3 billion at this valuation, obviously they believe the company is worth that much. But why? And how about those dozens of shared working spaces that sprouted across cities in the world?

Most of the tenants of the Great Room are,  in contrary to what many believe, MNCs instead of startups. For those MNCs with a relatively small branch office in Singapore, it is really a hassle (and too many things to worry about) to lease an individual office; instead, renting a few desks from this fancy co-working space makes them not only presentable, but also seemingly up to date with the world.

MNCs instead of startups

Compared to traditional shared office operators such as Regus, the likes of WeWork put more emphasis on ambience and community; and they use greater amount of technologies to connect (and benefit) their members. While the membership fee provides a steady income stream, these operators know much more about their tenants compared to Regus, allowing them to offer even more services with an economy of scale.

with an economy of scale

Therefore yes, although the pure real estate play is not that sexy, these additional offerings can be very attractive to investors. Adam, Neumann, founder of WeWork, expects a profit of US$1 billion this year – if that is true, a US$20 billion valuation will not be outrageous at all, on the contrary, it seems cheap.

As for SpaceMob, why did they stand out among the scores of shared working space operators in Singapore? Why did Vertex Investments pick them? We think the answer is very simple – the Founder. T is one of the rare serial entrepreneurs in the region with exit experience. WeWork acquires SpaceMob, probably, for the exact same reason.

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Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].