Past few days, some friends have asked us – while there have been so many companies running for bloodied IPOs, why only WeWork attracted so much criticism? It seems the whole world is against them?

The plausible reasons?

We thought, maybe the following factors?

1. Founder and (diner) CEO Adam Neumann was way too flamboyant. People see him as part of the entertainment circle not the tech one.
2. WeWork’s business model is one that almost everyone understands. In addition, you already have listed and profitable co-working companies that you can benchmark WeWork against. The loss as well as the valuation of WeWork were simply too staggering.
3. Many have been wanting to see the downfall of SoftBank and its Vision Fund – and the WeWork saga provides an opportunity for people to publicly and seriously talk about this.
4. Prof Scott Galloway and other “celebrities” throw their weight into the ring, repeating bashing WeWork and of course amplifying the whole episode.

Comparison with Uber

In comparison, Uber, which went listed earlier, faced much criticism but nowhere near the levels WeWork is facing now. Although the share price has dropped by almost 1/3, Uber managed to go public and even on its listing day people were not sure whether the price would go up or down. While WeWork not only failed to go IPO, but saw its valuation slashed drastically, and repeatedly.

With both companies heavily bet by SoftBank, why the stark difference?

We thought maybe the following l.

1)Uber’s business model has no clear benchmark. You can’t say it’s a taxi company. However WeWork’s model is so easy to benchmark.
2)Uber Co-Founder and (former as well) CEO Travis Kalanick indeed faced a lot of scandals. However, many still respect him as an adventurer and relentless fighter – while the same people would regard Adam Neumann with a sense of WTF. Even as Travis had been controversial, he was long gone by the time Uber filed for IPO.
3)When Uber went public, the doubt about SoftBank was not as pronounced as it is now. And OYO was not famous outside India.

Overvalued? 

A few of our enterprise partners asked us: “how would WeWork episode impact the whole tech/startup/investment scene, and the projects we are planning or working on?”

Many investors from China we have spoken to recently think that the emerging market startups are often significantly overvalued – especially compared to those with same metrics in China.

Maybe because of the WeWork episode, some said, there is room for downward adjustment?

Unlikely, we think. There is still more money than good startups in Southeast Asia, and the quality founders are increasing in numbers but still in short supply. In short term, this is simply supply demand in play.

What do you think?

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 hello@mworks.asia.

 

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