Scalability – Analysing The Bankruptcy of WeWork (Raised $21 Billion Then Went Public)
Let's dive into WeWork's business model scalability: Space-as-a-service.
🕒 Here‘s a TLDR summary:
🏢 WeWork went from a valuation of $47 billion to almost bankruptcy. Reports from Reuters indicate that they’re going to initiate the process next week.
🧠 They teach you at business school to always have a scalable business model:
A restaurant can serve up to 50 people in a single minute.
Meta serves billions of people in a single second.
📍 WeWork’s business model always focused on “space-as-a-service,” but is the future less dependent on physical space?
🚀 (For Paid Subscribers) Shifting a business model to a more scalable one – My personal entrepreneurial experience in the matter.
It’s all over the news — WeWork is going bankrupt next week. That’s good and bad news. It’s a sad piece of news for the 4,300 people working there. But that doesn’t necessarily mean that they’ll be laid off.
The good news is that it gives the world an amazing business lesson. World-class investors believed in WeWork and poured over $21 billion into the business. Going bankrupt means that there’s something that went wrong.
Their founder damaged the company with a few scandals.
Then, the pandemic hit their financial sheet hard.
It could be that they just are running out of time to be able to fix their balance sheet. But if they had another year, would it have worked out?
Their business model is what they call “space-as-a-service”. This is their main value-adding concept. They strongly believe that the future will be full of flexible workplaces rather than fixed ones. But the real question is, “What future are you referring to?”
People today might prefer that, but what about in 30 years? With the VR boost everywhere, the market might be more inclined to create virtual offices rather than flexible ones.
If a company offers flexible offices like WeWork, how many people can they serve in a minute? 1,000,000? Let’s say 1,000,000.
If another company shows up with a VR solution that creates a stunning and comfortable experience while people are on the beach in another country, how many people can they serve in a minute? The answer is not dependent on a building. Hence, it’s billions.
WeWork has a market opportunity. But the scalability of it and the question of whether it’ll turn a profit has always made investors curious.
I actually recorded an analysis of their pitch deck six months ago; it’s one of my best videos. So, if you’re interested in seeing how they’re pitching for investments, check it out.
Shifting to a more scalable business — The right way.
I had a startup around ten years ago. We were going through a business model modification because we believed it wasn’t very scalable. We migrated from something similar to WeWork into something like Meta.
Here’s the story and what a financial expert told me that resonates with me till today. It’s a business lesson that you always need to keep in mind.
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