The Cult of We | Eliot Brown

Summary of: The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion
By: Eliot Brown

Introduction

Dive into the compelling story of WeWork, the brainchild of Adam Neumann and Miguel McKelvey, as it transforms from a twinkle in their eyes to a $47 billion behemoth. The Cult of We takes readers on a journey through the rapid rise and downfall of one of the most hyped startups in history. Discover how Neumann and McKelvey managed to create a massive company with nothing more than a pitch and how they sold the illusion of the ultimate fusion between technology and real estate. Be prepared to uncover the murky side of the entrepreneurial world, including the chaotic mismanagement, audacious spending, and the dramatic downfall of a mighty empire.

WeWork: From Kids’ Clothes to Coworking Empire

How two friends, Adam Neumann and Miguel McKelvey, turned an idea of renting ready-to-use office spaces into a $45 million company called WeWork.

In 2006, Architect Miguel McKelvey met Adam Neumann, an Israeli entrepreneur, who was passionate about getting rich. Neumann sought McKelvey’s advice on finding affordable space for his baby-clothes business. McKelvey suggested the building he worked in, 68 Jay Street. Neumann moved in with the business plan to rent ready-to-use office spaces to technology companies.

McKelvey, who was often a sounding board for Neumann’s business ideas, pitched in his support. They approached their landlords with the idea in 2008, and the landlords joined them as partners, offering them a floor in one of their buildings. GreenDesk was born with McKelvey working on the floor plan, business plan, and website. The timing for GreenDesk could not have been more perfect, given the Great Recession of 2008 when even big companies were downsizing office spaces.

Neumann and McKelvey sold their stakes in GreenDesk to the landlords for $500,000 each in 2009 and then went on to search for spaces they could rent and slice up to create small offices. They did not have a single customer yet, but they pitched WeWork to real estate developer Joel Schreiber in 2010. They claimed WeWork was worth $45 million, and incredibly, Schreiber agreed to invest $15 million in exchange for a one-third stake in the company.

WeWork was the startup that went on to become a game-changer in the coworking industry.

WeWork: From Real Estate to Tech Startup

WeWork’s success can be attributed to the co-founder Adam Neumann’s ability to reframe the company as a tech startup, which appealed to venture capitalists. Neumann convinced investors by presenting WeWork as “space as a service” and highlighting the blurred lines between work and play, promising to create close-knit communities and a “physical Facebook”. Despite being a real estate company, WeWork’s revenue projections of $2.8 billion by 2018 convinced investors, leading to a remarkable valuation of $100 million. These factors helped WeWork attract $400 million in investments by 2015.

Neumann’s Obsession with Growth at WeWork

As WeWork expanded globally, its co-founder Adam Neumann became increasingly reckless in his desire to double the company’s revenue every year. Despite losing a million dollars a day with 65 locations by 2016, Neumann continued to ignore profit margins and obsess over rapid growth. After attracting significant investment from Softbank, Neumann convinced the CEO to invest billions in WeWork, valuing the company at an astounding $47 billion. However, the company was still far from turning a profit.

WeWork’s Misguided Expansion

WeWork, the company that redefined office space, lost track of its core business as it expanded too quickly. The company’s founder, Adam Neumann, sought to take over newer and bigger markets, leading to a failed attempt at redefining residential living with WeLive. He also rebranded WeWork as The We Company to encompass new ventures such as his wife’s WeGrow elementary school. Neumann’s spending became even wilder, including the purchase of a Gulfstream private jet for $63.4 million, causing confusion among staff and leaving WeWork no closer to being a profitable and sustainable business after depleting $3 billion of Softbank’s investment.

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