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Originally Posted by austlar1
Are there enough people like you out there to make the numbers work for a huge We Works investment in Austin? You just moved into cheaper digs. I doubt We Works is going to want to match the price you are paying to get your business.
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Startups that need flexible space to grow is a big market. As the US continues to shift into a service based economy from a production economy and becomes increasingly urban, the bet is it's a model that will continue to see increased demand. WeWork feels like they are getting out of the "floating desk" market (or at least not relying on it) and starting to focus heavily on the "5 person dedicated office market" all the way up to "whole floor office" market.
For start-ups that are growing its far more efficient than having to move offices every few years (or risk leasing a bigger space and not growing into it). It also lets you avoid the headaches of Triple Net leasing which most small businesses don't have the manpower to understand.
My company is leaning heavily that way as we grow. Right now everyone works out of my dining room twice a week and at home the rest of the time. But our efficiency loss of people working from home may be sufficient for us to benefit from dedicated space. Especially as we grow.
In larger markets (of which I assume Austin is about to become) for WeWork they also offer a nice feature to use space in any office in a city. In NYC for instance one of my best friends did consulting work and if he needed to be downtown to meet with a client could take space there, in downtown Brooklyn and Midtown but was able to do most of his work near home where he had rented dedicated space.
It's a cool concept. It's ultimately the office space equivalent of leasing a car. Kind of expensive, but with none of the headaches of ownership (or, Triple Net).
But if you are in an industry that is growing in an area networking benefits are real. I know a friend who does web usability consulting and has wound up with 4-5 clients from her (non-wework) co-office space, and my aforementioned friend in NYC was able to get a few database engineers to do some freelance work for his consultancy from people he met there.
My guess is they hype around co-office space will die down some, but the benefits are tangible. Especially when home-officing gets harder and not necessarily more affordable to rent a 2BR vs an 1BR and a co-office membership).
Long-term Wework I think intends to become a one stop shop for small companies, and I expect banking, financing, lending, HR services and pretty much everything that isn't the core business of a start-up to be offered (at a premium) by them. Given the 2-3 hours a day for months it took me to get a credit facility in place for our company, I'm betting a nice turn-key solution is going to be really appealing to a lot of start-ups. It may also put them in a cat-bird position to be first-position VC for startups globally.
It's an interesting long-term play that (if it works) may make wework one of the defacto largest VC players who can cash-out pre-IPO when "real" first-round financing happens. These larger clusters of offices (of which Austin may be the first) are going to let we-work transact in odd ways. I can see a start-up with cashflow problems but high prospects being handed "free" office space, hotel space, etc. in exchange for equity on top of financing payroll. This all of course may not work out, but I think their 47 billion valuation is around some of these "bigger" ideas.
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Great points, AustinGoesVertical and everyone above. Bigger risks generate bigger rewards, but can also generate bigger flame-outs. Regardless (irregardless?) its facinating to watch.
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