WeWork Disaster Shows Crowdfunding’s Advantages

Just this week, I came across an intriguing startup investment opportunity. A Philadelphia-based company was offering shared office space for physicians and related medical practices. Doctors — especially those just starting their practices — are often forced to accept expensive and long-term leases. It’s a real problem that needs fixing. 

Then I remembered WeWork — the shared offices startup. And the huge IPO that was planned. It was set to generate enormous profits in 2019 for VC investors and the company’s rock star founder, Adam Neumann. 

But the IPO never happened. The company’s future and survivability is now in doubt. And Neumann’s reputation is shot. His many excesses, bad behavior and mismanagement of a once high-flying startup has made him persona non grata with the VC crowd.

But Neumann wasn’t the only villain in WeWork’s demise. VCs were complicit in WeWork’s rise and fall. They poured hundreds of millions of dollars into the company — funding outrageously excessive behavior while looking the other way.  

It’s easy to say in hindsight that they should have known better. After all, WeWork never came close to making money. The more it spent, the more it lost. But this isn’t so unusual for startups. One startup strategy is to achieve hyper growth as fast as possible. To grow now and conquer markets before other companies smell the opportunity — and worry about profits later. 

This strategy depends on a high level of responsible execution. And that often comes down to the founder. VCs loved Neumann a little too much. In an early assessment of the startup’s prospects, Benchmark wasn’t entirely convinced that the model would work. But it liked  Neumann. “Let’s give him some money, and he’ll figure it out,” a partner advised. So Benchmark wrote its first check to WeWork — worth $17 million. 

1 2 3
View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.