The WeWork ‘Chapter’

I’m starting this blog back up after what I’ll just call a sabbatical.  Much respect for busy professionals who manage to write regularly and work it into their daily/weekly routines.  It is not easy.
Onto the writing…
There have many busted WeWork IPO posts written, many dripping with schadenfreude (look it up).  Adam Neumann may or may not deserve the bad press – it’s hard to know what’s really behind someone’s motivations – but it is pretty striking how quickly the press and investors switched from adulation to tar-and-feather mode.  It reminds me of Elizabeth Holmes and Theranos.
Mostly, I wanted to write about them because their situation reminds me of the WeWork of the 1990’s: Exodus Communications.
I used to work at Exodus, which was a data center/co-location business back when that was a thing.  It has so much in common with WeWork that I’m surprised more people haven’t drawn the analogy.  Here’s a partial list:
  • A real estate business with long-term capital obligations and short-term client contracts
  • Decidedly *not* a tech company, but valued like one
  • Management making a lot of money through side deals
  • Also decidedly not a marketplace, but tried to present themselves like one
  • Huge debt load
  • Bankers who talked the company and employees into irrational deals (JPMorgan in WeWork’s case, Morgan Stanley in ours)
  • Insane growth (40% quarter over quarter for years) that could only happen by not worrying about running a tight ship – someone wise there told me that 40% QoQ growth meant that of 10 people you met in the hall, 4 just started, 4 had been there less than a year, and of the 2 that were left, only 1 was any good and that’s if you were lucky.  WeWork grew so fast that they had many of the same problems, I’m sure.
I could go on, and maybe I will in a future blog post, but you get the idea.  Exodus has the distinction of being one of the few large public companies to go Chapter 22.  First it went Chapter 11 on its own.  Then Cable and Wireless USA bought them, and they too went Chapter 11.  Then when Savvis bought the assets out of bankruptcy and rationalized the footprint and cost structure, they were able to execute a business with solid return on assets.
Buried within WeWork, there is a business with legs.  The question is how many Chapters, so to speak, have to be written before we find them.

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