Ben Thompson from Stratechery makes the bull case for the WeWork IPO, and compares it to the AWS business. Which I think is an apt analogy. It’s a first principles approach - think about the largest item on a startup financial statement and rent is probably high up there. WeWork turns a fixed cost into a variable expense based on usage, allowing startups to allocate their capital to what matters more.
There is nothing more fixed than real estate, yet WeWork’s offering transforms real estate into a variable cost for all kinds of companies, with benefits that roughly mirror public clouds:
New companies can have instant access to a well-appointed office space and pay for only a desk or two, and then grow as needed. Growing companies do not need to spend time on extensive build-outs months or years ahead of future growth, and instead pay for more space as they need it. Established companies no longer need to have a real estate competency all over the world, and can in fact expand to new territories with far less risk than previously required.
Really interesting take and could very well become true, but still a massive leap of faith. WeWork’s financial and operational red flags cannot be ignored. As Ben himself wrote, leadership matters.