EG’s resident tech specialist Antony Slumbers takes a look at why branding the user experience can be more valuable than branding a building
$10bn (£6.4bn). That is the valuation put on co-working operator WeWork when the company raised $433m a couple of months ago – up from the $5bn valuation when it raised $355m just one year ago. Operating from 35 locations, it leases about 3.5m sq ft at an average rate, it is reckoned, of $40-$50 per sq ft. Against this it is estimated, given its membership rates and occupancy levels, that WeWork takes in around $100 per sq ft across its portfolio.
In contrast, rival Regus operates 2,300 business centres across 106 countries and is valued today at circa $3.9bn.
What are we to make of this? Should one just scoff and mutter: “This is madness – the dotcom bubble part two. One-hundred times earnings? For a company that just sublets space?”
Well maybe, maybe not. A full real estate cycle will give us the answer to that. The really interesting thing to consider is why WeWork is being valued at this level, as that could tell us a lot about the future of work and the office market.
There are two key justifications, both functions of how technology is changing the economy. First, the rise of the contingent worker. Software company Intuit, in its 2020 Report, suggests that “contingent workers will exceed 40% of the [US] workforce by 2020”. It is unlikely this will be very different in the UK.
Cloud computing, the changing nature of work, and hyper-efficient networks will lead pretty much to where Charles Handy suggested with his writings on the Shamrock Organisation. He says people are the most important resource in any organisation and recommends that businesses place greater emphasis on meeting the needs of workers.
So, if contingent workers will exceed 40% of the workforce by 2020, that means an awful lot of people will be routinely working for more than one employer, and so not going to the same corporate HQ each day.
However, just because you do not have to go to a workplace to do work anymore, that does not necessarily mean not wanting to go somewhere to work.
And that brings us to the second key justification for WeWork’s valuation: brand.
What WeWork has done brilliantly is create a brand around its co-working spaces that has the potential to become a generic term. Think vacuum cleaner, think Hoover. Think taxi, think Uber. Think a space to work, think WeWork.
“WeWork is a platform for creators” is its tagline, and frankly it is genius. In the tech world WeWork has huge mindshare. If you are a young company, or an established company desperate to show how much you get the zeitgeist, then WeWork simply springs to mind when you need space to work.
In start-up parlance, it has achieved perfect “product/market fit”. It has not branded its properties, it has branded its user experience. This is the reverse of how the traditional real estate industry works, where developers tend to brand their individual buildings, and do so with physical attributes in mind. Branding the “what” is analogue thinking, branding the “why” is required to survive in a digital world.
Essential tech for property people: Slack
Talking of US tech companies with huge valuations, this month’s essential tech is Slack, the fastest-growing business app in history. Launched in 2013, the messaging and file-sharing tool now has a $2bn valuation.
Amazingly, it only exists because Flickr founder Stewart Butterfield spent four years unsuccessfully building a gaming app. He decided to release the software the development team built to enable them to work collaboratively as a standalone product. It went ballistic, amassing hundreds of thousands of users at an exponential rate, initially from the tech community but now branching out to the wider world.
Why should you use it? Because it is a great way to communicate with teams, share files, updates, links and ideas.
It is also very cleverly gamified (as you would expect from a game developer) and includes a raft of irreverent and enticing features that make using it both great fun and highly productive. It is sort of what Yammer could have been, if it had not been swallowed up in the corporate bear hug of Microsoft.
The only issue that sometimes occurs when your whole team uses Slack is that the workplace becomes library quiet, as everyone finds it quicker and more efficient to just communicate using Slack.
The upside, of course, is that everyone gets an awful lot done. No slacking.
Antony Slumbers is founder and chief executive of software developer Estates Today
