“The We Company’s business model effectively is pretty simple,” says EquityZen CEO Atish Davda. “It leases buildings and then rents it out in smaller pieces. That’s not a new business model, that’s a real estate company. What’s new about The We Company is that it’s pitching itself as a technology firm. The way it says it’s going to do that is by using machine learning and a lot of other software. It’s going to help folks optimize how they build and operate offices. They’re trying to turn our offices into an Amazon warehouse in order to get the tech valuation.”

Atish Davda, founder and CEO Of EquityZen, says that WeWork is just a real estate company positioning itself as a technology company in order to get a tech valuation, in an interview on CNBC:

Turning Offices Into An Amazon Warehouse To Get Tech Valuation

The We Company’s business model effectively is pretty simple. It leases buildings and then rents it out in smaller pieces. That’s not a new business model, that’s a real estate company. What’s new about The We Company is that it’s pitching itself as a technology firm. The way it says it’s going to do that is by using machine learning and a lot of other software. It’s going to help folks optimize how they build and operate offices. 

The worst-case scenario is that it gets pegged as a real estate company in which case it would be about 20 times overvalued than its last private round of $47 billion. The best-case scenario, the way I at least hear what they’re saying, is we’re going to put all these gadgets and sensors and we’re going to track what everyone’s doing. It sounds to me like an Amazon warehouse. They’re trying to turn our offices into an Amazon warehouse in order to get the tech valuation. That’s the best-case scenario. I just I don’t buy it.

Founders Have Already Taken $500 Million Off the Table

Their valuation in the private markets has continued to go up. What’s interesting about this is something we hear about with WeWork that we didn’t hear about with Uber and Lyft is the amount of capital that the founders have allegedly taken off the table in secondary sales. With every one of these rounds, the founders can take a few chips off the table. This happened when Snap went public also. 

The founders of Snap had taken tens of million dollars off the table. We’re talking about an order of magnitude more that has already gone in the pockets of the founders here, which is over $500 million dollars. That’s a lot of money that they are effectively just holding on to risk-free because they sold it on the ride up.

I Don’t See How WeWork Can Turn Itself Into a Tech Firm

I think they’re going to at least try and match that $47 million valuation in the IPO. We’ll see what the analysts today and Wall Street over the next three months actually decides to accept. You take a look at all of WeWork’s competitors, their price-to-sales multiples are between 0.5 and 1.3. The trailing 12-month multiple for the We Company is 26 times. You’re talking about something where its peers are being valued one way and this company is being valued 20 times greater. 

For the sake of all the people I know that I’ve worked at WeWork in the past and still work there, I hope I’m wrong. I just don’t see how WeWork by acquiring a few tech companies here and there turn itself from what’s effectively is a real estate firm into a tech firm.