So How Much Is WeWork Really Worth?

Commercial real estate startup WeWork has attracted some attention recently after being Softbank’s latest multi-billion dollar deal, raising $4.4 billion at an estimated $20 billion valuation. WeWork is by far the largest shared workspace startup, but is a $20 billion price tag justified? Such valuation makes WeWork the 3rd highest valued American startup after Uber and Airbnb, but also raises some questions in light of the criticism over Softbank’s policy of investment resulting in extremely high valuations for its newby portfolio companies.

In order to answer this question, we used Zirra’s company analysis automation technology that helps get the fuller picture about every company in question. First, we asked Emmet, a company analysis bot on Zirra’s homepage, to analyze WeWork’s risk and success criteria:

Source: Zirra.com

**Try Emmet the company analysis bot here**

Emmet is a first of its kind AI-powered analysis bot that understands simple English and answers high-level company analysis insights within seconds. Emmet uses Zirra’s company analysis technology, aggregating data from a myriad of public and private information sources. It then utilizes Natural Language Processing (NLP) techniques to process large volumes of unstructured text, to detect companies and their semantic context, model their interrelationships, and derive dynamic indicators.

Emmet’s output gave us a few interesting points to think about when analyzing WeWork. Emmet confirmed some of the indicators we already sensed about WeWork: the company is well-funded, it has raised much more than its average competitor, and it has created many partnerships, including its most recent partnership with Airbnb, in which business travelers will be offered spots at WeWork locations.

However, Emmet also shows that it’s not all rosy in WeWork’s kingdom, despite the massive PR the company attracts. The company had to cut 7% of its staff last year, it suffers from a certain level of competition, it lacks IP (while holding many trademarks), and it suffers from some legal issues.

Let’s tackle the legal concerns. After learning about their existence from Emmet, let’s go to Zirra’s automatic company report about WeWork, accessible to anyone from Zirra’s homepage. In the section ‘latest events’ we will look for recent legal problems and then click on one of the articles offered.

Source: Zirra.com

One of the articles describes WeWork’s recent legal battle against UrWork, a Chinese competitor, over a trademark infringement. According to WeWork, UrWork copied a part of its name and its logo. The lawsuit is also in context with other problems Emmet has raised such as the growing competition and the lack of IP: on the one hand, WeWork cannot register a patent over shared working space, on the other, it competes over global domination, just as Uber in the automotive space, especially in Asia-Pacific, where UrWork is a strong player.

While UrWork expanded into Singapore and invested in an Indonesia-based rival, WeWork bought Singapore-based SpaceMob. UrWork, which is funded by Sequoia and Jack Ma, also announced it plans to expand into the US and UK. In fact, a part of the financial round led by Softbank was dedicated to WeWork’s expansion in Asia.

According to analytics service SimilarWeb, WeWork’s traffic mainly originates in the US, followed by the UK, Brazil, Canada, and Japan. The recent Softbank round was a part of WeWork’s effort to penetrate into Asia-Pacific.

Source: SimilarWeb

**Try Emmet the company analysis bot here**

Emmet also raised an HR issue. Checking WeWork’s LinkedIn employee and job opening count reveals an interesting angle. September 2017 was the first month in which WeWork significantly reduced its growth to almost none. Also, according to the company’s job openings chart, WeWork is now reducing its operations efforts in favor of marketing and engineering.

Source: LinkedIn

So how much is WeWork really worth? Despite raising a few risk criteria, Zirra’s company analysis algorithms forecasts a bright future for the shared workspace company known for their free beer kegs.

Zirra values WeWork even higher than the valuation given by Softbank last August. WeWork’s worth is estimated at about $25-$26 billion. In the case that the company chooses an exit strategy, most likely to go to an IPO, it can ask for almost $39 billion in valuation. According to Zirra, WeWork can go public within 2-3 years, at a probability of 60%-70%.  

Source: Zirra.com

 

We Told You So About Lyft and Snap

Snap is finally on Wall Street, and it has settled on a final price, putting the company’s valuation at around $24 billion, according to the Wall Street Journal. With the valuation, Snapchat is staying close to the original valuation it was rumored to go public with from last October, which was around $25 billion. This is impressive, due to the fact that since its S-1 application a month ago, headlines have mainly circled Snapchat’s slowing growth, the growing competition with Facebook and leadership challenges.

In fact, Zirra’s algorithm estimated all along that Snapchat’s value was around $26 billion; a value issued long before the S-1 papers were published. That is a two billion dollar difference, which sounds high but is in fact only a 7.6% deviation from the real number, which is not that bad for a valuation algorithm that doesn’t look at the company’s financial books. No doubt the stock will go up, and then will go a bit down, and then the stock price will get a life of its own. But Snapchat got what it wanted, raising more than 10% of its valuation ($3.4 billion) and not giving up a lot in return: non-voting shares that will not allow new shareholders to participate in decision making. Co-founders Evan Spiegel and Bobby Murphy are still in full control of the company and will continue to be in the near future. [Read here for Zirra’s spotlight report on Snapchat]

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Another report which was actually anticipated by Zirra’s algorithm a month ago is that of Lyft’s devaluation, first reported yesterday by the Wall Street Journal. After failing to sell itself at a $9 billion valuation last summer, Lyft is back to pitch investors again, now with a $6 billion valuation, slightly above the $5.5 billion they were valued last round. According to WSJ, Lyft is now trying to raise $500 million in funding in order to keep financing its expansion into more cities and territories in the U.S and to better compete with Uber, which is now richer and bigger after selling Uber China to Didi last summer.

Research completed a little more than a month ago by Zirra valued Lyft at no more than $5.8 billion, slightly less than the number published yesterday by the WSJ. Again. Zirra’s valuation algorithm was very close. Not bad for an algorithm that does not communicate in any way with the company it’s evaluating. [Click here for Zirra’s full spotlight report on Lyft or here for Zirra’s list of the 5 highest valued automotive startups]

How is the magic done? 

The Zirra Valuation Process uses AI and machine learning technology and it involves both Intrinsic and Relative valuation algorithms. The intrinsic data includes revenue and expense estimations, traffic trajectories, investment history and velocity, based on aggregated sources. In the relative analysis, data is compared and benchmarked with a database of thousands of companies with correlation to stage, space, size, and trajectory.

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It then produces a map of competitors based on the data set, rated in accordance with the degree of direct competition, its size, threat, and proximity of the shared customer and partner base. Results are sent to relevant experts in our 450 strong expert community. Experts comment on both quantitative analytics (scores and metrics) and qualitative analytics (risks, opportunities, competitors).

Where do we get the data from?

Data is extracted from 85 different data sources, regularly updated (daily to weekly). Sources include both open and licensed directories such as the company website, Bloomberg, Linkedin, SimilarWeb and Adwords; It can be “derived data” such as Glassdoor reviews, consumer reviews, sentiment analysis from open web articles; or other data points such as academic researches, stock indexes, and macroeconomic parameters.

Why did we do it?

The private tech industry is one of the most secretive and mysterious – yet it is rich and growing rapidly. Those who are working in the startup ecosystem themselves, entrepreneurs, venture capitalists, reporters, are suffering from serious disinformation regarding the economy that surrounds them. The result of this panoply of secrets, taboos, and mysteries is enormous disinformation surrounding the startups market. Here at Zirra, we decided to do something about that. We have made it our mission to bring transparency to the private tech market. [Read here our post on valuing companies]