WeWork has halted pursuing an IPO and secured their footnote in VC history.
Founder vs. entrepreneur mentality
WeWork’s implosion originated at the top, with CEO Adam Neumann. Early investors overlooked many problems with the leadership team, hoping to strike gold. Since the mess at WeWork can no longer be contained, the public is learning exactly how bad it has been. Employees describe a leader who liked in-office parties, loud music and engaged in inappropriate behavior. The press describing Adam Neumann sounds like the behavior of a founder, not a passionate entrepreneur.
When someone is serious about making their company a success, they’ll stop at nothing to succeed – think Elon Musk, having to borrow money to pay rent. This is exactly the unwavering diehard commitment we look for. So, thankfully, investors got spooked, or got smart about WeWork’s executive decision making, company structure and the economic forecast and decided not to continue investing billions of dollars.
WeWork is an office space subleasing company. It’s possible to argue that it’s not even a tech company. Seasoned VCs and the market got caught up in the hype and excitement of a charismatic CEO and the valuations exploded. This formula has expensively played out with Jack Dorsey’s Twitter IPO bomb and Uber’s Travis Kalanik legendary letdown, which both lost investors a lot of money. With talks of a possible recession looming, this could be a sign that investors are more cautious than ever, digging into much deeper due diligence before writing any checks.
An industry unfit for most people
The turbulence at WeWork highlights some of the cons of venture capitalism. This model is being proven unsustainable by Uber, who will likely never turn a profit and Snapchat, who might possibly only have 3 years before they run out of VC cash. In the venture capital industry, red flags can be quickly overlooked, passionate entrepreneurs can be replaced by greedy posers, and regular investors tend to either be left holding the bag, or left out of the market all together.
The question is, will WeWork’s IPO implosion cause more angel investors and VC outfits to pivot into crowdfunding? It’s an adjacent industry that’s more inclusive, creates jobs, boosts local economies, and addresses the Valley of Death. Some might say that crowdfunding is the perfect pairing for venture capitalism.