Billion Dollar Loser

In 2010, an Israeli immigrant and an architecture graduate from Oregon opened a shared office space in a run-down SoHo building with 17 tenants. Within nine years, their company, WeWork, raised more than $11 billion in investment capital and reached a private valuation of $47 billion, making it the second most valuable start-up in America. Five months later, the company's attempt to go public collapsed, and its cofounder and CEO, Adam Neumann, was forced to resign. Journalist Reeves Wiedeman traces this arc through more than two hundred interviews, presenting WeWork's rise and fall as both the story of one man's ambition and a broader indictment of the venture-capital-fueled start-up economy of the 2010s.

Adam Neumann was born in 1979 in Beersheba, Israel. His parents, both doctors, divorced when he was young, and his childhood was marked by displacement: He lived in 13 places before reaching New York, including a stretch on Kibbutz Nir Am, a socialist community near the Gaza Strip. Adam later cited the kibbutz as foundational to WeWork, calling it a "capitalist kibbutz" combining community with individual reward. After serving in the Israeli Navy, he moved to New York in 2001, enrolled at Baruch College, and launched a baby clothing company that failed. He met Rebekah Paltrow, a cousin of actress Gwyneth Paltrow, who introduced him to Kabbalah, a Jewish mystical tradition practiced at the Kabbalah Centre in Manhattan. The tradition provided Adam with a spiritual framework and a network of wealthy donors who became WeWork's earliest backers.

Adam's future cofounder, Miguel McKelvey, grew up in Eugene, Oregon, as part of a matriarchal collective of single mothers. He studied architecture at the University of Oregon and moved to New York in 2004. Miguel met Adam in the elevator of a Tribeca building, and despite their contrasting personalities, they bonded. Together they converted an empty floor of an old coffee factory into subdivided offices under the name Green Desk. Green Desk opened in May 2008 and thrived as the recession drove freelancers to seek affordable, flexible space.

The partners sold their Green Desk stakes and poured the proceeds into a new venture they called WeWork. Joel Schreiber, a young real estate developer, invested $15 million for a third of the company at a $45 million valuation, a figure the cofounders invented on the spot. Miguel renovated a SoHo building himself, soda-blasting paint off the brick walls and outfitting the space with residential furniture. WeWork opened in February 2010 and quickly expanded. Adam declared that WeWork was not a real estate company but part of a revolution, positioning himself as a successor to Steve Jobs.

At a party in March 2012, Adam announced that WeWork was "the world's first physical social network," drawing comparisons to Facebook and Uber to attract the higher valuations awarded to technology companies. Benchmark, a Silicon Valley venture capital firm, invested $16.5 million at a $100 million valuation. To close the deal, Miguel agreed to transfer increasing portions of his equity to Adam, permanently shifting control. Ever-larger fundraising rounds followed, each boosting the company's paper value while the gap between perception and reality widened. Adam engineered supervoting shares giving him roughly 65 percent control. WeWork's 2012 profit of $1.7 million was the last profitable year in the company's history.

WeWork's culture became defined by lavish parties, heavy drinking, and an annual Summer Camp retreat that grew from 300 attendees to thousands. The company expanded into WeLive microapartments, but the finance team doubted the project would ever be viable. In 2015, a hedge fund pushed WeWork to double its already inflated growth targets, then invested at a $10 billion valuation that even WeWork's own finance team called "stupid."

The pivotal moment arrived in January 2016, when Adam met Masayoshi Son, the founder of SoftBank, a Japanese technology conglomerate, at a bar in New Delhi. In December 2016, Son visited WeWork headquarters but had only 12 minutes. Adam rushed him into the back of his car, where Son sketched a $4.4 billion investment on an iPad. SoftBank's internal team found that WeWork had missed some projections by 80 percent, but Son overruled them, telling Adam to think bigger. The deal was announced in August 2017 at a $20 billion valuation. Adam cashed out $361 million, nearly three times more than every other WeWork employee combined.

Armed with SoftBank's capital, WeWork launched an aggressive campaign to crush competitors with subsidized rents and guerrilla marketing. Adam rejected the counsel of Howard Schultz, the former Starbucks CEO, to pause growth and fix operational problems. The company doubled its locations in a single year. Rebekah launched WeGrow, an elementary school with tuition up to $42,000, after deciding no existing school was good enough for their eldest daughter. Adam acquired five companies in six months. Internally, the culture deteriorated: Miguel, reassigned as chief culture officer, struggled to effect change, and employee turnover accelerated until half of WeWork's nearly 10,000 employees had been with the company for less than six months by the end of 2018.

In the summer of 2018, Son and Adam sketched out Fortitude, a plan for SoftBank's Vision Fund, a $100 billion investment vehicle backed primarily by Saudi Arabia, to invest as much as $20 billion and keep WeWork private. The fund's backers refused to contribute more, and SoftBank's own Japanese mobile-phone IPO tanked in December. On Christmas Eve, Son called Adam to say Fortitude was dead. He agreed to a reduced $2 billion investment that pushed WeWork's valuation to $47 billion.

On April 29, 2019, WeWork announced it was preparing for an initial public offering (IPO). The S-1, the company's IPO registration filing with the Securities and Exchange Commission (SEC), was prepared amid chaos: Rebekah inserted herself into the process, directing a costly photo spread and drafting an epigraph that bankers and lawyers unsuccessfully opposed. When the filing, code-named Wingspan, was released on August 14, the reaction was devastating. The document revealed Adam's ownership of buildings leased to WeWork, Rebekah's role in choosing his successor, supervoting shares, and nearly $2 billion in losses. A Harvard Business School lecturer published a paper titled "Why WeWork Won't."

Adam's investor presentations faltered as the valuation in the press dropped from $47 billion to $20 billion and lower. On September 16, JPMorgan told WeWork there was not enough demand to proceed. Bruce Dunlevie, the Benchmark partner who first backed WeWork, flew to New York and dined with Adam alongside the company's earliest investors. All three told him he should step down. On September 24, the board met and Adam resigned as CEO.

Artie Minson, WeWork's co-president, and Sebastian Cunningham, a vice chairman, became co-CEOs. A restructuring firm determined that without new funding, WeWork would run out of money before Thanksgiving. The company slashed costs: WeGrow closed, the corporate jet was sold, and Adam's friends and relatives departed. SoftBank offered a rescue package of $5 billion in debt financing and a $3 billion share buyback, giving it near-total control. Adam's exit terms included the opportunity to sell up to $970 million in shares, a $500 million personal loan, and a $185 million consulting fee.

Miguel left WeWork in June 2020. SoftBank reneged on the $3 billion share purchase, citing government investigations, and Adam sued. Covid-19 devastated WeWork's model of high-density office space. SoftBank marked down its investment to $2.9 billion, roughly 6 percent of the $47 billion valuation from a year earlier, a figure approximately equal to the market value of IWG, the conventional office-leasing company that WeWork had always insisted it was nothing like.