Here’s How The ‘Future Of Work’ Can Drive Revenues For WeWork

&l;p&g;WeWork, the fastest growing co-working space provider was valued at &l;a href=&q;;&g;$20 billion&l;/a&g; in its latest funding round by Softbank. This valuation commands a Price/Sales multiple of 8.5 with WeWork&a;rsquo;s &l;a href=&q;; target=&q;_blank&q;&g;projected revenues of $2.3 billion&l;/a&g; in 2018. While this revenue multiple is high (WeWork&a;rsquo;s closest listed competitor Regus commands a multiple of around 1.0X), the company expects to increase its revenues exponentially as it rides the trend of the &a;ldquo;Future of Work.&a;rdquo; Companies such as &l;a href=&q;;&g;Facebook&l;/a&g; (NASDAQ: FB), &l;a href=&q;;&g;Google&l;/a&g; (NASDAQ: GOOG), and &l;a href=&q;;&g;Microsoft&l;/a&g; (NASDAQ: MSFT) are likely to make technology contributions towards the future of work, and we believe WeWork can benefit significantly from this trend.

We analyzed WeWork in our &l;a href=&q;; target=&q;_blank&q;&g;&l;strong&g;interactive dashboard for WeWork&a;rsquo;s Valuation&l;/strong&g;&l;/a&g; and you can refer to our note &a;ldquo;&l;a href=&q;; target=&q;_blank&q;&g;Can WeWork Sustain Its High Growth &a;ndash; The Key To Its Lofty Valuation&l;/a&g;?&a;rdquo; for this analysis. Below is a snapshot of the key drivers to WeWork&a;rsquo;s future revenue:


&l;a href=&q;; target=&q;_blank&q;&g;&l;img class=&q; wp-image-185696 size-full&q; src=&q;; alt=&q;&q; data-height=&q;315&q; data-width=&q;735&q;&g;&l;/a&g;

You can click on the blue dots to modify the drivers and analyze their impact on WeWork&a;rsquo;s valuation. &l;a href=&q;; target=&q;_blank&q;&g;Click here &l;/a&g;to enter your own estimates.

Reports now suggest that WeWork is looking for a valuation &l;a href=&q;; target=&q;_blank&q;&g;of $40 billion&l;/a&g; in its next round of funding with Softbank, double of what it got last year. This implies that WeWork is looking at a rapid growth trajectory as the traditional ways of working change, and an increasing number of employers and employees move towards the Future of Work.

&l;strong&g;What Could Be The &a;ldquo;Future Of Work &a;ldquo;?&l;/strong&g;

With technological advancement, the traditional job environment is changing rapidly. Several trends are emerging on how the Future of Work would be, and some of the key trends include:

&l;/p&g;&l;ul&g;&l;li&g;Automation of several processes eliminating the need of human intervention, use of robots, and artificial intelligence. This trend is likely to eliminate some jobs and create new technology related jobs.&l;/li&g;

&l;li&g;Rapid increase of freelancing professionals: Surveys suggest that the majority of the U.S. workforce will be &l;a href=&q;; target=&q;_blank&q;&g;freelance by 2027&l;/a&g;, led by millennials who prefer this form of employment.&l;/li&g;

&l;li&g;Flexible working/ working from anywhere- facilitated by technology advancement including 5G, virtual and augmented reality, eliminating the need for all employees to be physically present in one location to efficiently carry out a task.&l;/li&g;

&l;/ul&g;&l;strong&g;How Can WeWork Benefit From These Trends?&l;/strong&g;

&l;ul&g;&l;li&g;WeWork&a;rsquo;s business model of providing trendy office spaces to individuals/enterprises who want the flexibility to work from anywhere fits well with how the Future of Work is likely to evolve. With a growing number of freelancers and entrepreneurs, demand for co-working spaces is likely to increase steadily.&l;/li&g;

&l;li&g;However, WeWork&a;rsquo;s revenue growth is likely to come from its enterprise users who are looking to move away from real estate management and want to provide their employees an option to work from any location, reducing the commute time. Most millennials prefer the flexibility to work from any location however they also prefer to &l;a href=&q;; target=&q;_blank&q;&g;work from an office&l;/a&g; rather than from home.&l;/li&g;

&l;li&g;In 2017 nearly &l;a href=&q;; target=&q;_blank&q;&g;30% of WeWork&a;rsquo;s revenues&l;/a&g; came from these corporate customers and more than 1000 companies who have 1000+ employees use its facilities. WeWork&a;rsquo;s offering of &a;ldquo;Space As A Service&a;rdquo; where it would manage all real estate requirements of an organization (which could be as large as Facebook employing hundreds of thousands of people across the world), is finding favor with several corporates.&l;/li&g;

&l;li&g;WeWork&a;rsquo;s expertise in managing space, optimizing it for the use of its corporate clients, identifying the right location for an office, and a vast global network of office spaces is likely to give it a competitive edge over other players. Corporates can prefer to avail WeWork&a;rsquo;s services and provide their employees with a network of spaces to work, or have an entire dedicated building for themselves &a;ndash; leased and managed by WeWork.&l;/li&g;


WeWork is looking to cash in on the trend where traditional work spaces are likely to be disrupted by decentralized offices (not managed by the enterprise) where employees can work from any location, and have all the technology available (video conferencing, high speed 5G connectivity, virtual and augmented reality) to work efficiently.


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