The WeWork “Acquisition” (with Dan Primack)

[0] No, yeah, we'll cut this part out.

[1] We have a woodpecker happening.

[2] This is a first on Acquire.

[3] Dan's going to take care of it.

[4] I love it.

[5] Welcome to Season 5, Episode 6 of Acquired, the podcast about great technology companies and the stories behind them.

[6] I'm Ben Gilbert, and I'm the co -founder of Pioneer Square Labs, a startup studio and early stage venture fund in Seattle.

[7] I'm David Rosenthal, and I'm a general partner at Wave Capital, an early stage venture firm focused on marketplaces based in San Francisco.

[8] And we are your hosts.

[9] Today, we tell an episode that in our initial Season 5 planning calendar, we had as an IPO episode.

[10] And then that was pitifully canceled.

[11] And we were just going to tell the crazy story of the antics that got it here.

[12] But now it's shaping up to be a tried and true acquisition episode for us.

[13] So here on this episode, we will dive into the existential question of if we work, a once 47 billion dollar company can be saved by SoftBanks, effective acquisition of the company, and we are going to try to accomplish two goals.

[14] First, to dive into the history of this company from the very beginning, and second, to try and see the core economic forest through the undergoverned trees and understand precisely the position that the business is in today.

[15] Listeners, Dan's face staring all of this is priceless.

[16] If only we were a video podcast.

[17] Which brings me to the only appropriate way that we know how to tell this story is with the expert help of Axios' Dan Primac, who has a has been meticulously and astutely covering this company for several years.

[18] Welcome to Acquired, Dan.

[19] Thanks for having me. Okay, listeners, now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[20] Yes, ServiceNow is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

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[23] They're also a major partner of both Microsoft and Nvidia.

[24] I was at Nvidia's GTC earlier this year, and Jensen brought up ServiceNow and their partnership many times throughout the keynote.

[25] So why is ServiceNow so important to both Nvidia and Microsoft companies we've explored deeply in the last year on the show?

[26] Well, AI in the real world is only as good as the bedrock platform it's built into.

[27] So whether you're looking for AI to supercharge developers and IT, empower and streamline customer service, or enable HR to deliver better employee experiences, service now is the platform that can make it possible.

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[29] For example, smarter self -service for changing 401K contributions directly through AI -powered chat, or developers building apps faster with AI -powered.

[30] code generation, or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

[31] With ServiceNow's platform, your business can put AI to work today.

[32] It's pretty incredible that ServiceNow built AI directly into their platform, so all the integration work to prepare for it that otherwise would have taken you years is already done.

[33] So if you want to learn more about the ServiceNow platform and how it can turbocharge, the time to deploy AI for your business, go over to servicenow .com slash acquired.

[34] And when you get in touch, just tell them Ben and David sent you.

[35] Thanks, service now.

[36] And now, on to WeWork.

[37] All right.

[38] On to Wework.

[39] Man, we were thinking about how to frame this and talking with Dan a little bit before.

[40] And, you know, I think what we decided to go with, which is true, is like, this is a tragedy.

[41] This is like a Greek tragedy.

[42] Particularly for thousands of people who, you know, by the time people listen to this might have lost their job.

[43] I mean, within hours of when we're taping this or a day within when we're typing this.

[44] Yeah, it's like, you know, I don't know, the Peloponnesian War or something.

[45] Like, the outcome is predetermined and the actors are just caught up in forces beyond themselves.

[46] Minus one actor who gets a lot of money.

[47] And I guess gets an island of the Peloponnesian.

[48] Yeah, right.

[49] Those grandchildren, I'm sure we'll have their own island.

[50] Which Greek myth mythological character is Adam Neumann.

[51] Was there a Greek mythological character who just got to walk away with all the riches and leave all the responsibility behind?

[52] I don't remember that.

[53] There was usually a moral in the stories, wasn't there?

[54] Listeners, we sit here on Thursday, October 24th in the morning, 10 a .m. Eastern time.

[55] So you get a sense of where we are in this currently developing tragedy.

[56] Yeah, indeed.

[57] Well, all right, let's dive into Act 1, The Rise of WeWork.

[58] And to talk about WeWork, you obviously have to talk about the protagonist, question mark, of this, Adam Newman.

[59] Who is Adam Newman?

[60] Self -styled hero.

[61] Self -styled hero.

[62] So Adam, as many folks probably know, he was born in Israel.

[63] He's Israeli.

[64] His parents were both doctors.

[65] His parents divorced when he was seven.

[66] And he ended up living in 13 places over the next 15 years, which is actually like pretty crazy.

[67] And probably a lot of that goes into the ethos behind WeWork, including in the U .S. He spent a few years living in the U .S., then came back to Israel.

[68] And he spent a number of years living on a kibbutz in Israel, which is like a rural sort of communistic farm.

[69] He was dyslexic, I presume is dyslexic.

[70] But nonetheless, quite, smart.

[71] He tested into the Israeli Navy Academy, Naval Academy growing up, became an officer, and he served in a kind of elite unit in the Israeli Navy for five years.

[72] After that, he moves back to the U .S. to New York to live with his little sister, Adi, who was actually misteen Israel.

[73] No way.

[74] Yeah, totally.

[75] And she was a model in New York.

[76] And Adam, I guess, had always wanted to come back to the U .S. and to New York.

[77] They lived together in the city, and he went to business school at Baruch College.

[78] And his goal was getting out of the army, just like many folks in Israel, wanted to become an entrepreneur, wanted to start a company.

[79] And so I think this was probably while he was in business school or shortly afterwards.

[80] He has his first great startup idea, perhaps inspired by his fashion model sister, collapsible women's heels.

[81] Yeah, I forgot about that.

[82] Yep.

[83] Yeah, pretty amazing.

[84] I actually couldn't find the name of the company.

[85] Dan, did you remember what I was?

[86] Oh, God, I don't remember it.

[87] No, and it's killing me now.

[88] No, but that's exactly what it was.

[89] Yeah, it was.

[90] I mean, like, amazing.

[91] That, uh, unfortunately didn't work for reasons that are lost to history.

[92] But undaunted, Adam goes on and he starts his next company.

[93] The next company is called crawlers with a K. And crawlers, this is true.

[94] Now remember, Adam, I mean, folks listeners probably have some image of Adam right now.

[95] He actually does have five children now.

[96] At the time, he had no children.

[97] And crawlers was a baby clothing company.

[98] company, and the unique insight innovation that they had, this is maybe going to pressage we work here, is they had the technological advance of built -in knee pads in pants so that as your children were crawling around on the floor, they were falling on the floor.

[99] Danny, you could probably speak to this.

[100] Like, this is a real problem.

[101] This sounds like a Kramer thing.

[102] But it's also, it's a little bit in New York.

[103] Like you think of the ear, both of those, like collapsible heels, you know, baby clothes.

[104] Like, you think of New York in that time from an entrepreneurial sense.

[105] It wasn't, you know, there was all this complaint, you know, there's not much.

[106] tech coming out in New York, but a lot, whether you want to call it fashion apparel, consumer consumer products.

[107] I mean, that's also the Warby Parker era, et cetera.

[108] That's what was being made.

[109] We should set the time frame here.

[110] This is mid -2000s when all this is going on.

[111] So just pre -financial crash.

[112] And yeah, tech in New York was like, there was Union Square Ventures there.

[113] And there was media, media tech.

[114] Media and ad tech.

[115] Tumblr had done well or was rising.

[116] I mean, I guess was four square around yet, probably.

[117] But it got so much publicity as part because it was one of those earlier.

[118] Maybe it wasn't around.

[119] Yeah, it wasn't around.

[120] Yeah, it wasn't around.

[121] Yeah, it wasn't around.

[122] Maybe Etsy was, but like these were not, people weren't building like real tech companies in New York.

[123] Well, this, we will continue on that theme.

[124] Whether we work is or not, yeah.

[125] Yeah.

[126] So it's right around this time while Adam is trying to make crawlers work that he goes to a party and he went to lots of parties.

[127] In fact, he goes to a party at his own apartment.

[128] And as we were doing the research here, Dan, I don't know if you saw this or remember this.

[129] I guess Adam had a habit.

[130] This must have been summertime of in the parties that he would throw in his apartment.

[131] He would just walk around without a shirt on.

[132] That I don't know, although there's a photo of him from like two weeks ago walking down New York Street without his shoes on, which is insane in Manhattan, but was, yes.

[133] No shirt, no shoes.

[134] It was like within two hours of the board hosting him as CEO.

[135] It's possible they took his shoes.

[136] We don't know.

[137] So Adam is shirtless at this party.

[138] And a guest, a friend of a friend, shows up and meets, meets Adam in the elevator going up to the apartment.

[139] And that man's name is Miguel McHelvey.

[140] Now, Adam, I don't think we've mentioned yet, is six foot five.

[141] Miguel is six foot eight.

[142] So maybe they were like the only people who could see each other in the elevator.

[143] And Miguel had a similarly interesting background.

[144] So he grew up, not in Israel, not on a cabots, but in Oregon on a hippie commune.

[145] Uh, in a...

[146] Both we work founders have their origin stories from coming years.

[147] And it absolutely, when we get further along, absolutely makes sense when you think about what we work tried to become.

[148] So Miguel was born to a single mother, lived in this collective of five single mothers and their children.

[149] He had four sisters, we're not biological sisters, but this commune was 10 people, five mothers, five children.

[150] Later, there was a little brother that came into the picture about 10 years later.

[151] but that was that was how he grew up in this collectivist rural commune outside of eugene oregon he ends up he was very smart though is very smart goes to colorado college for university he spends a couple years there then ends up transferring back home to the university of Oregon just in Eugene he does two things there one he plays basketball uh and he's six eight you can't waste it and Oregon is like a pretty good basketball oh yeah he was like legit and um two he studies architecture and he gets his architecture degree so this is all starting to come together here.

[152] And it's going to come together even more.

[153] He graduates.

[154] And in true, you know, sort of free spirit fashion, he moves to Tokyo after graduation.

[155] And because he has a friend over there, and is like, hey, you should just come, like, hang out in Tokyo.

[156] So he goes, remember, SoftBank is going to enter the picture here, you know, in a little bit.

[157] And in Tokyo, he starts his first company, a company called English Baby, which amazingly still exists today.

[158] We'll link to this in the show notes.

[159] Yeah.

[160] Did it merge with crawlers?

[161] No. No, no, no, no. So Miguel was a co -founder.

[162] He was not the CEO.

[163] The company ended up moving, spent a couple years in Tokyo, ended up moving back to Portland, Oregon.

[164] So it's still based in Portland.

[165] An English baby is best described as like MySpace plus duolingo.

[166] So this is again, like early to mid -2000s.

[167] Yeah, it's probably not a bad idea.

[168] I think they were inspired by like, do you guys remember growing up like this concept of you would be like your schools would help you become pen pals with like students in foreign countries.

[169] I think that's what kind of inspired that.

[170] They wanted to do that on the internet.

[171] So like learn, help foreign students, learn English, you know, with friends in other countries.

[172] Yeah.

[173] So the tagline, which is still there on the website today, the motto of the company is learn English, find friends.

[174] It's cool.

[175] Kind of amazing.

[176] So after that, Miguel works on that for a couple years.

[177] And then he's like, you know, I have this architecture degree.

[178] I should use it.

[179] I also, he's also kind of always had this dream.

[180] He talks about this.

[181] He was on, how I built this podcast.

[182] He always had this dream to kind of move to New York.

[183] So he just picks up, moves to New York, and he joins a small architecture firm in Dumbo in Brooklyn.

[184] And there were two architects there, and he was working as a draftsman for these two architects.

[185] And they had one major contract, which was the buildout of the American Apparel retail stores all across the country.

[186] So Miguel gets drafted in as a draft from that basically, this was when the era of American Apparel, they were just rolling out in a huge way.

[187] kind of like we work would all across the country open up all these stores all with the same aesthetic that would come to sort of inspire we work here to bring it full circle uh just before flying out to do this episode i walked past the empty space in seattle where the american apparel store used to be and was more recently filled by glossier's pop -up which is just like to bring it the most full circle oh my god are you are you implying there might be some empty we work spaces soon no i don't know um so it is this man that walks into the elevator and meets Adam at this party in, this probably would have been like 2007, maybe early 2008 in New York.

[188] And they get to talking at the party.

[189] And Adam, it turns out, is looking for office space for his burgeoning hypergrowth company crawlers and is talking to Miguel.

[190] And Miguel's like, oh, yeah, like, I'm an architect like I'm into, I'm doing all this commercial space.

[191] And Adam wants to...

[192] If you can wait eight years, my company, the company I'm working for is going to collapse.

[193] It'll be storefronts everywhere.

[194] Everywhere.

[195] Everywhere.

[196] And so Miguel's like, dude, don't go, don't go looking for office space in Manhattan.

[197] Like, that's stupid.

[198] Come to Dumbo.

[199] Rents are cheap here.

[200] It's super awesome.

[201] It's really hip.

[202] You're going to like it a lot more.

[203] So he convinces Adam to move into the same building that his architecture firm is in Dumbo.

[204] And this is 2008.

[205] The financial crisis is happening.

[206] Rents are super cheap.

[207] There's, you know, blood on the, proverbial blood on the streets in New York.

[208] I was there.

[209] We all remember this.

[210] Real estate is plummeting, and these two entrepreneurial guys, they kind of cook up this idea.

[211] They're like, there's some empty floors in this building that we're in here in Dumbo.

[212] What if we convince the landlord to let us take over one of these floors, and then we can stuff some more people into it and like make the arbitrage on the rent?

[213] And they decide this is a good idea, these two new fast friends.

[214] And so they do it.

[215] They convince the landlord's like, well, I can't move this floor anyway.

[216] They give it to them.

[217] And the idea is this is going to become like Airbnb for office space.

[218] and maybe the better analogy, though, is there's a Forbes article a couple years later in the early days of WeWork, and they say, sort of like Airbnb, but maybe a better analogy is like an airline operator.

[219] Because really what they're trying to do is take a physical asset and squeeze as many people into it, just like coach on an airplane.

[220] And to turn out, I think the financial dynamics of this business look a lot more like an airplane operator than they do like Airbnb.

[221] be.

[222] But anyway, it's actually a great idea.

[223] Like, very quickly the space gets filled up.

[224] They listed on Craigslist.

[225] They're like, hey, we've got desks here.

[226] They decide to call it green desk.

[227] They think, like, this is going to be eco -friendly.

[228] That's what's going to appeal to these types of folks that are like, you know, new age entrepreneurs.

[229] They care about the environment.

[230] They start marketing.

[231] Didn't they only like stock environmental products?

[232] So it's like all seventh generation sort of like CPG stuff throughout the.

[233] I think they might have.

[234] They used.

[235] only recycled desks.

[236] And then the kicker is, I'm sure this was probably fake, but they were like, we are powered only by wind power.

[237] In Dumbo?

[238] In a birded building in Dumbo?

[239] They've changed their own grid.

[240] All right.

[241] Hey, they're entrepreneurs.

[242] They're entrepreneurs.

[243] Throw a windmill on top of the building.

[244] I'm sorry.

[245] I'm just, I'm trying to think of Brooklyn.

[246] I'm trying to identify my mind the first windmill I've seen there and I'm still trying.

[247] It was the Dutch, you know.

[248] They put the windmills in the New York.

[249] when they settled it.

[250] So like I said, though, it works great.

[251] Like there are all these people that are getting displaced from their traditional New York finance, you know, media, what have you jobs.

[252] And they're either starting businesses or they're freelancing and they're looking for stuff like this.

[253] And so the Craigslist postings that they're making are just getting all this demand.

[254] And within, I believe within a month, they have the space like pretty much booked up.

[255] Then they start taking some more floors in the building.

[256] The landlord owns a few other buildings nearby.

[257] They start doing this in the other buildings, and it really works.

[258] Wait, so this is Green Desk not.

[259] This is Not WeWork.

[260] There's something bad happen at Green Desk or did they just morph?

[261] No, something great happens to Green Desk, which is two years later, the landlord says, man, this is like becoming a big part of my business.

[262] And he, unclear to me if he offered to buy or they offered to sell to him, but they buy, the landlord buys Green Desk from Adam and Miguel for $3 million, which is pretty great.

[263] So this is 2010.

[264] They raise no investment.

[265] they, I believe, raised no investment.

[266] Now, they had a third partner who was a guy, I believe named Gil, who Miguel had worked with at the architecture from.

[267] And I believe Gil at this point just takes the money and moves back to Israel.

[268] He was Israeli.

[269] But Adam and Miguel, they make like a pretty bold decision.

[270] And this is 2010.

[271] Remember this.

[272] Like, they just made probably at least a million dollars each.

[273] They could be living large in New York at this point in time.

[274] In Dumbo at least.

[275] and man, to invest in Dumbo real estate in 2010, like you would have made a killing.

[276] But they say, no, we're going to double down.

[277] We think that we've learned a couple things from Green Desk.

[278] We think that this product has some form of product market fit.

[279] Let's take this across the water into Manhattan.

[280] And so they go, they decide to restart the company and they want to go do this same concept in Manhattan.

[281] But they've learned, one of the key things they learned is that actually this eco -friendlyness thing, like it sounds good but that's not why people showed up people showed up because what they were really doing was they were selling a culture they were selling a workspace feel design culture and I think this is totally true like Dan I don't know if you'd agree I think I mean I think they were selling you know if you think about freelancers back then or people trying to start they were selling they were selling without having to go and buy coffee and there was actually a desk that's what they were selling because that's where you would go and probably with worst Wi -Fi at the time.

[282] Yeah.

[283] What I think Regis and IWG is going to come up in a minute.

[284] But again, this is not a super new idea.

[285] The idea of, look, in 19, I'm going to really date myself now.

[286] In 1994, in Cambridge, Massachusetts, in Kendall Square, where MIT is, I was working on a startup newspaper at the time, and we rented an office space.

[287] And the big thing that that had was it had a common receptionist and a mailbox.

[288] That was huge, right?

[289] We could get mail to us and somebody would pick up the phone and would direct it to So, I mean, that was very much the early version.

[290] But that general idea, and there was a bunch of different, basically, conference rooms and every company had one.

[291] Yeah.

[292] But I bet, though, it probably didn't feel, it felt probably kind of pretty crappy.

[293] Yeah, it did.

[294] No, it felt like basically we were in a very large cubicle with a better, with a window.

[295] Yeah.

[296] So this is an age -old business, this subdividing real estate, basically leasing, taking on a long -term liability where you rent out space for some low price because you're taking it in bulk, you subdivide it up, and then you rent it for a higher price in a shorter term.

[297] And in this case, for what WeWork would become, and they have some common shared services, which is, you know, particularly if you're a two -person company, you don't want to have to deal with somebody answering the phone or how do we get, you know, broadband book job?

[298] Do we have to hire somebody to take the trash and make sure the coffee machine is filled every morning?

[299] Yep, yep.

[300] And I think just to hit on this one more time, because I think this actually is a big difference from WeWork and everything else.

[301] What they did is they did that and they made it feel like you were like at a real place, not like you were at some budget, low rent.

[302] It's like English baby, right?

[303] It's cool.

[304] That's what it was.

[305] Yeah.

[306] It was cool.

[307] And there's multiple interviews with early we work members that said, yeah, I was working on a startup.

[308] It wasn't going well, but like my parents could still come to the office and they felt like I was doing something real.

[309] Like I was a success.

[310] Like there was, you know, I was in a place.

[311] Oh my gosh.

[312] Look at all these great desks and computers and a receptionist.

[313] There's this energy here.

[314] Ostensibly something was working.

[315] Ostensibly, yes.

[316] So, and I think at this point in time, something really was working.

[317] People wanted this.

[318] So they had to come up with a new name.

[319] name.

[320] So Dan, I think you know the story of...

[321] I've heard rumors of the story.

[322] Adam's never said it directly to me. The rumors are that Adam was partaking some stuff he would later partake in on planes and that is when the name came up.

[323] This time on a couch as opposed to an airplane scene.

[324] Well, maybe he was on a couch on his private chip.

[325] That's possible.

[326] Of course, that's fair.

[327] That's totally fair.

[328] We're referring to, you know, the reporting that came out in the last couple months that Adam apparently smoked marijuana.

[329] Which shocked shareholders.

[330] Shocked.

[331] Shocked shareholders.

[332] Because apparently his major investors had never met him.

[333] Anyway, they obviously needed a name to replace Green Desk and they come up with WeWork.

[334] So this is like kind of an amazing entrepreneurial story.

[335] What happens next?

[336] So they start shopping for real estate in Manhattan, at least that they can take out on, they're looking for a whole building that they want to do this.

[337] They want to go big.

[338] But even with the two -ish million that they have between them, that's not really enough to get, even in 2010, a lease on a whole building.

[339] And they want to be in, like, real hip part of town.

[340] They want to be in Soho.

[341] They want to be downtown.

[342] So they're going around.

[343] They're like going to all of these, I don't even know how it works when a building's up for lease.

[344] It's like sort of an auction or like, whatever it is.

[345] I have no idea.

[346] It's, it's market by market.

[347] I know in New York it's like one of the craziest ways.

[348] In New York, when you're looking for an apartment, you hire a real estate agent.

[349] Like, that's how nutso the real estate market there.

[350] So I'm sure there's extra complications when you're looking to lease a whole building.

[351] A whole building, yeah.

[352] So while they're at a few of these, whatever they were, they were like moments where lots of people who were interested in buildings would all be in the room at the same time.

[353] So they're at one of these and they meet a Brooklyn based real estate developer named Joel Schreiber.

[354] And he takes a shine to these guys.

[355] He's like an established pretty big time real estate developer.

[356] And they know they need.

[357] some more capital and so they kind of throw out something to him and say hey we need some funding for what we're doing you think this is a good idea um how about you invest at uh 45 million dollar valuation and he says sure i'll buy a third of the company which by the way just i mean again go back nine years i mean when we you know nothing that's under a billion dollars anyone pays attention to that was a for a startup that didn't exist that was an enormous that's an enormous amount today well it is it is but even then i mean just so absurd This is the...

[358] Auditious.

[359] Yeah, audacious, fair.

[360] But this is the very first example of Adam looking around, like, if this were a tech company, then what they would have gone and done is raised $500 ,000 on a $4 million premium evaluation.

[361] What Adam did was say, oh, no, no, this is not that.

[362] And also, we're not going to approach a traditional tech VC type person.

[363] So you pitch something unfamiliar that's completely different to someone that's not playing the same game as everyone else.

[364] And you get a non -tech investor in a non -tech business at a non -tech value.

[365] and boom, very first time this playbook has been run.

[366] $15 million in the bank.

[367] And so they take out a lease for a whole building in Soho.

[368] They start doing the renovation.

[369] So there's the lease, but then they have to renovate this and turn it into a we work.

[370] We should be clear why it kind of makes sense that you should feel like your $15 million is safe here.

[371] Normally when you're investing in a tech company, you're buying like laptops and then you're paying salaries.

[372] And in this scenario, you're getting something of value, this longish term lease.

[373] So that, like, at least if the business goes kaput, then this major investor owns a third of a valuable lease.

[374] And presumably you could repurpose that building and rent it out for other things.

[375] Which, of course, by the way, as we go on, is in theory, the concept in part behind WeWork's kind of massive valuation, which makes what's just happened that much more.

[376] That much more nutty.

[377] So they start renovating this building, floor by floor, doing that.

[378] And I believe this, we'll see if we can find some pictures.

[379] we work as we know it today like this was it like they all the aesthetic the glass walls the communal spaces like they had this nailed kind of from their green desk days from the beginning so they start doing plus beer taps that was very important that like in the early days when you hear about a we work that was the first thing you hear they have beer taps in the office yeah uh i wg does not have beer it's like the lowest cogs it's the the highest delta between value and perceived value that you could imagine or i guess between cost and proceed value.

[380] So as they're finishing each floor in this building, within one quarter of each floor coming online, they're at 100 % occupancy.

[381] So they're like, oh, man, this is working.

[382] They start running the same playbook on other buildings in New York.

[383] And Adam has a great quote on this.

[384] He says, during economic crises, there were these empty buildings and these people freelancing or starting companies, I knew there was a way to match the two.

[385] if he had stopped there, that is like a brilliant entrepreneurial insight.

[386] He has one more sentence, though.

[387] What separates us, though, is community.

[388] So even back then, even in, you know, 2010.

[389] I'm going to defend him on that for a quick second, which is, and we talked about this, like go back to the Green Desk days and to your friend who said, oh, you know, my parents came in and it looked like something was happening.

[390] Like these freelancers, they weren't necessarily working with each other per se on the same project.

[391] But again, working next someone, it's the difference between working alone in like, you know, rent out a one office office, I guess somewhere right?

[392] And you're alone completely with a door shut.

[393] There's people around.

[394] There's an energy that makes you work more.

[395] It's the same reason why there's like even today questions about is it better for people to be in an office compared to, you know, all working remotely all the time.

[396] Yep.

[397] Yep.

[398] Yeah, again, he's not wrong.

[399] But it is a, but it does lead to some problem.

[400] He's not 100 % right either.

[401] So 2011, this is actually really interesting.

[402] I was surprised by this.

[403] The next year in 2011, PepsiCo takes out a bunch of desks in that first Soho WeWork and starts putting some of their remote New York City -based employees in the WeWork.

[404] I thought that was a much newer phenomenon in WeWorks Business Model.

[405] I thought so too, but it was actually from the very beginning that big corporate clients were also saw the appeal of this.

[406] The next year, in July 2012, this catches the attention of a number of venture capital firms, including storied venture capital firm benchmark, benchmark capital.

[407] And in the summer of 2012, they lead a. 17 million dollar series A in WeWork at a 97 million dollar post money valuation.

[408] So a nice step up from like the original seed round, which was crazy to begin with.

[409] And again, back in 2012, you know, a series A at a hundred million dollar post, like that's a significantly higher valuation than benchmark gave to Uber in Uber series A. Kind of crazy.

[410] And in Forbes, Bruce Dunleave, he gives a nice quote where he flew out to New York to see what was going on.

[411] He said it reminded me a lot of eBay when I first met them in 1997.

[412] There was something going on at both that you couldn't quite put your finger on.

[413] And I think this is an early precursor to a lot of we work, which is there's something valuable here.

[414] You can't quite put your finger on it, and thus it's hard to value.

[415] And that sort of gets taken advantage of over time.

[416] Now, all that said, like everything up into this point, Dan can feel free to disagree.

[417] It all makes pretty much sense.

[418] No, I don't disagree.

[419] I think it did.

[420] Yeah, I think it did.

[421] Yeah, I think does.

[422] Yeah, absolutely.

[423] Even this seemingly crazy investment by benchmark, as we stand today, like, that's a great investment.

[424] And there was like, yes, there was like, is this a tech company?

[425] Is this just a real estate company?

[426] It is.

[427] But we will come back to this benchmark investment and the subsequent investments that in the background is that was going on.

[428] You know, you talk about the valuation.

[429] The part that didn't get reported at the time none of us ever see is the actual governance terms that are sitting behind that valuation.

[430] Yeah.

[431] Do you know if that was happening at the series A already?

[432] Well, I had, I don't know for sure.

[433] Sure, but I don't, I believe Newman, I mean, Adam Newman, even at the time of IPO, owned a remarkable amount of this company.

[434] For example, compare, Travis Kalanick was, I think, owned like 6 % of Uber when he got booted, around 6%.

[435] Yeah.

[436] Adam owned a third of the company.

[437] So, I mean, he still, I mean, after all the soft bank money, et cetera.

[438] So he controlled this thing, even in that early days.

[439] Well, and it's interesting, you know, Adam, of course, had Miguel as his co -founder.

[440] I believe, well, now it's now obfuscated because they have their shares in an LLC, but I believe Adam always had a greater economic percentage of the company than Miguel.

[441] If you remember back to Uber and Travis, Travis was not the founder of Uber.

[442] No. It was Garrett Camp.

[443] Travis was sort of...

[444] But Adam had bigger piece than Garrett had of Uber.

[445] I mean, going forward.

[446] Interesting.

[447] Well, because Garrett and then Travis ended up splitting.

[448] But like there was some deluscious.

[449] Like, Travis didn't start in the same way as like, I am solo founder of this company.

[450] No, again, I mean, we'll get into this.

[451] But I didn't control was important to Adam.

[452] Very important.

[453] And in every way.

[454] control really mattered.

[455] Yeah, yeah.

[456] So after that investment, things continued to work while they're opening lots of locations in New York.

[457] I think it was right around then that I remember the Seattle we work opening, where we were, Ben and I were there at the time.

[458] They were opening, there was definitely in San Francisco, a number of cities around the country.

[459] Expansion keeps continuing.

[460] They start to attract the interest of the financial community.

[461] So they raise, I believe, three more rounds over the coming years, led by investment banks by Jeffries and J .P. Morgan, chief among them, but also from Goldman Sachs.

[462] And they start pumping quite a lot of money into the company on short order.

[463] And so by 2014, the company now is valued at $1 .5 billion and is kind of quite large at this point.

[464] Yeah.

[465] And how much do you think had to do with the fact that they were New York based and not San Francisco based at this point.

[466] I would think, oh, you mean in terms of the leads, I think two things, New York based, but also think about that.

[467] They are still basically a real estate company.

[468] Or if you are, if you are Goldman Sachs, if you're Jeffries, if you're JP Morgan, you have giant real estate investments.

[469] You have whole teams that are dedicated.

[470] They know that some sort of app or some sort of, you know, machine learning, something, They've got to put a lot of faith that the founder knows what they're doing.

[471] With this, they felt they knew what they were doing.

[472] This is them.

[473] This is real estate and it's on their block.

[474] Yeah.

[475] Yeah.

[476] Well, that's actually true.

[477] And I believe by 2014, WeWork had become the single largest lesser of new available commercial square footage in New York City.

[478] Like anybody.

[479] Like, think about like all of the real estate investment and property developers in New York.

[480] WeWork was the largest.

[481] So, of course, they were attracting attention to these folks.

[482] And it goes back to what you said earlier.

[483] Remember also what they are investing in.

[484] You know, an app company can disappear just like that, right?

[485] There's a scandal or a. doesn't work.

[486] There's no product market fit.

[487] Worst thing that happens here is you end up with a shell company that's got, as you said, all the real estate, commercial real estate in New York City.

[488] That's the worst case scenario.

[489] There are, you know, that, that's pretty safe as venture capital investments.

[490] Right.

[491] You know, Goldman and JP Morgan, they're going to be super happy to take over those leases if something goes sideways here.

[492] And let's think about how you, how you might make that investment and arrive at a $1 .5 billion valuation at this point.

[493] Is someone doing a discounted cash flow?

[494] Like is someone actually saying, well, if they continue growing, at this rate for X years and we're looking at our net operating margin and that we think that there's some chance to generate a billion and a half in cash flows.

[495] My get, I don't want to say, I guess.

[496] I would hope so.

[497] I have so little faith that people do that or really do that and don't just come up.

[498] There is a big part of me that believes, and you guys can feel free to disagree, that people come up with a valuation and then they back their math into that valuation.

[499] If the first one doesn't work, they'll come up with another way to make the calculation.

[500] But look, but there was some reasonableness to it, right?

[501] Because you think about WeWork, the issue was always they had to spend a lot of money up front.

[502] Their upfront capital costs A to lease the buildings, but also to do the renovation, right?

[503] It costs money to because they were doing full almost demo inside of these things, almost down to, you know, the equivalent of studs and then rebuilding them inside.

[504] That costs a lot of money.

[505] And if you got 20 year lease, you are theoretically, you're going to, you know, depending on the building, you'll get to break even at year three or year four at 70, 80 percent occupancy.

[506] And that's when you're really in the money.

[507] So that's how you're planning it.

[508] Yeah.

[509] Yeah.

[510] You know, and it's interesting, I hadn't quite thought about this until now as we've been going through it.

[511] I think you could argue, Dan, that, like, the valuations for the tech venture capital community look a lot like what you said.

[512] But I kind of imagine, you know, Goldman, JP, Morgan, Jeff, they don't do this.

[513] They were looking at the value of this real estate.

[514] And I strongly suspect having friends that were at some of these places on real estate investing teams at the time, they probably had big theses about, like, those years, call it, 2010 to 2014, were years to go big on investing in commercial real estate in major metropolitan areas.

[515] The counter argument would have been, even at the time, would have been, okay, we're in an economic recovery at the time, arguably boom, by 2014 -15.

[516] Okay, so you're right.

[517] So the floor, you know, floor 30 on 6th Avenue, that's, there's got a, it's got an intrinsic value to it.

[518] But we work has decided that they are going to rent it out to short -termers for the most part.

[519] Yeah, maybe some Pepsi's, but short -termers.

[520] And they're going to spend a fortune renovating it when it was already an office building, right?

[521] Generally, most of them, maybe not the one in Soho, but most of them were probably already office buildings.

[522] Could we have done better just calling Pepsi, calling somebody else, splitting the floor in half and basically keeping the infrastructure exactly the same, maybe with new coat of paint?

[523] Yeah.

[524] Maybe they could have.

[525] So the net of all this is in June 2015, WeWork makes a really key hire.

[526] They hire a man named Artie Minson, who was the CFO of Time Warner Cable.

[527] Now, if you think about the cable business, this is the not the content business.

[528] This is the, literally the pipes, the distribution of cable.

[529] Which is why he was perfect for this.

[530] Exactly.

[531] It's a cash flow business.

[532] Cash flow business, but the same thing, right?

[533] A huge upfront infrastructure spend and you will get your money basically recurring revenue year after.

[534] It'll take a while to get your nut back.

[535] But then eventually it's a lot of money down the road and it's recurring.

[536] I mean, I remember.

[537] And limited supply also.

[538] I mean, you think about cable.

[539] There's, in New York, as everyone knows when, you know, when Time Warner decides to stop carrying a channel, you're out of luck.

[540] Same thing.

[541] There's a limited amount of commercial real estate in New York.

[542] Yeah.

[543] I remember back in the mid -2000s, I was in a media investment banker at UBS in New York, and I remember covering cable companies, and the history of cable companies, as we've discussed a little bit on Acquired, was like nobody believed in them during the 80s and 90s when they were incurring huge losses doing all this build -out of laying the cable, laying the pipes into consumers' homes, but then the switch flipped exactly like you said, Dan, and then they became cash flow monsters, and people loved them.

[544] And so I think a lot of this bet here was the same thing was going to happen with WeWork.

[545] And already said that explicitly over and over again.

[546] He felt they were analogous.

[547] And that's Ben Thompson's AWS analogy, too, that says, look, there's huge buildout costs.

[548] It would be strange if this business weren't incurring huge losses right now in this era of rapid expansion of infrastructure.

[549] At some point, it should flip.

[550] Yeah, indeed.

[551] This, though.

[552] It did, by the way.

[553] It did eventually.

[554] AWS definitely.

[555] No, no. We work just in the opposite direction.

[556] Yeah, well, exactly.

[557] I was going to say, this is, no, no, no, you're not.

[558] This is a switch does flip at this moment.

[559] Unfortunately, the switch that flips, I think was more in Adam than in the business.

[560] Yeah.

[561] So this is the moment where until this point, the name we work is in no way Salid or in no way a head scratcher.

[562] It's, it's a really interesting company that seems to have product market fit.

[563] That's, of course, growing very fast, but no one's looking at the growth and saying, like, there's something massive.

[564] mostly the only concern i at least i remember hearing at the time was this argument and you know the Pepsi thing's interesting because the the enterprise piece of them in terms of renting to big enterprise companies wasn't well known and wasn't even that big within we work in terms of its revenue at the time there was a concern that wait a minute they are they're filling these with all of these startups these tech startups if the tech startup bubble bursts yep and that's on top of a commercial real estate burp you've got burst rather you've got a bubble on top of a bubble and then the whole thing goes to hell very very quickly that's a great point yeah that one I distinctly remember having this conversation, like late 2014, of I would be short this company purely because there's going to be a tech bubble that burst soon, which here we are five years later, and we're all still waiting for it to happen, or maybe it's happening right now.

[565] But, yeah, Dan, this is great point.

[566] You're right, but the growth makes sense.

[567] It's the reason they kept raising money at higher valuations.

[568] And they kept filling the buildings.

[569] I mean, that's important.

[570] The buildings kept being full.

[571] Yeah, they kept being full.

[572] So Adam at this point, he's very wealthy on paper.

[573] but as they keep raising money, he starts doing, it's unclear exactly the method by which he did this, but he starts taking quite a bit of money off the table.

[574] Some definitely from selling his own shares.

[575] We won't know.

[576] And there were employee tenders.

[577] I mean, I'm told at least that every time, there's some debt stuff too with J .P. Morgan, but in general, every time he sold shares, it was part of an employee tender.

[578] He was selling at the same price they were.

[579] But they had a lot more stock.

[580] Well, I was going to say, yeah, then what we do know is that by the time, we get to now, he has, I believe it's a $500 million loan facility personally from J .P. Morgan backed by his WeWork shares, which is effectively a way to be selling without actually selling your shares along the way.

[581] $500 million.

[582] That's a lot of money.

[583] Man's got a lot of houses.

[584] That's exactly.

[585] If you go like 10 homes or something like that?

[586] So he starts doing two things.

[587] What?

[588] That's two for each of his children.

[589] That's not bad.

[590] Well, he does have five children.

[591] Well, look, I agree.

[592] If I had five children, I, too, would have 10 houses, so I don't begrudge that at all.

[593] But, but yeah, he starts buying residential property.

[594] He owns four multimillion, we're talking like 10 plus million dollar properties in the New York area alone.

[595] Dan, I think you're right, 10 residential properties around the world.

[596] I believe so, yeah.

[597] 10 are in that ballpark.

[598] Well, he also sees, gosh, there's these companies like we work that will pay a bunch of money to me if I own a building to, to lease it for me. So I got to figure out a way to get into this building ownership business.

[599] The other thing and the other more problematic thing that he starts doing is he starts using this money to invest in commercial real estate.

[600] And this is a huge conflict of interest because...

[601] I mean, it is.

[602] It's an obvious conflict of interest.

[603] His argument was always, because I remember hearing about this and actually asking him about this.

[604] This is before I joined access, as if when we brought him and his wife, Rebecca, to a fortune conference in Aspen, I remember asking about this.

[605] His basic argument was we were having a hard.

[606] time.

[607] So I almost think he did some of the commercial real estate earlier because at least his argument was we were having a hard time at points convincing landlords to let us in because they viewed us as this venture back startup.

[608] Oh, we're going to sign a 20 year lease, but where are you really going to be in five years or you're not, you're going to be gone.

[609] But if I buy the building or I have a piece of the building, well, we'll lease do we work because I have faith in it.

[610] So I'm solving that.

[611] I'm solving for that problem.

[612] But you're right.

[613] Obvious conflict of interest.

[614] Right.

[615] Well, I mean, that logic Which in theory, if you had an independent board of directors, which had oversight, would be able to manage and silent.

[616] Yeah.

[617] And that logic might make sense.

[618] But then the obvious answer is start investing, have WeWorks start buying the buildings?

[619] Not Adam personally.

[620] Which is what they ultimately get to.

[621] But not.

[622] Yeah.

[623] Yeah.

[624] Not Adam personally.

[625] And then leasing the buildings back to WeWork that he's profiting on.

[626] The other thing, I mean, this is just standard, like ridiculous startup stuff.

[627] They, which is sad to say at this point, but they ran out all of Universal Studios, one day and they get the chain smokers to perform and they start doing this thing called We Work Summer Camp.

[628] It actually started at Rebecca's family's property I think in upstate New York.

[629] Somewhere like I don't think it's the Catskills but somewhere sort of like that that looks a lot like that.

[630] There's a few really great pieces reporting on this but it's like 150 acres of land her family I think is independently wealthy.

[631] Actually her cousin is Gwyneth Paltrow.

[632] Yes.

[633] Yeah.

[634] You know what again this is one of those things that sounds so stupid and it is.

[635] I remember the first time I called.

[636] I think it was I had to talk to like who was running PR for WeWork at the time and I called and I get a text back saying, sorry I'm at camp right now.

[637] To which I say to a colleague of mine, I say he, because it was like June maybe I said to a colleague, I think he's bringing his kid to camp and she responds, he doesn't have a kid.

[638] He said, but he says he's at WeWork camp and that began a whole conversation.

[639] What the hell are you talking about?

[640] But I will say like look at Google.

[641] Google still does this.

[642] So if things are going well, no one cares.

[643] And when things.

[644] go badly.

[645] This looks just awful.

[646] So when you have a monopoly in an 85 % gross margin business, you can do shit like this.

[647] You can't, by the way, as I said, I came from Fortune magazine.

[648] The old stories for Fortune from before my time were when they had a blowout, the Fortune 500 issue was, you know, the kind of the Vogue issue, right?

[649] It was massive.

[650] And I guess maybe like 10 years before I'd gotten there, they had a blowout issue and they brought the entire staff from, you know, most junior to the most senior, everybody to Hawaii for a week.

[651] So I mean, that in retrospect was really dumb.

[652] But, you know, the time you do it.

[653] You know, great.

[654] Like, you know, exactly.

[655] But here we are in a, I don't know, 10 to 20 % gross margin business that's purely right now, like all the cash in the bank is investor dollars.

[656] None of it is profit dollars.

[657] You know.

[658] Yeah.

[659] So the peak of this period of the company is 2016.

[660] They raise just under half a billion dollars from two Chinese entities that value the company at $16 billion.

[661] And that was, I think that was the first time they crossed the $10 billion valuation threshold.

[662] And now they're among the top like three most valuable startups in the world, to quote unquote startups.

[663] And we work.

[664] We work, Uber, Airbnb.

[665] And then you can take some of the Chinese ones, but at least for the U .S. Yeah, at least for the U .S. And I think that was 2016.

[666] That was before I think people really.

[667] Maybe Dropbox at that point was already there, but close maybe not quite.

[668] It was like in the five -ish because it went IPO around.

[669] 10.

[670] Yeah, but Uber, Airbnb and them.

[671] Those were the three.

[672] And I think actually a lot of the Chinese companies hadn't even been started in 2016 yet.

[673] I mean, that's fair.

[674] Yeah, like Pindo Duo, I think was started in like 2017.

[675] Like, it's crazy.

[676] So, uh, so, so benchmarks two for three in these, uh, these three big, $10 billion.

[677] Well, plus there's a Snapchat was kind of up on its, you know, rise at that point.

[678] So yeah, everybody's sitting pretty.

[679] Enter soft bank.

[680] And it's, uh, one of a kind founder, Masayoshi son.

[681] Listeners, if you don't hear the Imperial March playing, know that it's because I checked with Disney and we did not get the copyright authorization to put that behind this section.

[682] So we've talked a lot about SoftBank on this show, including doing a whole episode on the Vision Fund.

[683] We're now in early 2017.

[684] SoftBank has just raised the Vision Fund.

[685] And we're going to talk a lot about their motivations and everything that happened here along the way.

[686] But one thing I think they really keep in mind, like they have $100 billion to put to work.

[687] theoretically.

[688] Theoretically.

[689] And their goal that they're clear about is they want to deploy this capital in less than five years.

[690] How do you deploy $100 billion, which as we've talked about is the largest fund of any type in any asset class ever raised in history?

[691] How do you do that, let alone in tech companies?

[692] You need to find some companies that can absorb massive chunks of capital.

[693] So they start looking around and they say, where can we put this money?

[694] Uber is obviously one example that they put quite a lot of a number of those billions into.

[695] But here's this interesting company called WeWork.

[696] It's already one of the highest valued startups in the world.

[697] And they have this interesting capital dynamic.

[698] They're very capital intensive.

[699] They scale with capital.

[700] They take on these long -term leases.

[701] And they want to move into Asia.

[702] And they want to move into Asia.

[703] Exactly.

[704] This feels like the perfect fit.

[705] We could really put a lot of billions to.

[706] to work in this company and then, you know, get through our deployment phase in Fund One and just like, you know, any good fund manager, then go raise our next fund.

[707] Yeah.

[708] Now, David, is this is SoftBank Vision Fund's mission to invest in technology companies?

[709] How does that start to factor into the picture and how, and by this point, we work believes it's a technology company.

[710] I mean, I mean, the one thing you didn't say when I thought you were going when you talked about that inflection point was it started to be honest, the AWS example is pretty good, right?

[711] It is starting to add a lot or believes it's starting.

[712] to add lots of services on top of the real estate, right?

[713] So beyond the beer taps and the, and the decor, it's trying to add all these services.

[714] And some of those are social network for members, all that stuff, eventually in elementary school.

[715] But nonetheless, that's the idea.

[716] And I think that's part of it.

[717] But it's also if you're Masa, your soft bank looks at what they believe are transformational shift in how people either live or work, right?

[718] So they invest in Slack, for example, right?

[719] They think that's a fundamental change in how people work from collaboration.

[720] In this case, they think this is a fundamental change in how people work from a physical location standpoint.

[721] So this works for that from a thematic standpoint.

[722] Thematically, but economically, this doesn't have the high fixed cost, low variable cost component that a true sort of pure technology business would have.

[723] No. Not at all.

[724] But I think to underscore again, as we said, it has this other extremely attractive element to SoftBank, different than, you know, SoftBank invested in Slack, right?

[725] How much money could they put into Slack?

[726] They couldn't put that much money in.

[727] And Uber, they could only plug a ton in because it was in crisis.

[728] It was in management crisis.

[729] They took advantage of a situation.

[730] Even if you look at Vision Fund, they had put a ton of that was money that they had already invested in ARM, that they basically just transferred over to take a big chunk.

[731] If you're doing privately held companies, as you say, it is hard.

[732] It was the big question when they were raised.

[733] How are you going to deploy this in any reasonable way?

[734] Yeah.

[735] And so here's this like perfect vehicle.

[736] So this is amazing.

[737] Dad, you made no more details on this on how this happens.

[738] But the soft bank team is scouring the world looking for companies like this.

[739] WeWork is top of the list.

[740] So they set up a sort of like final diligence meeting where Masa is going to come over to New York to WeWork headquarters.

[741] They have two hours booked with Adam, going to see the whole space, going to spend a lot of time with Adam.

[742] And as the story goes, the time when Masa is supposed to show up arrives.

[743] Adam's all like, you know, ready.

[744] He's activated the space as he says that he does.

[745] and Masa's nowhere to be found.

[746] Time goes by, waiting, like an hour goes by.

[747] Finally, Masa shows up and he says, I'm really sorry.

[748] I only have 12 minutes.

[749] And so they do a quick walk through in the space, and then he says to Adam, I got to get in a car to the airport.

[750] You can get in the car with me if you want.

[751] We can talk about this.

[752] Adam gets in the car with him.

[753] Masa pulls out his iPad, as the story goes, draws up with his like finger on the iPad.

[754] a sketch of like the terms of a deal.

[755] The terms being that SoftBank would invest an initial $4 billion in total.

[756] Out of the vision fund.

[757] And that's $1 billion for international expansion into entities outside the U .S. In Asia.

[758] 1 .3 billion of primary capital into the company and $1 .7 billion in secondary to basically buy shares from existing shareholders.

[759] No new cash.

[760] Including Adam.

[761] They sketched this on the I. pad in the car, Masa signs his name to it, Adam signs his name to it.

[762] And then, of course, like the team is on hammered out.

[763] And it's important just for those who don't understand Vision Fund.

[764] To get an investment from Vision Fund, at least one, I think it's like over $100 million, you do need Mossa's approval.

[765] And that can't be via phone.

[766] It's got to be an in -person meeting.

[767] This isn't a normal venture fund where one partner meets with this, or maybe two partners, meet with the CEO, and then they bring it back to the partners and they discuss it and they have an investment committee to vote.

[768] No, if you want this, Adam had to meet with Masa.

[769] This has been true for anyone who's raised money from them.

[770] Yeah, lots of friends.

[771] It's, what, 100 companies now, 100 investments?

[772] I'm not sure with, I'm not sure with numbers.

[773] Although Vision Fund, one, is basically full in terms of new companies.

[774] I have friends who've gone through this, like, where the SoftBank investment team will, you know, we're kind of deal together.

[775] And then it's like, okay, well, we're going to fly you over to Tokyo or wherever in the world.

[776] Yeah, the fact that Masa came to New York was a big deal or was going to be in New York was a big deal.

[777] Because you're right, usually you have to get on a planet.

[778] Usually you go to Tokyo, yeah.

[779] So it's done.

[780] So now all of a sudden, they valued the.

[781] company at $20 billion, which was, you know, was already valued at 16.

[782] But this was $4 billion of capital.

[783] That was a step order of new capital coming in and 1 .7 of that going to existing shareholders, which again, we don't know the details, but imagine a lot of that was to Adam.

[784] Yeah.

[785] And also notable time, they get two board members do.

[786] It's important.

[787] They put two people on the board of directors at this moment.

[788] Yeah.

[789] Which that had to be stomach churning for Adam who's obsessed with control.

[790] Well, as we will learn later, he had two people on the board of directors, but, you know, they have as much control over financial decisions there as my kid does in my house, right?

[791] Like, she can ask for things and complain about things, but in the end, I get to decide what we buy and what we don't buy.

[792] Dan, do you know, so famously now Adam has a 20 votes for every one share in the company that he has.

[793] Do you know if he got this as part of the deal?

[794] I do not know.

[795] I do not know.

[796] At some point along the way, I mean, I have to, again, we can't go back.

[797] We don't have the documents to sort of forensically examine in what the control.

[798] But luckily, there will probably be class action lawsuits so we will get these documents.

[799] It's just a question of time.

[800] But what the governance was at various points along the way, I can say with 100 % confidence.

[801] There's no way that going back to like the original benchmark investment that the voting structure was like this.

[802] I don't know that that's true necessarily.

[803] I mean, think benchmark and it's not just benchmark, but all of them were so bent over backwards for any, I mean go back to the Zuckerberg thing right like think of Zuckerberg he turns down a billion dollars from Yahoo when the entire board including his investors wanted him to take the deal he was able to do that and as you know I mean after that so many other founders of quote hot startups were able to get similar terms whether it was 20 to one or not I have no doubt that after the benchmark deal and the B and the C rounds Adam could ultimate whatever he had it was more than the rest of the board combined yeah what is really interesting here is the soft bank dynamic that comes into play with boards because they're basically the only entity that is going to do the things that they're going to do because they so aggressively want to put this capital to work.

[804] So they basically arm Adam to go back to the board holding a piece of paper that says, I'm going to get literally billions in investment dollars.

[805] And the terms can kind of be as Adam friendly as they want.

[806] You can look at the rest of the board.

[807] The board's not going to say, no, we don't want $2 billion here to, what, $2 .3 billion of new capital coming into the company, like almost any terms, they're going to be happy with that, especially because what SoftBank does is they say, also, if you don't take it, we're going to find someone who competes against you who will.

[808] And also with SoftBank, they and Adam are peas in a pot in this, right?

[809] Adam, Adam is a grow, grow, grow, grow person, and that is what SoftBank's model has been really with most of its companies that Vision Funds invested in, right?

[810] you know, think of DoorDash, think of Uber, it has been this idea that if you buy, no matter what the industry is, if you buy market share, you can suffer the losses, we will make money eventually.

[811] And so in the case of we work, that is new markets, new cities, new buildings, buy, buy, and here's your checkbook.

[812] We're going to do this.

[813] And that's exactly what Adam wants to do.

[814] Yeah, yeah.

[815] I mean, there's a famous story also of, they have a closing dinner for the investment in Tokyo after it happens.

[816] And supposedly Masa asks Adam and Miguel, who would win a sort of rhetorical question.

[817] Who would win in a fight?

[818] Who wins in a fight?

[819] The crazy guy or the smart guy?

[820] And Adam answers right off the bat, the crazy guy.

[821] And Masa says, yes, the problem is you're not crazy enough.

[822] So he's, you know, Dan, we talked about this and I prefer this.

[823] Masa, in a lot of ways, is feeding Adam's instincts here.

[824] Absolutely.

[825] I mean, he's an enabler.

[826] But beyond that, he's more than that, he's an enabler who's also like pushing him from behind.

[827] I mean, as I said, they were perfect for each other in the sense of they both wanted the same thing.

[828] And, you know, leaving the money out of it, Masso, you know, when you hear a founder saying, you know, I want this investor because they see the same vision I see, Masa was that guy.

[829] Yeah, yeah.

[830] So this is the pivotal moment where if you accept this term sheet as the board, this is the last opportunity that you have to exert any measure of control.

[831] This is basically, you're faced with this, it's almost a Kobayashi Maru.

[832] On one side here, you cannot take $2 .7 billion of fresh capital in a company that needs a crap ton of capital.

[833] On the other side, you can accept your fate that what all then happens in the next two and a half years, something along those lines, you're letting happen.

[834] It's not going to necessarily play out exactly like it did, but you're basically saying, this is the soft bank and Adam show.

[835] We're about to do a bunch of crazy stuff.

[836] Another thing we do not know is, you know, you talk about that tender.

[837] Did benchmark take money off the table in that deal?

[838] They might have.

[839] They did an Uber from soft bank.

[840] So like you might also be saying, well, okay, we're getting our principal back plus, you know, 3x our principle.

[841] So we're already in the money.

[842] Worst thing that happens is worth 3x in the money or 5x or whatever the hell the number is.

[843] So, you know, go for it.

[844] And then make us, you know, make us the next Google, make us next Facebook.

[845] Yeah, yeah.

[846] Get the exactly.

[847] Like you're at the, you're at the casino at this point, you know.

[848] You've gotten 3X your money back.

[849] Let it all ride, you know.

[850] So those are the incentives.

[851] So we've talked about the board, the investment.

[852] investors.

[853] We've talked about Adam is looking for this partner in crime and soft bank is looking to go put billions and billions of dollars into something because boy, are those management fees sweet when they have these huge funds and they can actually put it to work.

[854] Yeah.

[855] It's also crazy too.

[856] I mean, let's just think about this for a minute.

[857] This was like mid 2017.

[858] That was two years ago.

[859] Like, this was very recent.

[860] It feels five years ago.

[861] It feels 10 years ago.

[862] So much has changed.

[863] So they take this money.

[864] They turn around right away.

[865] And they buy the Lord and Taylor building on Fifth Avenue in New York for $850 million, which, you know, I don't know.

[866] I'm not a real estate investor.

[867] I don't know how to judge, like, whether that was a good investment or not.

[868] But now all of a sudden, you're now in a new league of capital deployment here.

[869] And this is for their head.

[870] I mean, it's partially the, they'll use some floor.

[871] We were, this is because they feel they need new headquarters because they have physically grown out of theirs and they're out of space.

[872] And I will say from being in their headquarters even a few months before all hell broke loose this year, it was crowded.

[873] Like, it was legitimately crowded.

[874] hired a lot of people.

[875] Yeah, I mean, they had 15 ,000 employees until this week.

[876] Now that Lord and Taylor store is going to look like an American apparel store, the one you pass by.

[877] It's going to look very similar.

[878] Oh, man, how history repeats itself.

[879] They also at this point purchased the infamous Gulfstream G650 private jet purchased by the company for Adams' use for $60 million.

[880] Right around the same time, Adam and his wife, Rebecca, who at this point has been rewritten into history as a co -founder of the company.

[881] As best as we could tell in our research, she and Adam were together when they started the company, but was not actually like really cool.

[882] It's a fascinating thing too, because usually co -founders get written out of stories, not written in.

[883] You know, Silicon Valley is littered with people who legitimately co -founded companies who don't get to be part of those narratives.

[884] And in this case.

[885] In the sort of like sci -fi world, this is referred to as a retcon, a retroactive conversion.

[886] Yeah.

[887] Sort of retcon that person into that role.

[888] Again, we don't know for sure, but so anyway, they, the two of them decide right around the same time that going back to the Green Desk environmental roots of the company, they really should ban meat from, it would have such an environmental impact if they banned meat from WeWorks.

[889] And I have heard a back story of this.

[890] And again, I'm not going to, I'm not going to claim that this is completely true.

[891] But the back, a story I heard when this decision came up or when Adam proposed this decision was that internally they said no. Like his people internally said, for example, we have salespeople who go and try to sell things to potential customers or maybe meet with landlords.

[892] Are they not?

[893] And they're going to pick up the tab, right?

[894] You know, I'm a sales person.

[895] If the person I'm with gets a burger, can they not buy it?

[896] And because Adam had actually basically said, no, no company money will be spent on meat.

[897] Well, that is a problem.

[898] And so people raised all these legitimate concerns.

[899] But this goes to the governor later to the governance is one, the board issue, but raised all these legitimate concerns.

[900] And he sat there.

[901] He took them all in and just got up and said, yeah, we're going to be.

[902] banned meat and walked out and then announced it before then like and just announced it and that was that and that's how these things worked yeah at the same time that he's flying around on a private jet which very great has terrible environmental impact cover your ears and ignore the cognitive dissonance nothing wrong with banning meat but like in theory but but it's part but it's part of this idea that we work you know what was that line you said the the community line right i mean adam and i believe this was sincere uh he believed we work was more than a co -working space you know anytime If you've ever been in a we work and you get in the elevator to go up to whatever the floor is, there's a schedule of events.

[903] These events have nothing to do with, quote, business as it is.

[904] It is farmers markets.

[905] It is, you know, it is yoga.

[906] It's stuff like that.

[907] He legitimately believed that.

[908] And he also believed that that was a way to keep customers that when you, okay, maybe now my three -person company now is a 20 -person company.

[909] We should maybe have our own space.

[910] But, man, we like it here.

[911] Yeah.

[912] Yeah, totally.

[913] Again, not wrong.

[914] It just got so perverted over time.

[915] um the uh so fast forward to this year and um you know the probably i think in many ways once this came out in the IPO filing this was the straw that sort of broke the camel's back um we've talked about everything that's happened up until now in january of 2019 we work changes its name to the we company and in doing so we work did not have the trademark for the name the we company who had that trademark adam had that trademark uh via an entity he controlled called uh we holdings i believe and so we work at adam's direction licensed that name from his own company for 5 .9 million dollars and um again i'm just sort of speechless here and the and the and the and the defense of Adam Newman in this, which I'm not going to make, by the way, because I said this was horrible.

[916] But the argument was that this was a tax issue, was that it had a value, that it had a value.

[917] And if he simply gave it, it's kind of like you can't just give your friend a brand new car.

[918] You just can't do it.

[919] There's a tax liability with that that if he had simply given it to the company.

[920] Now, this is also a person who did have a $500 million loan from JP Morgan.

[921] This is someone who had taken hundreds of millions of dollars.

[922] He could have sucked up taxes.

[923] And again, even if it's one of those things that the board at the time was willing to do, how nobody was able to flag it and convince everybody internally before it became publicly disclosed is a just endless mystery.

[924] Yeah, like how this would look.

[925] Yeah.

[926] Even if there is, it's one of those things that even if you could make a valid on paper argument for it, the optics are so god awful.

[927] You don't do it.

[928] Yeah.

[929] David, I have a name thing I got to talk to you about after this.

[930] We're changing the name.

[931] We're going to be the acquired company.

[932] No. Acquired Media LLC is a great name.

[933] Right around the same time, news comes out, remember SoftBank and their motivations.

[934] They want to dump a lot of money in here.

[935] So now we're in the beginning of 2019.

[936] We're two years into the Vision Fund.

[937] God, I can't believe that was this year.

[938] That's when the news comes out.

[939] The discussion between SoftBank and Adam and We Workers are going on in late 2018.

[940] And Adam does think he has a deal.

[941] Well, and again, so like, one of the things we wanted to do on this episode is talk about why is SoftBank doing what they're doing throughout all this.

[942] Okay, so we're now two years into the Vision Fund.

[943] They've deployed a lot of it, but they're thinking about and talking publicly about Vision Fund too and trying to start fundraising for that.

[944] People are still like, like shaking off the shock that Vision Fund One happened.

[945] Like this notion that, oh, we're about to go do it again, $100 billion again?

[946] Yeah.

[947] Yeah.

[948] So now speaking as a fund manager, like any fund manager, you can't, it is in your fund documents that you cannot go raise a successor fund.

[949] until typically you are at least two -thirds, if not more, deployed and reserved of your initial fund.

[950] So they're now sitting here, and I don't know exactly how much capital they had deployed out of Vision Fund 1 at this point, but they're like, we want to raise fund too.

[951] We've got to deploy Fund 1.

[952] So news comes out that they're talking about, and like you said, Dan Adam thinks there's a deal for SoftBank and the Vision Fund to invest $16 billion more in WeWork.

[953] And by the way, this is the first time the issue of control comes up because the story, the news stories that come up were that SoftBank would basically buy a majority stake in the company, which even though I don't think it was ever explicitly said, the assumption is if you own most of the company, you get to make most of the rules.

[954] Which we thought until yesterday.

[955] Which we thought until yesterday.

[956] But Adam apparently, at least from what I'm told, was never going to give up control.

[957] And this becomes this issue of you might own 52%, but I still have control.

[958] And that, I don't think that was the breaking point of that deal, but that was always something I always heard from Adams people internally at WeWork was that he always felt the reporting and that was wrong because, quote, he was never, ever going to give up control in a soft bank deal.

[959] Interesting.

[960] Interesting.

[961] Yeah, because it was not Adam that blew up that deal.

[962] No. No, it was soft banks LPs.

[963] So, at least according to the reporting.

[964] David, walk us through this.

[965] I thought venture capital was a blind pool.

[966] Not envisioned.

[967] Saudi Arabia has a, it's actually funny.

[968] Saudi Arabia doesn't have a veto.

[969] They can't kill a deal.

[970] But Saudi Arabia, which, you probably know this better than me, I think they're like 30 or 40 % of the fund.

[971] Yeah.

[972] They can say you can't use our money for this.

[973] And they are, for anything over a certain amount.

[974] They have a right to basically say, you go do the deal, but we're carved out of this one.

[975] Yeah, interesting, which is not typical in a venture fund agreement, but there's such a large commitment isn't typical of venture fund.

[976] So you should get a little bit of extra say, shouldn't you?

[977] There's a lot of things that are not typical about the Vision Fund.

[978] But regardless of whatever control they had, they had the ultimate hammer, which LPs always have, which is like, we're evaluating you about whether we're going to do fun too.

[979] or not.

[980] And I have to believe that that was ultimately the leverage they had and why SoftBank backed out of the deal was they're like, oh, shoot, actually, if we do this, it's going to jeopardize.

[981] There's also tense relationships at this point.

[982] Remember when you're thinking, now this is a little bit after, but in October of 2018, we're talking December, January.

[983] In October of 2013 is when the Jamal Khashoggi gets killed.

[984] 2018, sorry, I apologize.

[985] Masa decides he's not going to go to their big conference.

[986] He's actually going to show up in Saudi Arabia and meet behind the closed doors, but he's not going to sit on stage.

[987] So things are tense.

[988] This is Davos in the desert.

[989] Davos in the desert, correct.

[990] Which is happening very shortly.

[991] Happening this coming Tuesday.

[992] Masa is speaking this year.

[993] Wow.

[994] Someone needs to raise a fund.

[995] Man, that just shows, it's all written out right there.

[996] I mean, it's not to, no, I'll make a value judgment on the show.

[997] Like, that's a horrible thing to go after the events that transpired and represent your organization there and participate clearly.

[998] clearly desperately needs to raise a fund.

[999] Absolutely.

[1000] Yeah.

[1001] So the deal falls apart.

[1002] SoftBank does end up investing corporate, I believe, not the Vision Fund.

[1003] $2 billion in WeWork at this point in time.

[1004] Because WeWork needs the cash.

[1005] They've been grow, grow, grow.

[1006] They bought the Lord and Taylor Building for $850 million.

[1007] And they've been making decisions.

[1008] Because remember, the bigger deal fell apart really at the last minute as far as WeWork was concerned.

[1009] They were making, and think about the time again, end of year, Q4, That's when you're making all your plans for the next year.

[1010] They expected to have the money.

[1011] They were, I don't know whether they were officially signing lease or not, but they certainly had the engine runner.

[1012] Yeah, totally.

[1013] And to explain the SoftBank Corp thing, this is SoftBank, the gigantic telecom that's been around for 30, 40 years, that precipit, that came before the Vision Fund.

[1014] This is off their balance sheet rather than.

[1015] And a balance sheet that SoftBank Corp expects to grow in 2019 because they've agreed to sell Sprint, a deal that's still not closed.

[1016] Interesting.

[1017] Yes, yes.

[1018] Wow.

[1019] We did the T -Mobile Sprint.

[1020] episode so long ago.

[1021] I forgot that it hasn't closed.

[1022] Has not closed.

[1023] Still being still in court.

[1024] Yeah.

[1025] Still, uh, antitrust regulations.

[1026] But I believe they just got approval.

[1027] They got they got through antitrust, but about a dozen state attorney generals are, are suing to block it.

[1028] So we will see.

[1029] We'll see.

[1030] Wow.

[1031] So, okay, so now, now We work needs a plan B. They need capital to fund this plan and probably a lot of these lease commitments are in place already.

[1032] So what's, what's the, at this point, I'm going to raise a point here that we want to talk more about.

[1033] There is essentially only one buyer of WeWork shares at this point.

[1034] And that's SoftBank.

[1035] Like at these - Or the public market.

[1036] Or the public market.

[1037] Well, the belief is or the public market.

[1038] It turns the public market is not a buyer.

[1039] But so they're looking around for alternative.

[1040] There's no other private investment firm or entity that we work could go to for financing at this point in time.

[1041] Some might call this a price discovery problem.

[1042] Yeah.

[1043] Indeed.

[1044] So the only alternative is, well, public markets.

[1045] Let's tap the public markets.

[1046] So in April of 2019, just like three months after this deal falls apart, they file confidentially with the SEC to go public.

[1047] It gets reported that this is happening.

[1048] They filed technically in December.

[1049] Technically filed confidentially.

[1050] They thought they did it.

[1051] What was the, they gave an explanation, which I didn't think made a lot of sense.

[1052] But they did because why else would they have done it?

[1053] Something about the timing in the year.

[1054] But yeah, they filed officially confidentially in December.

[1055] It got reported several months later.

[1056] Wow.

[1057] Is that like help us understand that timeline versus a normal IPO timeline.

[1058] Was this rushed?

[1059] No, that makes sense.

[1060] If you were to file confidentially in December, they knew kind of similar to how Uber knew or Lyft knew that this was, that this company was relatively unusual and that the SEC was going to have more questions than it would have, you know, for a run -of -the -mill company.

[1061] So you file in December with the idea, first idea, maybe we'll go public in late spring, but we'll probably go public in September.

[1062] We are working on this big soft bank deal, so we don't have to, but we'll have this in our back pocket.

[1063] You do it in December.

[1064] No one's paying attention until January anyway.

[1065] Go through a bunch of revisions.

[1066] you don't want to go public in the middle of the summer.

[1067] You'll come out right when Q3 happens.

[1068] You'll be out the door.

[1069] And indeed, that was what they tried to do.

[1070] So August comes around of this year, just two short months ago.

[1071] And they filed the public version of the S -1, which means, like, the train has left the station.

[1072] Like, once the public version of the S -1 comes out, the process is going.

[1073] Yeah, it should be six weeks.

[1074] And then you're up your public.

[1075] And all hell breaks loose.

[1076] I mean, Dad, you were more than that.

[1077] than anyone on top of this.

[1078] It's one of the most remarkable S -1s that's ever been written.

[1079] And not just because, look, let's start with the obvious, right?

[1080] There was huge revenue growth.

[1081] You know, the base, if you only read like to the, whatever it is, like the eighth page where you see kind of the top line financials, even though the losses were massive, which wasn't a secret.

[1082] Because remember, We work had been kind of like Uber had done, even though they were private, had been disclosing financials for a while for two reasons.

[1083] One, because they wanted people probably not to be shocked by the S -1 eventually.

[1084] And two, they had done a bond offering, a public bond offering about a year and a half earlier.

[1085] So they had public disclosure requirements anyway.

[1086] So the top line, look, revenue growth was huge.

[1087] And it was billions of dollars of revenue.

[1088] This wasn't a small thing.

[1089] Losses were huge, billion dollars of losses.

[1090] But then you had to keep reading.

[1091] And to be honest, these things are like 100 pages long.

[1092] And this, I think, is the longest I've ever read.

[1093] It was like multiple hundreds of pages.

[1094] It was very long.

[1095] And lots of reporters kept going to different sections and finding things that were shocking and surprising.

[1096] And you kept looking at and going, no, that can't be right.

[1097] And we had conversations like, it says this, but it doesn't really, right?

[1098] Like, what am I, because these are written by lawyers and bankers.

[1099] What does it really mean?

[1100] And good Lord.

[1101] And also partially because, you know, you talked at one point about, you know, Adam has some real estate.

[1102] WeWork has, is this series of LLC.

[1103] Every building is its own LLC.

[1104] So it's incredibly, even if everything is on the up and up.

[1105] And it's an extraordinarily complex organization structurally.

[1106] And all that comes out in the S -1.

[1107] Yeah.

[1108] Even without, I mean, there's, I think it's page, I'm going to lose it.

[1109] But the first 20 pages here, there's their org structure here.

[1110] it is page 16 of the wee company that owns the wee company MC LLC that has the we company partnership and then the we work companies LLC and then the all the countries and like this is before you get to buildings yeah and remember they'd also they'd raised or are still are maybe not now they'd been raising a massive fund you know you talk about oh you know we work should have bought the buildings well they were doing that they were they were raising a massive fund which adam was going to have a stake in but just like everybody else that we work would and that was going to go buy buildings that was again that's another separate entity which is then leasing out and all that.

[1111] But yeah, look, we learn a lot of stuff.

[1112] This is where we learn about the trademark thing.

[1113] This is where we learn about the extraordinary amount of control he had, even to the point where if something were to happen to Adam, like he were to die, the board doesn't get to replace him.

[1114] His wife, Rebecca gets to decide the succession plan.

[1115] And if she dies too, then their children.

[1116] Absolutely.

[1117] We learn that they are also going to give away an enormous amount of money in charity after this IPO.

[1118] I think he's committing to a bill.

[1119] And Adam has, I will say, Adam has given a lot of money and charity over the years out of some of that money.

[1120] He hasn't put it all into houses and Gulf Streams.

[1121] But I think they committed.

[1122] that they're going to give a billion dollars over 10 years after the IPO away from proceeds.

[1123] Which is fascinating.

[1124] There's actually in this document a section that says charitable commitments of our co -founders and other senior leaders, that is very atypical.

[1125] It's very typical.

[1126] And by the, if this had become official, if this IPO gone forward, he would have, I think, been legally obligated to do so.

[1127] I mean, he was, he was, this wasn't a giving pledge, which is signing something that Warren Buffett gave you.

[1128] And, you know, if you don't do it, what's going to happen to you?

[1129] This had the force of law behind it in theory.

[1130] Yeah.

[1131] Or at least the force of the SEC branch.

[1132] Of course, okay, so much, much weaker loss.

[1133] Well, law.

[1134] No, law.

[1135] I mean, that's a lot.

[1136] It's sort of law.

[1137] It's not the DOJ, but it's something.

[1138] Exactly.

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[1142] hyper growth and scale into a larger enterprise.

[1143] It's kind of wild.

[1144] When we first started working with Vanta and met Christina, my gosh, they had like a couple hundred customers, maybe.

[1145] Now they've got 5 ,000, some of the largest companies out there.

[1146] It's awesome.

[1147] Yeah.

[1148] And they offer a tremendous amount of customization now for more complex security needs.

[1149] So if you're a larger company and in the past, you showed Vanta to your compliance department, you might have heard something like, oh, well, we've already got a compliance process in place.

[1150] And we can't integrate this new thing.

[1151] But now, even if you already have a SOC2, Vanta makes maintaining your compliance even more efficient and robust.

[1152] They launched vendor risk management.

[1153] This allows your company to quickly understand the security posture of the vendors that you're choosing in a standardized way that cuts down on security review times.

[1154] This is great.

[1155] And then on the customization front, they now also enable custom frameworks built around your controls and policies.

[1156] Of course, that's in addition to the fact that with Vanta, you don't just become compliant once, you stay compliant.

[1157] with real -time data pulled from all of your systems, now all of your partner's systems, and you get a trust report page to prove it to your customers.

[1158] If you click the link in the show notes here or go to vanta .com slash acquired, you can get a free trial.

[1159] And if you decide you love it, you will also get $1 ,000 off when you become a paying customer.

[1160] Make sure you go to vanta .com slash acquired.

[1161] So let's talk about what we don't learn in this document.

[1162] So what I was really trying, when we were talking about doing this episode, in my head, I'm like, okay, I want to tell people what the macro story is here.

[1163] And then the question in my mind was, is this actually a good business at steady state?

[1164] If we work stops expanding.

[1165] So I'm scrolling and scrolling and scrolling and scrolling in hundreds of pages, you can't actually ascertain, hey, of the cohort of your buildings that are at scale, what are the gross margins?

[1166] What are the unit economics?

[1167] They keep saying we have really strong unit economics.

[1168] And then the only financials they give are this like massively blended one that is, you know, a very, very basic P &L that shows the business, including all of the expansion.

[1169] So really difficult to tease out what losses are actually incurred at maturity.

[1170] They have this silly graph that has no y -axis with like this curve that basically shows, hey, the buildings are breaking even after six months.

[1171] But like not much more detail than that.

[1172] No, and you would have thought they maybe would have, by the time they filed the S -1, learn the lesson from Uber, which had a six.

[1173] similar problem, which is, you know, every, look, every single company I think I've ever talked to tells me that even though they're losing a lot of money, their unit economics are fantastic.

[1174] I'm waiting for someone to say, well, our union economics are kind of mediocre.

[1175] No, you're right.

[1176] And that was an issue with Uber.

[1177] Guess what?

[1178] They don't tell investors that either.

[1179] But when you looked inside Uber's documents, you could not figure out how much, what were the union economics per ride, particularly for Uber eats, per delivery?

[1180] You couldn't figure out any of that.

[1181] I think that has been an ongoing problem for them.

[1182] And we work was the same way, right?

[1183] you and you should have been able to because we work had been saying things over the years like again like Uber in mature for them mature markets where they had been X number of years or had X number of buildings we were building profitable even understood there's there's overhead there is marketing but you couldn't even figure out that in that building in Soho that they'd been in for four years take out all the overhead is the building profitable no freaking idea No idea, which is a problem because if the argument was Artie Minson's argument, like with a cable company, eventually you could figure that out.

[1184] Was the, you know, was deciding to lay pipe in Seattle?

[1185] Did that make money in the end?

[1186] After a certain amount of time, you should be able to say yes or no. In this case, they didn't.

[1187] It wasn't even that they couldn't.

[1188] They didn't.

[1189] And the backstory that you keep hearing and part of this is probably self -serving about bankers and board is that these things were indeed raised, not by the SEC, but these things were raised by bankers and boards.

[1190] like with Adam in the meat thing, he basically waved his hand and said, don't worry about it.

[1191] This is how we're doing it.

[1192] Wow.

[1193] So needless to say, potential public market investors react terribly to this, as does the media and everybody.

[1194] First problem is the governance, as you keep saying, Dan.

[1195] So September 13th, we work announces is changing the corporate governance.

[1196] And Adam is still going to have the super voting shares, right?

[1197] But they're going to be weaker.

[1198] I think it was supposed to go down to three to one.

[1199] I'm correct.

[1200] It was 20 and then 10.

[1201] 20 and then 3.

[1202] So it was going to load the succession thing was going to change.

[1203] The board was going to be able to determine who was his replacement.

[1204] Was there one?

[1205] And they were allowed to fire him, which was important.

[1206] And by the way, that's unusual because again, think of Facebook, board can't fire Zuckerberg.

[1207] I don't think alphabet they can fire Larry Page.

[1208] That was interesting that the board now, even though they didn't have the votes, the one thing they could vote on would be to fire Adam Newman.

[1209] Now this was, Dan, correct me if I'm wrong.

[1210] This was an announcement.

[1211] This was not an actual change.

[1212] These were things that were going.

[1213] to happen upon the IPO?

[1214] Yes and no. And that's where things get very tricky because as we know, they do fire Adam Newman.

[1215] So they clearly got the ability to do so or maybe they just persuaded him he had to step away.

[1216] Either way, we, we being you, me, the media, everyone is under the impression at that moment that these changes have been made.

[1217] It is codified.

[1218] It's talked about an SEC document.

[1219] And again, it comes this question of, okay, is this something you've done?

[1220] Or is this something that is effective as of the issuance the actual shares being off or being issued that remains unclear because i believe when we get to the end of this in just a sec adam still has the 20 to one if not 20 he has at least 10 i believe he still has 10 he still controls the votes as of well as of two days ago yeah so then september 24th adam is out as CEO the board is replaced he remains chairman he remains he becomes chairman yeah executive chairman even that wasn't enough to get the the IPO back on track.

[1221] They announce after that they're pulling the IPO.

[1222] Well, let's just go back quickly because this is important.

[1223] This is where SoftBank plays.

[1224] Even before Adam gets fired, there start to be reports over a weekend that SoftBank is pushing to have the IPO postponed.

[1225] Now, remember, Adam wants this thing to go forward.

[1226] To be honest, the board wants us to go forward and obviously the bankers want this to go forward.

[1227] It's an interesting leak.

[1228] It's an interesting leak.

[1229] And SoftBank will not cop to it.

[1230] But if you go to who had incentive to leak this, because this is a really damaging thing to leak.

[1231] This isn't just like, oh, you know, maybe earnings projections.

[1232] This is really damaging.

[1233] This is staying in perspective investors, this thing shouldn't happen.

[1234] That's a real freaking problem.

[1235] And by the way, the biggest investor who's got two people on the board, they should know this company well, doesn't want it to happen.

[1236] So SoftBank is clearly somebody at SoftBank is leaking this.

[1237] And then there's the question of why.

[1238] Why would SoftBank be torpedoing its own portfolio company?

[1239] And the best explanation I've come up with, or at least the one that everybody affiliated with WeWork, those who support Adam, those who don't.

[1240] Everybody seems to believe it's a SoftBank, this goes back to Vision Fund, which is, if this goes public and it goes public, say, at a valuation, I'm going to make this number up now, a 15 billion.

[1241] Because now they were getting investor feedback.

[1242] This thing's not going at 49.

[1243] It's probably not going at 20.

[1244] Down to 20, down to 15.

[1245] If it goes public at 15, SoftBank then is obligated to revalue its existing shares in WeWork.

[1246] And what does that do?

[1247] It means when you're going to the Saudis or to Apple or whoever else, our IRA on our existing fund has gotten a lot lower because you said earlier, This is one of the biggest investments there.

[1248] It has a significant, any valuation change has a significant change to SoftBank.

[1249] And remember, SoftBank had previously marked it up to $49 billion.

[1250] It had done an insider deal.

[1251] It marked up on its own.

[1252] So the reduction would have been massive.

[1253] Yeah.

[1254] It would have cratered this fun.

[1255] They've got $7, $8 billion in because they continue to put in more convertible notes too.

[1256] There's a lot of money.

[1257] And again, just, yeah, and the value of it, it just would have been, they had marked it up themselves.

[1258] If they had just kept it at cost, things would have maybe been a little bit better.

[1259] But yeah, it leaks, it leaks out, and it becomes a cavalcade and eventually Adam leaves.

[1260] Because then there was, again, there was first talk.

[1261] SoftBank wants the IPO not to happen.

[1262] Then SoftBank thinks Adam Neumann should leave.

[1263] Well, Adam's not leaking that.

[1264] There's no reason for anybody else to be.

[1265] SoftBank's leaking that.

[1266] Yeah.

[1267] Wow.

[1268] So the net of all of this is that...

[1269] I should say for the record, SoftBank says they didn't leak it.

[1270] There we have it.

[1271] We don't know who did.

[1272] Somebody did.

[1273] The net of all of this is that...

[1274] that the company is now running really, really on fumes.

[1275] Shockingly low on cash because remember how much money they were planning to get.

[1276] They are looking to bring in $3 billion for the IPO.

[1277] And then they had also agreed, J .P. Morgan had arranged a massive $6 billion debt package, which was concurrent to the IPO.

[1278] So we work in whatever it is in August, looks at its balance sheet and says, we're running really low on cash.

[1279] But come end of September, we're going to have $9 billion.

[1280] And they had banked that in their brains and in their models.

[1281] And at that point, if you got $9 billion coming in September, Spend.

[1282] And by the way, really spend because wouldn't it be great if we go public right after Labor Day, then five weeks later we can come out with Q3 financials which show massive growth.

[1283] And so let's goose the growth now.

[1284] Yeah.

[1285] Yeah.

[1286] So I think, Dan, you had reported something's got to happen by Thanksgiving because they're going to hit zero.

[1287] And I overstated it.

[1288] I heard by Thanksgiving.

[1289] But apparently they would have been out of cash by the end of next week.

[1290] Although it is unclear how much of that's related to severance, et cetera.

[1291] They were going to have to pay to these thousands of people.

[1292] They're laying off.

[1293] But yeah, they were.

[1294] They were.

[1295] They were.

[1296] They were almost out of money.

[1297] They need money.

[1298] So yesterday, as we sit here, the outcome of this is announced.

[1299] SoftBank is acquiring the company.

[1300] Without acquiring.

[1301] Without actually.

[1302] Which no one can explain to me, still, including SoftBank.

[1303] No one can explain this.

[1304] So let's walk through what that package looks like.

[1305] So SoftBank is going to, well, first of all, to get Adam to step aside from the board position, they are paying him $175.

[1306] $185 million.

[1307] For a three.

[1308] A quote consulting fee, which gives them three things.

[1309] Adam gives up his super voting shares.

[1310] Adam steps down as executive chairman.

[1311] And those are the two official things.

[1312] The unofficial thing is he votes for the deal.

[1313] There's a there's an alternative package.

[1314] And there's questions about how real it was.

[1315] But there's an alternative package led by J .B. Morgan.

[1316] It includes things like Starwood, Barry Sterling, who's a serious real estate investor.

[1317] There's an alternative package.

[1318] There are people on the board who prefer that package because they think it leads to IPO quicker.

[1319] But Adam, again, didn't give up the voting control.

[1320] So Adam gets to decide.

[1321] he takes $185 million bribe, which his people say is in the best interest of the employees because there's a tender offer as a piece of this, which is discussed.

[1322] But yeah, they pay him off.

[1323] And by the way, what a remarkable thing to learn.

[1324] If you are an activist investor like Elliot who spends all this time, for example, with AT &T, like working with small shareholders and stuff to convince the board to maybe vote, I wonder if Paul Singer has ever thought, what if I just gave the independent directors $10 million each?

[1325] Wouldn't that be faster, easier, and buy their votes?

[1326] It's unclear at this moment if that's illegal.

[1327] to be honest, from what I can tell him, but so long as you can have a defensible fiduciary argument in this.

[1328] Yeah.

[1329] He's going to be a consultant to the company.

[1330] They're going to ask his advice.

[1331] I asked somebody within We Work.

[1332] Is this legal?

[1333] And they said, we can't tell.

[1334] And then said, because no one really considered this, right?

[1335] Like, I don't know.

[1336] Like, in the way he said to me what I said, we also don't have anything in there.

[1337] What happens if we learn that like we work can actually work well on Mars?

[1338] It's not in the documents.

[1339] We didn't think about it.

[1340] I think the only guaranteed outcome here is that the SEC is going to have, lots of job openings and guaranteed, like, employment, you know, for for a number of years, at least the New York office of the SEC.

[1341] There's going to be a lot of unemployed we work people to go there.

[1342] Let's go through the rest of the package because in addition to that $185 million consulting agreement, they are doing a tender offer of $3 billion.

[1343] So to Adam and anybody else at the company.

[1344] And investors at $19 and $19 a share, which goes back from evaluation perspective, years, you know, four years, three years.

[1345] Right.

[1346] So that's, and it's looking like about a billion of that.

[1347] buy Adams shares.

[1348] Up to a billion.

[1349] He doesn't necessarily have to sell it all.

[1350] It's hard to imagine he won't, but in theory he doesn't have to.

[1351] So interestingly, you pointed on that 1919 number, that strike price, if you go back to the last time that the stock was valued around there, you brought this up earlier, was around 2014, which was around the time when we work had about 1 ,000 employees.

[1352] So 14 ,000 of the 15 ,000 employees have been issued.

[1353] stock options that are underwater.

[1354] It's what we think.

[1355] I mean, as we discussed before the show, there's a, I mean, valuation stuff.

[1356] There's a 409A valuation, which is what shares are really valued at.

[1357] And that's different than the official price.

[1358] So it's possible there's another thousand that.

[1359] But even if you're slightly in the money, there are taxes on top of this.

[1360] You weren't expecting this.

[1361] So a lot of people might not have exercised options.

[1362] And if you deal with this stuff, you realize that if you haven't exercised your options, you're actually paying a higher tax rate than people who did a year ago.

[1363] And I have been told there are certain people who got actual stock grants, which is different than options, just were handed stock basically free in lieu of cash.

[1364] I doubt that was very much if that existed, those people are in the money.

[1365] But look, no, most people who've joined, we work in the last couple years who a couple months ago, honestly, might have been taking out mortgages, might have been taking out loans.

[1366] Why wouldn't you, right?

[1367] You've got a $49 billion company.

[1368] Any bank would loan against that.

[1369] Or at least loan something against that.

[1370] And they are two things.

[1371] They get nothing out of that financially.

[1372] And thousands of them are literally going to be out of work jobs.

[1373] Yeah.

[1374] So they don't get nothing for their stock and they don't even have paychecks.

[1375] They'll get some severance, but not much.

[1376] Really sad.

[1377] The last component of this deal is a $500 million loan to Adam.

[1378] I'm sorry, there's a couple more parts of this deal.

[1379] The $500 million loan to Adam personally from SoftBank Corp. off of their freaking balance sheet, which he will use to basically repay his loans to JP Morgan.

[1380] And then a $1 .5 billion investment at a share price of around $11.

[1381] So somehow there are two different...

[1382] And that values the company at $8 billion, I believe.

[1383] I think in the end, most money is a little bit over 10, I believe.

[1384] But again, it's so convoluted, no one really quite knows.

[1385] And I think at this point, you could say that the old valuation models that we use for most of these companies, right, this is value, this is series A, value this, I think is all just out the fricking window at this point.

[1386] So this gets to the market discovery or the price discovery problem that I alluded to earlier.

[1387] When you have only one party who can buy and the leverage keeps swinging all over the place, they just keep valuing it up down, up down, all these different places depending on this specific moment in time.

[1388] We work there's.

[1389] Yeah, there's no way to ascertain what the price should be because there's only one party that can and is willing to and keep buying.

[1390] Yeah.

[1391] It's wild.

[1392] And then the final piece, because we kept saying that they bought the company, except they say they didn't.

[1393] They have a majority stake in the company, but they claim they will not control the votes.

[1394] on the board.

[1395] And the way they say they get to that is they are going to significantly expand the board.

[1396] But when you ask them, okay, what's the size of the board?

[1397] And then most importantly, who's going to appoint those new board members?

[1398] There are no answers.

[1399] When you ask WeWork internal official spokesperson for WeWork internal, you ask her that.

[1400] She said, she said to me yesterday, I said, call SoftBank.

[1401] I said, why would I call SoftBank if SoftBank's not the one who's controlling this?

[1402] Call SoftBank.

[1403] When you call SoftBank, we haven't either, I don't know if it was we haven't determined or no comment.

[1404] But I mean, look, they're, for whatever reason they're claiming they're not controlling this.

[1405] They're in charge.

[1406] They should be.

[1407] They own most of the company.

[1408] They own most of the shares.

[1409] And whether or not most of those board members are salaried soft bank employees or not, they're going to be beholden to softbank or in some way related.

[1410] Okay.

[1411] So this is the last piece, which conveniently is acquisition category on this show.

[1412] Why is SoftBank doing this?

[1413] Here's my thoughts.

[1414] I think there are two reasons.

[1415] One, I can't remember where I read that I didn't come up with this idea is Sipheus, the committee on foreign investment in the U .S. Sopank is, of course, foreign entity.

[1416] They're a Japanese company.

[1417] Now they would be buying control of a U .S. company.

[1418] They've had issues with Sipheus in the past.

[1419] So this just like short circuits that.

[1420] That could be a risk to the deal, say, oh, we don't actually own it so we don't have to go through Sipheus.

[1421] I don't think that covers because even a minority state, for example, they had to go through Sipheus for their Uber deal.

[1422] Yeah, yeah.

[1423] So, yeah, I don't think that's the real reason.

[1424] I think the real reason is, I don't think they want to, pure speculation, I don't think SoftBank wants to consolidate WeWorks financials on their balance sheet.

[1425] No way.

[1426] Because, now, remember, the balance sheet of this company is enormous liabilities of all these leases.

[1427] SoftBank has a lot of debt that they have taken out at the corporate entity.

[1428] Remember, they're a telecom provider.

[1429] They have debt.

[1430] That debt is basically junk bond rated status.

[1431] They're one of the most highly leveraged companies that exist.

[1432] Look at it.

[1433] They would make a private equity person blush.

[1434] Exactly.

[1435] Exactly.

[1436] And so now if they all of a sudden consolidate this balance sheet, jack up the liabilities on the balance sheet, that's going to torpedo their debt ratings at the corporate level.

[1437] That's going to increase their cost of capital hugely.

[1438] That's terrible for the company.

[1439] So I think they're doing all these gymnastics to, A, to avoid that happening.

[1440] But then B, why do all these gymnastics?

[1441] Then you get back to the Vision Fund.

[1442] And at this point, I don't even think it's about raising Vision Fund too.

[1443] I think it's about just trying to salvage Vision Fund one.

[1444] They can't let WeWork go to zero.

[1445] Because the alternative.

[1446] here is we work is going to die as you said in like a month the jp morgan thing that's interesting there's a bunch of i mean this is still a real business right this isn't you know i've seen oh this the next theranos no theranos had a product didn't work this has a product that worked it's still you know like go to any city there are people who went to work this morning to we work and not who work for we work lots of them they have real buildings those buildings still exist all that stuff there will still be thousands of employees left even after the massive layoffs obviously certain facilities will close that are underperforming.

[1447] Obviously, expansion slows down.

[1448] But it is a real business.

[1449] I will say that the word soft bank isn't arbitrary, right?

[1450] Soft is the software piece, right?

[1451] I believe I'm a tech visionary.

[1452] But the bank part is important too.

[1453] He is a financier.

[1454] So the stuff you said about, you know, balance, that's all real.

[1455] I will say that I will bet that soft bank still believes long term there can be a business here.

[1456] The one thing about Masayoshi son is that I've always found fascinating is he made an enormous.

[1457] amount of money in the dot -com boom, huge money.

[1458] In fact, I saw I'm sitting next to Bill Gates at one point.

[1459] And he said to Bill Gates, he said, at one point, he said in the late 90s, I was richer than you.

[1460] He said, two weeks later, I was broke.

[1461] And that's true.

[1462] And what happens to most people who went through that, the dot -com boom, Mark Andreessen always talks about how people who went through that are to risk averse.

[1463] That's true, usually.

[1464] You are because you were so scarred by it.

[1465] Masa went the other way.

[1466] Masa decided to take all that risk again.

[1467] And he caught the Alibaba train and he did great with it.

[1468] But like most, and then he decided to go over the top.

[1469] That's why he's so unusual.

[1470] And I would say with this, he might look at it and say, things are really bad right now, but there is a business.

[1471] I still believe in the thesis of the business.

[1472] Maybe the management got away from us.

[1473] If I can get in what I believe is relatively cheap and control this thing, maybe we can make a go with this.

[1474] So here's my attempt to put a bow on the whole thing, which is, you know, we talked about this in the Vision Fund episode.

[1475] This is the largest fund of any type, any asset class raised ever, masquerading as a venture capital fund.

[1476] well wait that doesn't make sense venture capital funds shouldn't be bigger than private equity funds is this an unmasking of the vision fund for what it is is a private equity fund and when you look at this gosh they just made a $1 .5 billion equity purchase that now has them owning a majority of the company oh and they they levered $5 billion of debt on top of it wait a minute I've seen this playbook before and they paid a CEO to go away which is a very private equity leverage buyout thing to do totally so now all of a sudden like Yes, you've now taken out the time frame of which they're going to realize returns on this asset.

[1477] But if they can turn this around, turn it into what it does still have the potential to be, not the same kind of business everyone thought it was, but a good business and a big one with real estate assets all around the world.

[1478] Well, now maybe they just saved the Vision Fund.

[1479] I mean, I will say, I will say, though, there is an ongoing question of why they didn't let J .P. Morgan do the bailout.

[1480] Like I almost get the sense that J .P. Morgan looked at this and said with SoftBanks deal, all right, if you want this problem, your problem, take it.

[1481] Like it was almost like a hot potato.

[1482] I don't quite understand why SoftBank was willing to catch that.

[1483] Because again, J .P. Morgan was going to now you could argue it would have been too much debt and the company would have sunk under the debt.

[1484] You could make that argument.

[1485] But it was money.

[1486] It was money.

[1487] It was a it was lifeline.

[1488] It was runway.

[1489] This brings us to what we normally call what would have happened otherwise.

[1490] This episode I'm going to call the bizarro world we work.

[1491] We've got this comp.

[1492] It's.

[1493] IWG.

[1494] Last year, they did 3 .3 billion in revenue.

[1495] This business ends up looking a lot like we work at maturity.

[1496] That was profitable to 100 million in operating profit.

[1497] Their market cap is about 4 .6 billion.

[1498] So we're getting close to the neighborhood of where, you know, you're basically buying a business that looks like IWG.

[1499] You run that for a while.

[1500] It's going to be, you know, profitable for you.

[1501] So look.

[1502] Hey, great private equity pickup.

[1503] Exactly.

[1504] Exactly.

[1505] Exactly.

[1506] All right.

[1507] Well, let's bring this home.

[1508] So, WeWork is in a place now where they have six and a half billion in the company, some debt, some equity.

[1509] We sit here today.

[1510] We will see if that is enough to have them figure it out over the next year, maybe IPO at some point.

[1511] We don't know what the future will hold.

[1512] What we're going to grade here today is SoftBanks pseudo acquisition here of WeWork.

[1513] Woo.

[1514] I'm going to give them a B minus.

[1515] The low part is for why exactly, Again, I think they should let J .P. Morgan probably take it.

[1516] But, man, they were creative.

[1517] Like, you deserve something for, like, you might have gotten to the wrong answer, but you got there in a fascinating way.

[1518] You really can't knock the hustle here.

[1519] No. And by the way, remember, they wanted control of this company a year ago.

[1520] They got it, even though they didn't officially get it.

[1521] They got it for a lot less money, too.

[1522] So SoftBank Corp has put in the $2 billion from earlier this year and now another $1 .5 billion in equity capital.

[1523] So the corporation themselves outside of the $3 billion tender.

[1524] That's equity.

[1525] They're buying it from shareholders, but that's new equity they're buying.

[1526] Good point.

[1527] So they've spent, what's that, $6 .5 billion to own a majority of this company.

[1528] Now, the Vision Fund poured $8 billion in, and the business isn't even worth the combined amount of that.

[1529] But if you look at what SoftBank did, they made a bunch of management fees off the Vision fund and paid $6 .5 billion to own an asset that's probably, worth about $6 .5 billion.

[1530] I'll give the one counter, so maybe I would give a lower grade would be it's unclear who runs this.

[1531] They've spent a lot of money without having a CEO.

[1532] There are, there's these co -CEOs CEOs who are there, Sebastian Gunningham and Ardy Minson, who we talked about earlier.

[1533] It remains unclear if they are staying or not.

[1534] Maybe they're getting a good deal of cash to stick around.

[1535] That's unclear.

[1536] They've put Marcelo Chloray, the CEO of Sprint in his executive chairman, which is mind -numbingly strange, mainly because Mossa said, well, we're going to originally we're going to bring Marcello in so we can figure out what's really happening inside the company.

[1537] Again, you had two directors.

[1538] What were they doing?

[1539] And why do they still have jobs if they couldn't figure those basics out?

[1540] But like, but, but Marcello is a telecom guy.

[1541] Yeah.

[1542] Do they believe these two are the right horses or not?

[1543] That's unclear.

[1544] It's a lot of money to spend without knowing who's really going to be running it in six months.

[1545] I'm in for your B minus.

[1546] David, where are you?

[1547] It's so hard to conflict.

[1548] I think just like this story has illustrated, all of these series of decisions along the way by everybody involved, many of whom were like, many of which decisions were terrible decisions.

[1549] I think it's why like in the beginning we frame this as like, this is a tragedy.

[1550] Like this is the sum of the system that has created this.

[1551] So now if we're to grade specifically this decision by SoftBank, I think there's...

[1552] If you're on the fence, take employee sentiment.

[1553] into it.

[1554] They have to own this thing and they have some very angry people working right now.

[1555] Yeah.

[1556] Yeah.

[1557] So I, yeah, I think I'm in for the B minus for slightly different reasons, which is the reason it's that high is this is a save, like, because this was going to go to zero.

[1558] If maybe the JP Morgan thing would happen, maybe it wouldn't.

[1559] So it's saved.

[1560] But on the other hand, there's a very strong case to be made that this is throwing good money after bad.

[1561] So, you know, and that's, that's never a good position to be in.

[1562] So yeah, B minus.

[1563] There we are.

[1564] We'll check in in a year or so.

[1565] I'm sure we will.

[1566] Well, if the cash lasts that long, listeners, thank you for going on this journey with us.

[1567] Dan, where can listeners find you?

[1568] Oh, at axios .com.

[1569] I can get my daily prorata newsletter at signup .axios .com or just type Axios prorata into your podcast thing because we've got a daily podcast as well.

[1570] And I will say prorata is excellent.

[1571] Like much of the details that we've gotten over the last few years about this.

[1572] company have been that pro rata is the first thing that I read when I wake up in the morning.

[1573] So thank you for doing that.

[1574] Appreciate it.

[1575] It's the first thing I write when I wake up in the morning.

[1576] Awesome.

[1577] Our sponsor for this episode is a brand new one for us.

[1578] Statsig.

[1579] So many of you reached out to them after hearing their CEO, Vijay, on ACQ2, that we are partnering with them as a sponsor of Acquired.

[1580] Yeah.

[1581] For those of you who haven't listened, VJ's story is amazing.

[1582] Before founding Statsig, VJP.

[1583] spent 10 years at Facebook where he led the development of their mobile app ad product, which as you all know went on to become a huge part of their business.

[1584] He also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world.

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[1590] It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product.

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[1593] Customers include Notion, Brex, OpenAI, FlipCart, Figma, Microsoft, and Cruise Automation.

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[1598] for rolling out and testing AI product features.

[1599] So for anyone who's used Notions' awesome generative AI features and watched how fast that product has evolved, all of that was managed with Statsig.

[1600] Yep.

[1601] If you're experimenting with new AI features for your product and you want to know if it's really making a difference for your KPI's Statsig is awesome for that.

[1602] They can now ingest data from data warehouses.

[1603] So it works with your company's data wherever it's stored so you can quickly get started no matter how your feature flagging is set up today, you don't even have to migrate from any current solution you might have.

[1604] We're pumped to be working with them.

[1605] You can click the link in the show notes or go on over to stat sig .com to get started.

[1606] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[1607] Well, listeners, if you want to hear more Acquired, feel free to subscribe from wherever you are listening to this one.

[1608] And if you're looking for another episode to listen to, we did a SoftBank Vision Fund episode earlier this year, last year, Something like that.

[1609] Search SoftBank in your acquired feed.

[1610] With that, listeners, we will see you next time.