Wework Listing And Halting, And Sharing Office Companies' Profitability

If the lips are gone. The listing of Wework is blocked, and it is also a test for domestic shared office enterprises.

Recently, the second largest unicorn in the United States and Wework, the originator of shared office, issued a formal statement saying that the company would withdraw the prospectus and postpone the company's IPO. The star company, valued at the highest value of $47 billion, is being questioned by two market investors after its 9 year delay.

After opening the listing process, Wework's valuation has been cut down to only $about 10000000000. If the valuation is listed, investors such as Softbank vision fund will lose everything. Under a lot of pressure, Wework had to choose to postpone IPO and concentrate on core business.

"In our view, the days of generous funding for enterprises that have not yet made profits are over." Morgan Stanley chief U.S. stock strategist Wilson said in October 6th. Investors have shown that they are no longer willing to pay for overinvestment. This also means that technology companies and other high growth software stocks will face difficulties and will put pressure on the whole market.

The days of sharing office enterprises in China are also bad. Wu Shichun, founder of plum blossom angel, analyzed the twenty-first Century economic report, saying that because of the high valuation of Wework in the past, the domestic shared office enterprises were doing a good job, and they were more reasonable in seeking a corresponding financing valuation with their business being a fraction of Wework. Once the Wework valuation falls sharply or even gets into trouble, it will mean a test for domestic shared office enterprises.

From the perspective of listing exit, another investor who shares the office industry has told the twenty-first Century economic report that if Wework is successfully listed in the United States, China's shared office head enterprise, customer service workshop, krypton space and so on will be more logical to go to the US market in the future. But now, if Wework is questioned by the two tier market, domestic share office companies may have to consider the mainland capital market or Hongkong market listing. But the liquidity of Hongkong market is not very good. The A share market needs to be lined up and has profit requirements. The hard science and technology standard of Ke Chuang board may not match that for shared office enterprises. So, on the whole, they are not particularly ideal exit channels.

Faced with this situation, how can share office enterprises accomplish self salvation?

Shanghai WeWork Weihai road China's first flagship store. -IC photo-

Sharing office: from rapid rise to integration

The sharing office starts with solving the cross regional office, standardized solutions and flexible demand of office area of enterprise users, which can effectively reduce user capital expenditure and improve operational efficiency through centralized and unified management. In recent years, due to the rise of freelance groups and the tide of mobile office, the demand for sharing office is more and more vigorous.

Wework, founded in 2010, is a pioneer in the sharing office industry. Five years later, Mao's Daqing SOHO and Pan Shiyi's 3Q were only emerging. When China entered the first year of shared office in 2015, a large number of capital and entrepreneurs poured in. This led to a shared economic boom, and also catered for the office requirements of start-ups in the context of "double innovation".

Wanliu Shuo was an entrepreneur in the shared office track. He won the early investment of Meihua venture capital, Qingshan capital and Jingwei China in the unbounded space which he founded in 2015, and quickly entered the second tier industry.

But in 2018, as the market competition became more intense, the unbounded space was merged with the customer service workshop, and it was officially managed by the quality guest workshop. Wanliu Shuo started the two venture and devoted himself to the "inDeco collar building", the latter as an office space design and decoration company based on Internet + public clothing.

"At that time, we judged that sharing office needed capital support. We could only be counted as the second tier player. In this case, we prefer to merge with the first tier players, and then look for new entrepreneurial opportunities in the field of public service. Wan Liu Shuo told the twenty-first Century economic report.

Reflecting on the entrepreneurial experience in the field of shared office, Wanliu Shuo believes that young entrepreneurs may not be suitable for catching up. Because the wind power needs two core competencies: first, the ability to make use of capital; and the two is to have a full grasp of the company after the rapid expansion of the scale. These two points do not have an advantage for young entrepreneurs. Conversely, in some tough and tired industries, young entrepreneurs use new ideas and new technologies, but they can seize opportunities that others can't see.

For the Wanliu Shuo after 90, from sharing office to public dress is a more extended ground, and let him take advantage of the accumulated resources and connections. For Daqing after 60, it is a logical and challenging choice.

His ambition and the call, let the customer service workshop quickly gather a large number of capital and attention, become the most brilliant star in the field of shared office. In the wave of industry consolidation in 2018, the customer shop bought Hongtai's innovative space, unlimited space and other brands.

But even the head office, such as customer service factory and krypton space, is still being questioned about profitability. The Wework's IPO crashed again, drawing the problem to people's eyes again.

Earnings tested: monomer model established, but overall profitability is difficult, avoid blind expansion.

Can share office be accounted for? Why are large numbers of enterprises still losing money? Many practitioners and investors told the twenty-first Century economic report that when a business is very careful and careful in running the business, it can strike even or even earn some profits. But when the company desperately expanded, the huge investment in the early stage turned it into a business of burning money. In addition, if there are too many shared office space to compete in the market, it will be very difficult to make money.

Hirotake investment is one of Wework's investors. For the loss of Wework, Hirotake's investment chairman and CEO Zhao Ling said in an interview in June this year, "at the time of our investment decision, Wework has more than 50 office space and more than 40 thousand members in the world, and now has more than 400 office space and over 400 thousand members. This happened in just three years, and its change is accelerating. For the loss, I think this is Wework's long-term commitment to continue to achieve strategic leadership and advance layout.

Sun Liang, CEO of the company, admitted in a media interview in August that the sharing office is in the initial stage of the industry. The customer service workshop is also in the expansion stage. It does require a lot of investment, plus the characteristics of long investment return cycle. But as the community becomes mature, there will be a stable profit model.

"Sharing office itself is still valuable." Wu Shichun told the twenty-first Century economic report that the Chinese market still has a certain particularity, that is, it has a large number of small start-up companies, ranking the first in the world. For them, the sharing office mode has an irreplaceable value. Compared with the traditional office buildings, the shared office space is more flexible, and the initial cost is lower, so the bag can be put into office.

But Wu Shichun believes that this value does not necessarily follow the so-called technology companies. It is equivalent to the concept of asset reconfiguration, and obtains the stock assets in the form of long-term lease, and then rents for a short time, thereby earning the difference between long-term lease and short-term lease.

Therefore, if the shared office can get a good location of the property, and do every single thing well, the monomer economic model can still be established. But if the business caters to the market and expands the scale, it will be unable to make ends meet.

At the same time, the direction of the capital market itself has changed a lot. Originally, enterprises have high growth and high market share, and are easy to get the recognition of capital market when financing. But now investors are more concerned about whether companies have good cash flow, gross margins and high efficiency.

Many share office enterprises want to earn money through value-added business and membership fee, besides the rental income. They often talk about the imagination of this business. But Wu Shichun thinks, at present, rent is still the main income of sharing office enterprises. It is still not mature enough to make big value-added business income to make big cake.

"Rental income is the most rigid part, value-added business income is not too stable, the scale is far less than the rental income. At the same time, the added value business needs higher investment in manpower cost, and there are many alternative products and services in the society. Wu Shichun said.

Qiu Hao, founder and partner of lotus capital, told the twenty-first Century economic report that more and more flexible sharing of office forms is a trend. The office will move from monopoly to openness and sharing. But the trend itself does not bring about a great increase in efficiency, so sharing office does not make much extra money than the original rental office. It still faces the industry with large investment, long cycle and low profit.

"But space is the last place for the Internet to change. Maybe 35 years later, with the mature application of 5G, IoT and AI technology, space will become the entrance of people's connections, which will bring great efficiency improvement and show long-term value." He said.