WeWork woes weigh on startups

Welcome to the 13th issue of the Tech Wrap-Up Europe newsletter.

Every fortnight, we'll be sharing interesting stories and expert insights from LinkedIn members. 

In this issue, Sam Shead looks at the ramifications of a potential WeWork collapse, the importance of the Arm IPO, and the top films, podcasts and books tech workers are enjoying this summer. 

WeWork has been on a rollercoaster ride over the past few years but now there's "substantial doubt" about its future, and there's a chance it could even disappear altogether.  

With its free beer taps, ping-pong tables and trendy locations, WeWork has become a popular spot for young companies that don't want to take on long leases with stuffy office providers. The company offers startups a variety of packages, depending on whether they want hot desks, a private space or access to more than one building. 

The troubled firm, once valued at $47bn (€43bn), was forced to combine 40 of its shares into one recently in an effort to keep its stock price above $1 and avoid being delisted from the New York Stock Exchange. On Tuesday, Reuters reported that the NYSE has suspended trading in WeWork's warrants due to "abnormally low" trading price levels and will initiate proceedings to delist them

Needless to say, it's a tense time for WeWork and its punters around the world.

Over 700,000 people use WeWork; many of them small startups that enjoy the flexibility WeWork offers on real estate. 

Tech campaigner Russ Shaw CBE, founder of Tech London Advocates & Global Tech Advocates, told LinkedIn News that WeWork has attempted to act like a tech startup when it is fundamentally a property business.

"Having posted nearly $2bn in losses in 2018, concerns around its business model – and much-publicised issues with the leadership of founder Adam Neumann – meant its value continued to fall dramatically until it eventually went public in 2021," Shaw said. "This spooked potential new clients who were worried about the company going under and being evicted from a WeWork space. The pandemic exacerbated this issue of high tenant churn – many smaller businesses adopted remote or hybrid working practices, while large companies set about re-evaluating how they used existing office space as part of attempts to attract and invest in startups."

He added: "All of this – combined with significant boardroom turmoil, highlighted by the recent abrupt departure of three board members – has seen the pressure on WeWork reach boiling point. While the financial losses may be slowing, the company is simply running out of financial runway and it looks like it will be left with little option but to file for bankruptcy protection."

So what do other coworking companies make of WeWork's woes? 

Philip Ellis, the co-founder of London-headquartered Techspace, described the latest developments as bittersweet.

"The market leading name in our sector going to the wall is never good news but mainly because of their risk appetite," he told LinkedIn News. 

"It isn’t a lesson for our sector specifically, but a valuable lesson for startups and investors alike," Ellis added. "It emphasises the significance of striking a balance between innovation and responsible growth, ensuring that scaling doesn't compromise the fundamental health of a business."

Some startups will no doubt be wondering what happens if WeWork does fail.

Venture capitalist Chris Smith told LinkedIn News that it wouldn't fundamentally change the commercial real estate market for early-stage businesses. 

"There is still a surplus of space and startups can negotiate good rates – but it may require founders to start taking a longer term view with their office space as short-term, flexible arrangements become less commonplace," he said. 

"I'd see it as an irritation rather than anything more fundamental than that, especially given how good companies have become at remote/hybrid working," Smith added. 

Elsewhere, Elizabeth Varley, who co-founded the TechHub coworking space, pointed out that startup founders are great at "finding what they need, when they need it."

"Obviously it would be bad news for landlords, given WeWork is such a large tenant, and the market is already still impacted by the pandemic," she told LinkedIn News. 

But many would be sad to see WeWork go, should it come to that. 

Oscar White , CEO of online ticketing startup Beyonk, told LinkedIn News: "We like WeWork and think it’s a good proposition."

Other coworking space providers appear to be keen to take advantage of WeWork's misfortunes. "We’ve been inundated with offers from other providers," said White, adding that he's not overly concerned about not being able to find an alternative base. 

"WeWork do have a deposit for each managed office, so the concern for us would be our exposure to losing the deposit," he said, without specifying the size of the deposit.

UK chip giant Arm has unveiled a preliminary prospectus for a listing on New York's Nasdaq stock market that is set to take place early next month. 

The initial public offering will reportedly be the biggest US IPO in almost two years, with the firm looking for a valuation of between $60bn to $70bn. 

But venture capitalist and LinkedIn Top Voice Michael Jackson questions whether Arm, which is now trying to market itself as an AI company, is worth anywhere near $70bn.

Owner SoftBank has brought in a whopping 27 underwriters including Barclays , Goldman Sachs , J.P. Morgan and Mizuho to help with the offering.

"The large roster is tacit admission that SoftBank needs some assistance to hit its targets," the FT wrote in a column this week.  

Arm's patented chip designs are featured inside 99% of the world's smartphones and the company is often referred to as the Switzerland of the semiconductor industry, because it sells its designs to almost all mobile device chipmakers.

One of the main risks associated with Arm is the fact that almost a quarter of its revenue comes from China, where its business is under threat from local firms who have been investing heavily into the same space that Arm operates in: RISC-V, open-source chip design architecture.

Other tech firms will be watching the IPO closely to see how investors react.

"It could spur dozens of companies to pursue – or further delay – their own IPO plans," Elliott Bray BSc (Hons) DipPFS , a senior partner at St. James's Place Wealth Management, wrote on LinkedIn.

Instacart, Databricks and Socure are among those that have been tipped to follow suit.

Sam Cash, a London-based venture capitalist at Project A Ventures, told LinkedIn News that the Arm IPO is a positive sign of liquidity coming back to the market, although he stressed that the IPO "window" probably won't open until 2024.

"Multiples are still very low for tech in public markets and a lot of late stage companies have a lot of cash," he said. 

Jackson agrees that it's not a good time to list. "I had a call last week with the COO of one company I invested in, that had been hoping to list this year, but they’ve firmly put that one on hold another year," he said.

Summer is a time when many people hope to relax and recharge from the daily stresses of life. With that in mind, LinkedIn News asked tech workers across the country which books, films and podcasts they'll be turning to this summer.

Perhaps unsurprisingly, Christopher Nolan's Oppenheimer received several mentions from members. The film, which features Cillian Murphy, Emily Blunt, Robert Downey Jr, tells the story of how the US developed the atomic bomb. 

In terms of books, Matt Brittin, Google's president of Europe, the Middle East and Africa, recommends Lessons in Chemistry by Bonnie Garmus and Turn the Ship Around, by David Marquet. He's also looking forward to the new Doctor Who series. "I’m hoping it’ll fill the Succession and White Lotus-shaped holes in my TV heart," he wrote. 

Elsewhere, Dragon's Den investor and LinkedIn Top Voice James Caan CBE recommends all budding entrepreneurs read Peter Thiel's Zero to One if they want to understand what it takes to set up and scale a company. 

"Thiel's central thesis revolves around the concept of going from 'zero to one' – that is, creating something entirely new and innovative instead of merely copying existing ideas," writes Caan. "He advocates for the pursuit of monopoly-like domination in a specific niche, where businesses can thrive in a relatively uncontested space."

On the topic of Dragons, Steven Bartlett's Diary of a CEO podcast series is worth listening to, according to Saad Mahmood, a branding and marketing expert at Equinix, noting that it offers an "unfiltered journey into the remarkable stories of the people that have defined culture, achieved greatness and created stories worth studying".

Marjo Palanee, creator growth lead at Pinterest, recommends the "Not my first guess" podcast from Hattie Willis, where startups share candid stories to help founders feel less alone in the emotional rollercoaster that is entrepreneurship.

Elsewhere, cybersecurity specialist Lisa Ventura MBE is a fan of sci-fi, particularly the Star Wars movies, Back To The Future and Ghostbusters. And metaverse evangelist Dr. Martha Boeckenfeld says she has been reading Nick Bostrom's Superintelligence, among many other AI books. 

1. Getir to cut jobs. The rapid grocery delivery company is planning to lay off around 2,500 people across five countries as the cost of living crisis forces some people to reevaluate whether they need their shopping in minutes. 

2. Microsoft reworks $75bn Activision deal. The tech giant, which owns LinkedIn, is trying to convince the UK competition regulator to approve the deal. 

3. DeepMind's "personal life coach". The firm is currently testing the new generative AI tool, which has been trained to provide advice about challenges in people’s lives. 

4. The digital divide runs deep. Find out how the elderly, low-income households and the unbanked are often penalised in today's digital world.

5. Threads adds web version. Meta is rolling out the much-anticipated web version of its Threads app in the coming days.

Pushmeet Kohli – Pushmeet is VP of research at Google DeepMind. He posts about how AI can revolutionise healthcare. 

Carissa Véliz – Carissa is an associate professor at the University of Oxford. She posts about the ethics of AI. 

Matt Clifford – Matt is the co-founder and CEO of startup builder Entrepreneur First, as well as the chair of the UK's Advanced Research and Invention Agency. He often posts about startups and AI.

Laura Jeffords Greenberg – Laura serves as interim general counsel at Worksome. She talks about how legal professionals can optimise their performance through AI and other technologies.

Get Hired UK – A fortnightly update dedicated to advice and insights on landing your next role and progressing in your career.

Get Hired Europe – A newsletter focused on helping you land your next job.

A bi-weekly digest of news, views and insights from the world of tech written by Sam Shead.