US office-share group valued at $20bn steps up push into competitive market
WeWork, the shared office provider that is among the world’s most valuable start-ups, has launched a unit in China to accelerate growth in one of its most competitive markets.
The formation of WeWork China, which has raised $500m from investors led by Hony Capital and SoftBank, comes on the heels of a deal last week in Japan where WeWork and SoftBank launched a joint venture.
New York-based WeWork, which rents office space and desks to freelancers and enterprises, has been on a fundraising spree this year and is accelerating its worldwide expansion.
This month it closed a $760m investment round that valued the company at about $20bn.
WeWork China, which will be a Chinese entity, has raised funding from a consortium of investors including Chinese private equity firm Hony Capital, SoftBank of Japan, China Oceanwide, Greenland Group and Legend Holdings, an affiliate of Hony. The step represents a change in strategy for WeWork, which launched in China a year ago and has eight offices open with seven more under construction. When completed, these offices will have a total of 15,000 desks. The company expects to have 10,000 Chinese members by the end of the year. “We are about to start moving fast,” Adam Neumann, chief executive, told the Financial Times. “China is actually adopting it faster than a lot of other places,” he added, referring to the co-working model. “It is the success of China that made us want to focus even more . . . but in general without a local entity that has local laws and local management it is hard to give China the focus that it deserves.” WeWork has many rivals in China, including Naked Hub and URWork, and its expansion there comes at a time when certain parts of the Chinese start-up scene are starting to contract. Mr Neumann said WeWork’s goals go far beyond office space. “People confuse our business, and think that our business is an arbitrage between what we pay the landlord and the rent we charge for desks,” he said. “Anyone who thinks that is confused. That is just step one.” According to Mr Neumann, WeWork’s real business is to provide services to the people and companies who use its space. “It is the communication between those businesses, and the services that we are creating that we can sell to those businesses,” he said. John Zhao, chief executive of Hony Capital, said the new structure would allow WeWork China to “localise” certain portions of the business. “The creation of a slightly separate entity to make sure WeWork’s service was tailored to the Chinese community was not an afterthought, it was a forethought,” he said, explaining that a local entity had long been part of the plan. WeWork China will be run by Christian Lee, who was previously the company’s chief financial officer, and WeWork will have a majority stake in the entity.