WeWork raised another $1B from SoftBank as revenue — and losses — accelerate

To continue its ambitious expansion plans, WeWork continues to raise funds from SoftBank by the billion, worrying some investors.

August 13, 2018

WeWork raised $1B from SoftBank last week after the company reported it doubled its Q2 revenue. But the only thing that grew more than WeWork’s revenue were its losses — which quadrupled from the previous year.

A fundraising machine

With a valuation of more than $21.1B, WeWork is one of the 6 most valuable private tech companies on the planet. But, WeWork has had to raise far more cash than similarly valued companies to continue growing. 

WeWork has raised $8.1B in 12 different fundraising rounds. For comparison, $31B Airbnb has raised $4.4B, and $24.7B SpaceX has only raised $1.9B — meaning every dollar WeWork raises yields 1/5 the value of a SpaceX dollar (at least in the eyes of VCs).

WeWork has had to raise money almost constantly to continue growing, going so far as to issue $702m worth of bonds in April to keep the cash flowin’ — an unusual move for a startup.

Doing whatever it takes to make it work

WeWork compared its habit of burning cash to Amazon’s, assuring investors that it’s spendin’ money to make money. Big investors like SoftBank have footed the bill so far in exchange for massive equity. 

While WeWork’s bond sale was good news for shareholders (debt financing gives startups more control than equity), it has continued to dilute equity with this recent round of ‘convertible debt’ (i.e., debt that SoftBank will later convert to preferred equity).

This financial instability is a red flag for investors — particularly since WeWork’s revenue per user has declined as it has grown. WeWork ended last year with a loss of $933m, and it is on track to lose way more this year.

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