Property startup WeWork is seeking to raise new funds at a valuation of $35 billion, according to one of its biggest investors.
Rajeev Misra, chief executive of SoftBank's $100 billion Vision Fund, told the CogX conference in London that WeWork was in the process of raising capital at the newly disclosed valuation, and predicted it would be worth $100 billion in the next few years.
Misra's comments will raise eyebrows, given WeWork has raised several billion dollars in venture capital to date, another $702 million in its bond market debut, and is burning through cash. WeWork's most recent fundraise, a Series G round, reportedly valued the company at $20 billion.
A $35 billion valuation would also mean WeWork has overtaken Airbnb and SpaceX to become the second most valuable startup in the world behind Uber.
SoftBank invested $4.4 billion in WeWork in March 2017, some of it through its Vision Fund. The deal valued WeWork at $17 billion at the time, despite some skeptics seeing WeWork as an over-valued real-estate company. WeWork then went on to raise another $760 million in July 2017, which is the round that reportedly bumped the company's valuation up to $20 billion.
"A year ago, we were told that WeWork was overvalued [at] $17 billion for real estate," Misra said on Tuesday. "Guess what, they are looking to raise capital at $35 billion today. Maybe it's overvalued, but I believe they'll be a $100 billion company in the next few years."
Misra did not go into further detail about WeWork's current fundraising efforts, nor did he say whether SoftBank was participating. A SoftBank spokesman declined to provide additional clarification.
WeWork declined to comment on the valuation number and the possibility of a raise.
WeWork is counteracting chatter about overvaluation by pointing to the ways it will diversify revenue
WeWork currently has 256,000 members across 22 countries and is projecting 400,000 members by the end of 2018. The company has hit a predicted revenue run rate of $1 billion, and is projecting a run rate of $2.3 billion by the end of the year.
The company's rapid expansion and multiple, diverse acquisitions mean it's burning money. Skeptics worry that WeWork's core proposition of taking on long leases, doing up office spaces, then subleasing them don't justify its huge valuation. "If you had positioned this as a real-estate company, it wouldn't be worth this," Starwood Capital Group CEO Barry Sternlicht told the Wall Street Journal last October .
In an interview with Business Insider, chief product officer Shiva Rajaraman said WeWork was developing a suite of new services. He pointed to "Powered by We," an office management service targeted at bigger enterprises and launched late last year. The idea is that WeWork draws on its observations of how companies and employees work to design more thoughtful office spaces for big firms.
Rajaraman said: "When you look at a big enterprise, a Fortune 500-level company... maybe they have two locations. If they work with WeWork, let's say they spill into a few new markets and those sit inside a WeWork. We [then] manage their space, their main campus and flexible space in a WeWork, that's really the entirety of the platform.
"Many big companies have more or less space than they need. If they have more space, they can work with us, [we] take one floor and turn it into a WeWork because [they] don't need it now. That allows them flexibility."
"Powered by We" may give WeWork more stable income from established firms. Rajaraman said "Powered by We" customers, which reportedly include IBM and Airbnb, might pay an initial scoping and redesign fee, then an ongoing service charge.
"It's a very important and great new growth trajectory for the business," he said.
WeWork's investors think the company can transcend real-estate and provide additional services that are worth paying for
Ultimately, investors' belief in WeWork seems to stem from their conviction that the company will make itself indispensable to its members by selling them a community. That's why WeWork acquired Meetup last year, a community organising platform to let people with the same interests and hobbies find each other, and the Flatiron coding school so that it can offer training to members.
"They will go completely horizontal beyond office spaces to manufacturing furniture for themselves... becoming a leader in real estate as an industry," said Misra. "The key is to own the customer. They own their customer, and that is extremely valuable."