WeWork, the billion-dollar office-sharing company based in New York, stunned the business world on Tuesday when it filed for Chapter 11 bankruptcy protection. The company, which was once valued at $47 billion during its 2018 funding round, has been hit hard by the impact of COVID-19 and is facing a cash crunch.
Founded in 2010 by Jared Neumann and Adam Neumann, WeWork has become synonymous with a co-working technology-enabled approach to office sharing. The concept was embraced by both entrepreneurs and startups wanting to grow their businesses without the costs of traditional leasing arrangements.
Early investors such as SoftBank Vision Fund and a group of venture capital firms had invested close to $10 billion into the company, helping it to expand its global footprint. By the end of 2018, WeWork had operations in 111 cities across 28 countries and had signed up almost 400,000 members to its services.
The company had ambitious plans for expansion in Asia with its biggest market being China. The company was also actively marketing its unique brand of work experience to larger corporations.
Despite this, WeWork has been struggling with its financials and was unable to secure the funding it needed to keep its operations going due to the onset of the pandemic. As a result, the company announced in July that it was putting an end to all its expansion plans and was laying off thousands of employees.
The filing of bankruptcy protection gives the company time to restructure its financial obligations and gives investors the chance to reclaim their funds. The restructuring process is expected to take several months as the company works to cut costs and renegotiate leases with landlords.
WeWork’s founder and Chief Executive Adam Neumann has stepped down from his role and has been replaced on an interim basis by co-CEOs Artie Minson and Sebastian Gunningham.
The business of office-sharing has been severely impacted by the coronavirus pandemic. WeWork’s bankruptcy filing has cast a pall on the industry with the implications of its struggles to stay afloat still unclear. It’s a reminder that even high-flying startups can come crashing down in a challenging economic environment.