Mikey Tom March 14, 2016
Office co-working space company WeWork is reportedly in the midst of raising a massive $430 million round that will value it at close to $16 billion. If the round is completed, the company would see its valuation jump by 60% from its last financing, a $434 million investment secured last year that valued it at $10.2 billion.
The round and skyrocketing valuation are notable for a handful of reasons. One reason is that it’s been just nine months since the company raised the aforementioned uncommonly large financing. And six months before that, the company raised a substantial $355 million investment at a $5 billion valuation. Usually, rounds are meant to sustain a company through at least a year of operation with specific goals in mind, but in WeWork’s case, the time between raises has been much shorter. One reason could be the funding environment at those times. There were many investors in the market looking to back high-growth startups, and WeWork was likely able to secure favorable terms. This same explanation is harder to apply to this most recent round.
There has been a lot of talk recently of a cooling in investment activity, sparked by less-than-attractive performance of stocks in the public market. With the general acceptance that the current funding environment is less than ideal, it’s interesting that WeWork would set out to raise a round now, when it presumably still has cash on hand from the large round last year.
It will be interesting to see how the round fills out. Has WeWork set its sights too high? Could we see the valuation for the round come down, or will investors continue to pour money into the company at eye-popping valuations?