I'm not saying it's a perfect metaphor for WeWork. But it kind of works, right?
The supernova-style saga of the co-working unicorn continued this week, with two of the company's closest allies now said to be offering competing $5 billion lifelines that could help keep WeWork afloat. And WeWork's nightmarish past two months are also having wide-reaching impacts on the rest of the unicorn universe.
For Airbnb, whose finances were the subject of a surprising new report from The Information this week, that means newly pointed questions about its future profitability. Or lack thereof.
The presence of WeWork's looming shadow over the rest of the VC world is one of 11 things you need to know from the past week:
1. WeAreAlmostOutOfMoneyWeWork is on track to run out of cash by the middle of November, according to CNBC. As such, the company's board and new co-CEOs Artie Minson and Sebastian Gunningham are hunting for additional funding. And even though Adam Neumann is gone from the top job, the two candidates to throw WeWork a lifeline are the two investors who for years were Neumann's biggest fans.
Those supporters would be SoftBank (led by CEO Masayoshi Son), which is reportedly offering $5 billion in financing to help rescue WeWork from bankruptcy, and JPMorgan Chase (led by CEO Jamie Dimon), which has reportedly put together a rival $5 billion debt package for the company. Doubts exist about the feasibility of JPMorgan's proposal, according to Bloomberg, because some are skeptical about WeWork's ability to service such a large new debt commitment. Which, considering the company lost $1.9 billion last year, seems eminently reasonable.
It's believed that SoftBank's proposed investment would still leave the Japanese telecom giant holding a minority stake, with Bloomberg reporting a possible valuation of below $8 billion. That's kind of incredible. It would put SoftBank in the position of having invested more than $15 billion in a company that's now worth barely half that, and yet still lacking control of said company. It'd be quite a trick. Even stranger, perhaps, is that prior reports of a possible SoftBank lifeline said the Japanese conglomerate would pursue a majority stake in WeWork. Which would seem to indicate that WeWork has negotiated that down to a minority stake? Which would seem to indicate WeWork still has some sort of leverage over SoftBank? Which would seem crazy to me.
Considering WeWork's desperation for cash, it's likely the company will choose either SoftBank or JPMorgan's offer sometime soon. Perhaps then, at long last, it can finally escape the headlines for a few weeks and get down to the business of trying to recover from a horrific past two months.
Everybody forgetting about WeWork for a while probably sounds dandy to Airbnb, the short-term vacation rental company that was valued at $31 billion with its last round of VC funding, back in 2017. The company was thrown into the spotlight this week by The Information, which reported that Airbnb posted an operating loss of $306 million during 1Q, more than doubling its losses from 1Q 2018. For a unicorn in 2019, that's not necessarily a surprise; what is a surprise is that Airbnb had reported an $18.7 million profit for all of 2018, leading some to think it had officially made the shift from red ink to black.
Not so much, as it turns out. Much of the loss-making was attributed to $367 million in expenditures on sales and marketing in 1Q, a steep YoY increase that shows Airbnb's hunger for new customers. The spending had a positive impact on revenue, which was up 31% YoY in 1Q to $839 million, again according to The Information.
For years now, this has been the typical math for unicorns. Spend like crazy. Grow revenue like crazy. And have confidence that investors will meet it all with a big smile and piles of additional capital.
But there are signs that the post-WeWork world may be different. Uber and Lyft, perhaps the two unicorns best known for the combination of enormous valuations and heavy losses, have both seen their share prices plummet since going public. Companies like Postmates and Endeavor have postponed planned listings rather than face a tepid market. Other loss-making unicorns like Slack and CrowdStrike have experienced major stock slumps over the past two months.
If Airbnb actually goes public in 2020—the company announced last month it would do so—what kind of reception will it meet?
Let's be clear: Airbnb isn't WeWork. For one, it's reportedly sitting on some $3 billion in cash and cash equivalents. WeWork is almost broke. But there are similarities. Like Neumann, Airbnb leader Brian Chesky has certain outsized ambitions that are said to include Airbnb eventually offering its own flights and dominating the travel industry. It already has its own magazine. And the company has spent recent years making several acquisitions and VC investments, spreading capital around to hotel-booking companies (HotelTonight), property management companies (Lyric Hospitality) and co-working companies (The Wing).
Like WeWork, there are also real questions about how Airbnb's business model will fare in the face of an economic downturn. When money's tighter, will as many travelers be shelling out for daintily decorated bungalows in that perfect neighborhood by the great brunch spot?
Only time will tell. But the average blood pressure reading of the company's backers is probably a few points higher today than it was back in July.