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WeWork's Rough 8 Weeks, Explained.

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Michael Wenner   October 25, 2019

WeWork, A Timeline (of the Last Two Months...)

It’s been an eventful two months for The We Company, parent of shared workspace company WeWork. Everything was going smoothly until they filed the S-1 for their highly-anticipated IPO in August.

After the filing, questions about everything from its valuation to corporate governance immediately came into question. The company, which was destined to become one of the biggest IPOs, quickly found itself on the defensive. Everything began to go downhill pretty quickly.

In the middle of September, the company decided to postpone its IPO, saying “The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year.” The company’s largest investor, SoftBank, even supported the delay.

One week later the company had its fall guy. Co-founder and CEO Adam Neumann stepped down as CEO of the company. In a statement, Neumann said “While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive.” As time went on, additional details came out about Neumann that raised eyebrows. It was revealed he once said he wanted to live forever and become the world’s first trillionaire.




With Neumann gone, The We Company began cleaning house. They divested three companies, a SaaS SEO marketing platform, an office management platform and a service used to organize group meetings. The company even put its private jet up for sale, citing poor optics. With Neumann gone, so was his inner circle, as the company let go 20 of his close long-time friends and family.

With its valuation and reputation continuing to take hits daily, The We Company formally withdrew its S-1 to go public on September 30. The newly appointed co-CEOs said “We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong.” They didn’t shut the door on an IPO in the future, though, saying “We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”

With Neumann gone and the IPO on the shelf, one piece of business remained; where to get the money to continue operations as the company was about to run out of cash. Naturally, SoftBank was the white knight, taking an 80% stake in the company. The deal included a $3B tender offer for existing shareholders’ stock, an accelerated equity injection of $1.5B and $5B of new debt.

The SoftBank bailout landed Neumann an exit package worth close to $1.7 billion, while 4,000 employees, or nearly 30% of its global workforce, will be laid off. We can now sit back and watch to see if SoftBank can turn around the company and put its IPO back on track to vindicate the employees who are not too happy at the moment.

And Everything Else...


Will there be 174 more similar IPOs? Casper, the direct-to-consumer mattress company, is reportedly working with Morgan Stanley and Goldman Sachs on an IPO. The company's valuation could exceed the $1.1 billion valuation it received in its latest funding round in March. The company's 2018 revenue exceeded $400 million while reporting a $64 million loss. Casper faces plenty of competition, with a report showing there may be as many as 175 companies selling mattresses in a box, with it being difficult to differentiate between products.


Microsoft is opening its wallet to move your data. For the second time in six weeks, Microsoft has acquired a company that makes it easier to move data to their cloud-based services. Microsoft acquired Movere, which helps IT administrators migrate data to services such as Microsoft Azure, to make "migration an easier process for our customers." This week, Microsoft ironically acquired Mover, which "will help make it easier than ever for customers to migrate files to Microsoft 365." Terms of both deals were not disclosed.


Wait, what? In possibly the most unusual story you'll see relating to Silicon Valley, a former child star of the show "The Wonder Years" is embroiled in a lawsuit with Mithril Capital, a venture fund owned by Peter Thiel. Crystal McKellar is accused of anonymously mailing letters to the fund's clients accusing the fund of lying about the fees it was charging, trying to poach clients and telling clients the fund was under SEC investigation. She allegedly deleted nearly 2,000 text messages sent from her work phone from the time she left to when she gave it back to the company.

They sell better experiences than Fyre Festival. Pollen, formerly known as Verve, has raised $60 million to expand its influencer-based experiences marketplace. The members-only platform, which refers to members as "Ambassadors," essentially leverages high-profile social media influencers to move tickets for experiences and events. Pollen, which has sold 1 million experiences since being founded in 2014, takes a cut on the sale of each ticket. Co-founder and CEO Callum Negus-Fancey believes influencers are the "billboards of new media." One of the company’s investors, who was an early investor in Spotify, believes "Pollen can become one of the most culturally significant companies for Gen Z." If he's correct, this may be a company to keep an eye on with Gen Z representing one-third of the world's population.


Have a spooky week. And don' forget to follow us on Twitter for the best Pre-IPO memes around.

Love,

EquityZen

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Retail 2.0: Digital Native Brands Take on Tradition

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Kartik Ram   December 21, 2017

As we approach the end of December, the holiday season is in full effect. While retailers prepare for their busiest time of the year, we take a look at what the wave of innovation and tech in the retail space means for both the firms competing in it and the consumers the space serves.

We’ve tapped friend of EquityZen, and FashionFund Managing Director, Kartik Ram, to dive a bit deeper into Digital Native Brands (DNBs) and the rapidly growing reach of e-commerce.

Consumers have more choices in affordable luxury than the standard fare that malls and boutiques serve up. Today, the world’s leading retailers are all online. The long-tail playbook has won. But the fastest-growing digital brands aren’t following it. Most such companies focus on selling only a handful of different products, and many started out with just one. Casper began by selling the single, killer product, namely, the “perfect bed.” Bonobos started with a single pair of men’s pants. Allbirds made its mark with a distinct wool pair of minimalist shoes. This new generation of disruptive brands is not only a consumer phenomenon but also threatening to shake up retail.


Digital native brands are comprised of direct-to-consumer e-commerce companies that build, market, and ship their products without middlemen. They’ve built a dominant presence in Google’s search results, turned their Instagram followers into micro-influencers, and used highly-targeted Facebook ads to grow their audiences. Such brands are able to manufacture and ship their products at much lower costs than traditional consumer brands because they own all of their customers’ data and maintain end-to-end control over the making, marketing, and distribution of products.

Digital storytelling is the holy grail of this revolution

Savvy brands use content marketing to create scarcity and influence far before they take on Main Street. Their success is often a factor of algorithms combined with great customer experiences. The biggest winner in this democratization of retail is the consumer, who can now choose brands, ranging from detergent to sneakers, hence altering their perception of quality, price, and performance.
Digital native brands like Casper, Warby Parker, Allbirds, Indochino, and Stitch Fix have cleverly used content marketing to grow fast and connect directly with their customers.

Unlike their traditional retail competitors, these brands have created explosive growth with innovative distribution models, from shipping directly to consumers, to clever merchandising, to opening pop-up shops. They haven’t relied on traditional retail stores for exposure. Rather, these well-funded startups have created worthy competition for some of retail’s biggest brands by launching their own simpler, better-priced alternative. They’ve competed more efficiently by rethinking not just the product, but also the retail model.

Amazon still looms largest of all

However, no e-commerce company stands taller than Amazon. Practically every e-commerce company must factor Amazon into their growth strategy. In doing so, some digital native brands have even leveraged Amazon for distribution of their products or carved out niches away from its marketplace. Amazon Launchpad offers several digital native startups the opportunity to build their presence using content-rich, “A+ pages”. Hardware brands like Ring, Eero, and Boosted Board have masterfully bolstered their sales, brand, and influence using Amazon Launchpad for its scale and clout.




In conclusion, digital native startups have made it big by remaining acutely focused on fulfilling customers and providing a satisfying user experience rather than opening stores. These companies have set themselves apart — in design, how they launch, the customer experience they build, and how they market themselves — and found that “facts tell and stories sell.”

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Kartik Ram is the New York-based Managing Director of Fashion Fund, a next generation venture capitalist at the intersection of retail, technology and finance.

Credits: Amazon Launchpad; CB Insights
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