- Airbnb CEO Brian Chesky recently discussed some takeaways from the failure of WeWork’s planned initial public offering.
- Speaking last week at The New York Times’ DealBook Conference, Chesky, who plans to take his home-rental platform public next year, highlighted WeWork’s slim gross margins and suggested its cofounder Adam Neumann wasn’t ready for all the attention and responsibility.
- “We’re all realising we have a significant amount more responsibility,” Chesky said. “It’s a growing-up experience for a lot of founders.”
- Read more of Business Insider’s WeWork coverage here.
Airbnb’s CEO and cofounder, Brian Chesky, who is preparing to take his startup public, recently discussed some takeaways from WeWork’s failed initial public offering, mainly involving the company’s slim gross margins and its cofounder and former CEO, Adam Neumann.
“Tech companies live on a continuum,” Chesky said last week at The New York Times’ DealBook Conference, implicitly distancing his home-rental platform from the embattled coworking startup.
Chesky’s comments came with his own firm preparing for a public listing next year.
“The best way to understand the continuum is your gross margins, or, what is your gross profit,” he added. “Microsoft and these really big tech companies have really high margins and other companies really low margins. And I think that’s the first lesson of WeWork.”
Microsoft’s gross margin was 69% last year, dwarfing WeWork’s approximate gross margin of 19.7% in the first six months of this year. Airbnb’s gross margin was 67% in the first quarter, according to The Information.
On the other hand, Apple’s gross margin of 38% last year was just over half of Microsoft’s, yet the iPhone maker ranks among the world’s most profitable companies with over $US55 billion in net income last year.
‘Imagine everything you do will be on the cover of The New York Times’
Neumann, who reportedly made millions by leasing properties to WeWork, charged his company nearly $US6 million to use the “We” trademark and cashed out $US700 million by selling and borrowing against company stock ahead of its IPO, may well have been unprepared for the intense attention he ultimately received.
“You have to be really thoughtful about the actions you have,” Chesky said. “I think that young founders sometimes forget that they are going to one day have a huge amount of scrutiny.”
“I used to get advice from somebody: ‘Imagine everything you do will be on the cover of The New York Times,’ because one day it very well could be,” he added.
Neumann has come under fire over the way the company spent its cash – WeWork reportedly flew 8,000 employees to London last year for a retreat. He’s also been criticised for his management style: He once followed a discussion of cost-saving layoffs with a round of tequila shots for employees, and after being ousted as CEO in September he has reportedly secured a $US1.7 billion exit package for himself as SoftBank prepares to fire thousands of WeWork workers.
“It’s also easy to underestimate the amount of responsibility we have,” Chesky said. “Most people never intend to have as much responsibility. You have an idea. You build something. You launch it, then one day you have all this adulation.”
“We’re all realising we have a significant amount more responsibility,” he added. “It’s a growing-up experience for a lot of founders.”
Given the similarities between WeWork and Airbnb, it’s unsurprising Chesky tried to draw a distinction.
WeWork’s operating losses more than doubled to $US1.4 billion in the first half of 2019; Airbnb’s operating losses also more than doubled, to $US306 million, in the first quarter of this year, The Information reported.
WeWork secured a valuation of $US47 billion in January, only to see that fall below $US5 billion at the end of September, shortly before it struck a $US9.5 billion rescue deal with SoftBank that gives ownership to the Japanese conglomerate. Airbnb raised funds at a $US31 billion valuation last year, and investors are valuing it as high as $US42 billion, according to the Financial Times.
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