WeWork, a startup that leases trendy, millennial-friendly office space to startups and Fortune 500 companies, just became the sixth most valuable startup in the world.
It’s been raining money all year long at WeWork. The company has raised over $US8 billion in funding to date — with $US4.4 billion flowing in since July — at a $US20 billion valuation. It’s the third biggest startup by valuation in the US after Uber and Airbnb, and the largest in New York City.
Take a look at how an architect and a serial entrepreneur set out on a mission to reinvent the office and, in the process, built a global brand that’s worth $US20 billion.
Neumann came to New York City in 2001, fresh off his service in the Israeli military. He started a company called Krawlers, which sold clothes with padded knees for crawling babies.
'We were working in the same building as my co-founder Miguel McKelvey, a lead architect at a small firm,' Neumann told Business Insider's Maya Kosoff in 2015.
'At the time, I was misguided and putting my energy into all the wrong places,' he added.
Neumann also had an interest in real-estate. While working in the gentrifying neighbourhood of Dumbo, he fell in love with a vacant warehouse on Water Street.
In an interview with Fast Company, Neumann recalled approaching the landlord and asking for the building. The landlord said, 'You're in baby clothes. What do you know about real estate?'
Neumann shot right back: 'Your building is empty. What do you know about real estate?'
He and his new friend McKelvey struck a deal to start a real-estate business there: Green Desk.
In 2008, Green Desk became an early incarnation of WeWork. The company offered sustainable co-working spaces featuring recycled furniture, free-trade coffee, and green office supplies.
Customers, called 'members,' could rent a desk or a private office month to month. Neumann and McKelvey made money by charging more for those spaces than their lease payments.
Green Desk offered most things individuals and small companies needed: fully furnished offices, conference rooms, high-speed internet access, utilities, printing, and a stocked kitchen.
Something clicked for Neumann and McKelvey. They saw that it was the focus on community, not sustainability, that drove people to Green Desk. In 2010, they sold their stake and began WeWork.
Neumann and McKelvey had only $US300,000 between them, low credit scores, and no building. Still, they convinced a landlord to rent them one floor of a building on a trial basis.
The first WeWork location was just 3,000 square feet in a tenement-style building in SoHo. It had creaky floorboards and exposed brick, which the founders power-washed clean.
Early on, Neumann and McKelvey imagined office rentals as part of an ecosystem, complete with apartments, gyms, and even barber shops, that served the concept of a communal life.
'It was always thought of, 'How can we support this person who wants to live more collectively, live lighter -- who wants to have less stuff, who wants to pursue their passion, pursue a life of meaning, rather than looking for just material success?'' McKelvey told Business Insider.
They used their flagship in Soho (which turned a profit one month after launch) to host developers and investors and grow the WeWork brand.
WeWork opened four more locations in the next two years. It caught the attention of Benchmark, a top venture capital firm that made early bets onBay, Twitter and Uber.
Benchmark led a Series A funding round of $US17 million, pushing WeWork further into growth mode. WeWork shot up to 1.5 million square feet of space and 10,000 members by 2014.
As even more venture funding flowed in, the number of WeWork locations exploded. Today, the company has more than 120,000 members in 164 offices spread across 17 countries.
Most WeWork locations have a similar layout, but no two look exactly alike. WeWork Old Street in London features bare concrete and graffiti art that give it a fun, industrial feel.
WeWork Sony Center in Berlin's Potsdamer Platz does away with the quirky wallpapers often found in WeWork locations and opts for glass walls with sweeping city views.
WeWork has been criticised since the company doesn't own any actual real-estate assets and relies on the health of the startups who occupy those properties.
In an effort to diversity its revenue streams, WeWork got into residential real estate in 2016. WeLive provides fully furnished micro-apartments. People can join these communities and instantly tap into amenities like free internet, maid service, and new friends.
To protect against a collapse in the startup world, WeWork started building offices for big companies like Amazon, Microsoft, and IBM this year, in cities where they have fewer employees.
'In the big picture, we see WeLive as a huge opportunity, as big as WeWork, for sure,' McKelvey told Business Insider for a story about co-living earlier this year. 'I think we're lucky to have a good foundation in place where people trust us and are interested in the product.'
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