By Harnessing Israeliness, WeWork Joins the Ranks of Uber, Airbnb

Company founder and CEO Adam Neumann says his kibbutz childhood and Israeli army service molded WeWork, nicknamed 'Kibbutz 2.0' and valued at $20 billion. It's a mission, not just a business, he explains

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Adam Neumann. According to the Forbes rankings in February, his assets are estimated at $2.4 billion.
Adam Neumann. According to the Forbes rankings in February, his assets are estimated at $2.4 billion.Credit: Ron Kedman
Inbal Orpaz
Inbal Orpaz
Inbal Orpaz
Inbal Orpaz

“We are here in order to change the world. Nothing less than that interests me.” This, in short, is the ambition of Adam Neumann, the Israeli founder of WeWork, with regard to the company he established six years ago, and which now has a valuation of about $20 billion. “There are simpler ways to make money. It’s possible to buy and sell real estate, for example. It isn’t necessary to raise a lot of money for that and to invest as much as we have invested,” he tells Haaretz.

'As a child who lived in a lot of places, one of the hardest things for me was to join a new community. It was hardest at the kibbutz, but that was also one of the most impressive communities.'

The WeWork concept is already familiar: The company leases real estate spaces, renovates them, furnishes and upgrades them – and rents them out to its clients, who are then defined as “community members.” Members rent the spaces on a monthly basis and can enlarge or reduce the size of those spaces as their needs change. They do not have to worry about furniture, communications or electrical infrastructure, cleaning services or kitchenette management – all of these are part of the service.

In the first stage of WeWork, this model served for the development of office buildings around the world, but last year WeWork began testing the area of residential properties with the opening of its first two apartment buildings, in New York and Washington.

WeWork is one of a group of companies that have emerged in recent years in the private market and that have reached valuations of billions of dollars; others include Uber and Airbnb. The success of WeWork has brought Neumann, 37, into the exclusive club of Israeli billionaires. The past February, Forbes estimated the value of his personal assets at $2.4 billion.

A terrace at WeWork Kinzie, Chicago. Credit: WeWork

The company opened its first building in February 2010 in Manhattan’s Soho district in New York, with 300 square meters (3,230 square feet), one employee and 30 community members. Today it leases more than 8 million square feet in more than 155 buildings, in 49 cities on five continents. It has more than 2,000 employees, and a “community” of more than 120,000 members.

In New York, the Neumann siblings decided to compete with each other, to see how many neighbors each could befriend in the elevator. His sister, the model Adi Neumann, won.

The Adam Neumann saga begins in Be’er Sheva, the “capital” of the Negev, where his parents were in their fifth year of studies at what became the first graduating class of Ben-Gurion University medical school. He did not remain in the southern city for long: At the age of 9, after his parents divorced, he moved with his mother – an oncologist – and his siblings to Indianapolis. By the time he arrived in New York, as a post-army adult, he had lived in 13 different places during his childhood and adolescence.

A visitor to the WeLive building is struck by the sense that the experience it offers to tenants is a kind of retirement home for the children of Generation Y, the “millennials”.

When they returned from the U.S., in 1990, says Neumann, “it was important to my mother that we do something special, and that’s how we came to be at Kibbutz Nir Am. She worked as a doctor in the oncology department at Soroka hospital,” referring to the medical center in Be’er Sheva, “and I went to the Sha’ar Hanegev school” – which is located in nearby Sderot, in the northwestern Negev, near the Gaza Strip.

Later, Neumann’s path wound through Havatzelet Hasharon and Kfar Saba, where he went to high school. One of his classmates there, Zvika Shahar, manages the operations in the company’s largest market – WeWork’s 35 buildings in New York.

Neumann. Sometimes he calls WeWork 'Kibbutz 2.0.' Credit: Ron Kedmi

Kibbutz 2.0

“As a child who lived in a lot of places, one of the hardest things for me was to join a new community. It was hardest at the kibbutz, but that was also one of the most impressive communities. I remember how much fun it was to be a child in the kibbutz,” says Neumann, noting that sometimes he calls WeWork “Kibbutz 2.0.” Neumann’s partner in establishing the company grew up in a commune as well. Perhaps it was not by chance that the two got together to establish a business based on shared values.

“We are making a capitalist kibbutz,” added Neumann, qualifying the metaphor. “I remember from my childhood that not everyone worked the same number of hours.”

Neumann’s military service was in the Israel Navy. “I learned a lot in the naval officers’ course. It gave me a lot. I wish someone had told me that those would be among the five best years of my life; instead of complaining I would have enjoyed myself, because that’s where I got to know a lot of my best friends,” he says. One of them, Ariel Tiger, is now the CFO of WeWork. and one of the company’s top executives.

“When I finished the army, I felt that there weren’t a lot of things I couldn’t do. After I arrived in the United States I realized that in the army Israelis learn how to be part of something bigger than themselves. The things I had experienced in my life all came together.” In our life we had a lot of movement and a lot of new things, so I feel sorry for someone who is having a bit of a hard time because I know what it’s like to be new,” says Neumann.

WeWork in South Bank, London. A real estate or a technology company?Credit: WeWork

Neumann says that this is part of why he sees an advantage to hiring other Israelis. “There are Israeli qualities that are hard to teach. Someone who has served in the army has given of himself to the country, and will also know how to give of himself to the company.”

After his return to civilian life, Neumann joined his sister, model Adi Neumann, in New York. Adi, who to this day is more of a household name among Israelis than he is, had moved there at the age of 16, and the family encouraged Adam to “look into what’s happening with Adi” after the army.

Meeting in WeWork at 401 Park Avenue South, New York.Credit: WeWork

“During my military service, the family said: ‘Maybe when you finish the army you will look into what’s happening with Adi.’ He recalls how he shared his sister’s apartment. “We rode up and down in the elevator between floors in that building – and none of the tenants ever spoke to one another. Adi said it’s not that they don’t want to, but it’s not done, and that I didn’t understand the Americans. In Israel you go to your neighbor and knock on his door when you need something. As Israelis, we don’t appreciate how special that warmth is.”

'During my military service, the family said: ‘Maybe when you finish the army you will look into what’s happening with Adi.’ He recalls how he shared his sister’s apartment.

Thus ensued a competition between the Neumann siblings, to see how many neighbors each could befriend in the elevator over the course of a month, with the test being that they could knock on that neighbor’s door to borrow a cup of sugar. “Within a month Adi got 12 and I got only three – but that’s because she is Adi. One day we went and knocked on all the doors in the building. We drank a lot of coffee, but from that day on, the whole building was connected. There wasn’t Facebook, so they started to post notes in the building and give gifts to neighbors who moved.”

It was during that period, while taking a course in entrepreneurship at Baruch College in New York, that Neumann presented an early vision of WeWork, inspired by the elevator game he had played with his sister. He did not make it even to the second round (of five) in the competition, because the lecturer did not believe in the business plan for the idea.

“It’s very dangerous for teachers to tell students what is possible and what’s not,” says Neumann. “This is something else we learn in Israel – it doesn’t matter what they tell you.”

Before WeWork, Neumann started five other businesses that didn’t succeed, in areas including baby clothes, women’s shoes and deliveries.

In its first incarnation, before the financial crisis of 2008, WeWork was established by Neumann and Miguel McKelvey as a startup called Green Desk. They were joined by Joshua Guttman, who owned a property that was standing unused in Brooklyn.

“We saw the idea worked – the idea of being a community. We went to Guttman and we told him we wanted something bigger,” recalls Neumann. “Green Desk , which was a brand without a trust and without anything, opened in May of 2008 – when the whole world crashed. All that we needed to fill the place was seven posts on Craigslist. Everyone who had been fired from their jobs came to work at Green Desk, everyone who didn’t want to be at home because they were depressed.”

Adam Neumann: 'The millennials are a group of 1.2 billion people aged 20 to 35 – it is a limited group. The 'We generation' is a much larger group.'

With the money they made from selling their share in the joint venture –$300,000 – they rented the first WeWork space in Soho in 2010. – 300 square meters (3230 square feet), used by 30 people.

WeWorks chief brand director is Neumann’s wife, Rebekah Paltrow Neumann. She is also a cousin of actress and lifestyle guru Gwyneth Paltrow. 

Retirement home for millennials

After having become the standard in the world of shared office space, WeWork recently took its initial steps in the residential field. Last year the company opened its first apartment building in New York, under the brand name “WeLive.” The concept is very much the same: of a community in the residential market continues the company’s approach in the office space market – rentals are renewed from month to month, and tenants can leave on short notice. Apartments come fully furnished – with not only all the necessary furniture (beds, sofas, closets, television and more), but also small, useful items like kitchenware and cutlery, bed linens and even decorative bowls for the coffee table. The payment includes a monthly cleaning of the apartment, with additional cleanings available at $50 each. None of these, however, is what make WeLive apartments unique, they can also be found in other furnished apartments in New York. What is unique is the building design, which places special emphasis on the provision of shared spaces that encourage interactions between tenants.

A visitor to the WeLive building is struck by the sense that the experience it offers to tenants is a kind of retirement home for the children of Generation Y, the “millennials,” born between 1980 and 2000. Residents have everything taken care of, they have flexibility and they get an experience they won’t find elsewhere. This, perhaps, is the formula for success that WeWork cracked, and it earns the company a high price from investors, many of whom still don’t know how to deal with this generation. The company has successfully figured out the kinds of products that interest the younger generation – people characterized by not being property owners themselves and whose standard of living has declined relative to that of their parents.

Neumann prefers to refer to them as the “We generation.” “The millennials are a group of 1.2 billion people aged 20 to 35 – it is a limited group. The We generation is a much larger group – everyone who understands that they are part of something larger than themselves, who are prepared to relate to others in a certain way, who are part of the sharing economy – which means that I can be without ownership of anything and have access to everything.”

WeWorks Chief Brand Director, Rebekah Paltrow Neumann. She also is a filmmaker, studied yoga and introduced Neumann to the world of Kabbalah. Credit: Lauren Kallen/WeWork

The average age of community members is 30-plus, nearly half are married or parents of children, and more than half are men. As for professional background, they come from a variety of worlds, such as financial services, public relations, travel and softward application development. “Millennials understand that very often in life, intention and meaningfulness are more important than material things. When you realize that, everything changes.”

A Paltrow spouse

WeWorks chief brand director is Neumann’s wife, Rebekah Paltrow Neumann, who was part of the company from its inception. She also is a filmmaker, studied yoga and she introduced Neumann to the world of kabbala. (She is also a cousin of actress and lifestyle guru Gwyneth Paltrow.)

Gwyneth Paltrow.Credit: Thibault Camus/AP

'When I finished the army, I felt that there weren’t a lot of things I couldn’t do. After I arrived in the United States I realized that in the army Israelis learn how to be part of something bigger than themselves.'

“When people ask me what is the most important, best advice I can give someone who is 22 years old, I say that the most important choice in life is your life partner,” he says, “finding someone who will push you to be the best version of yourself. The right partnership is one in which one side pushes the other ahead. This is a relationship.”

The couple has four children, all of them under the age of five. “Rebekah does a lot of things in the company and also runs the home,” says Neumann. “When I met her I was a big talker, and I was chasing after money, I wasn’t healthy and I smoked. One of the things she taught me is that I was chasing after the wrong thing. Success is a happy person, who knows how to give and to take and to be part of something bigger than himself. Success is not how much money you have. I know an awful lot of people with an awful lot of money, And they are sad. Depressed. Sick. They have defined success as how much they have. I don’t buy it that people want to be alone. It is very important to me to teach the world to treat others as you would like them to treat you, so that we will have a better community.”

Though Neumann has been living in New York since he was in his early 20s, he maintains a strong connection to Israel. Until now, however, he has never given an interview to a media outlet in Israel. “We don’t talk just for the sake of talking,” he explains. “In Israel, there hasn’t yet been anything exactly to say and we wanted to see that we aren’t just gabbing. We didn’t want to start from an assumption that we understand everything. We opened in New York and it has succeeded. But this doesn’t mean that every other place – London, Shanghai, Berlin, Seoul, Sydney, Hong Kong, Mexico City – are like New York. We’ve learned what works in each place and we have adapted the business. The concept is global, the management local.”

Israeli dominance

The WeWork “community” in Israel consists of more than 2,000 members in six buildings – four in Tel Aviv, one in Be’er Sheva and one in Herzliya. By the beginning of 2018, the company is planning to open an additional site in Tel Aviv, plus new locations in Haifa and Jerusalem. The connection between WeWork and Israel is strong – not only as a market where the company operates but also in the presence of Israelis at the decision-making centers in the growing company.

WeWork’s Israel properties have 100 percent occupancy, with many of the clients startups in their earliest stages, who are using WeWork as a solution before they rent independent office space. In conversations, many of these entrepreneurs note that this solution is suitable only for small companies, and that once a company reaches a certain number of employees, it becomes more economical to rent an office. A major expense that is not economical as compared to the alternative of renting an office – This claim strengthens the suspicion concerning what would happen to WeWork in a scenario of a decline in the real estate market.

“Most businesses don’t understand real estate,” says Neumann in response. “Businesses often outsource for things like IT, cleaning and other services, so that it can focus on what it does. Even large companies, when they rent space, they sign a contract for 10 years and bring in a designer who does renovations and construction. This will cost twice as much as you think it will, though, and take twice as long. By the time you are done building, if the company is fast-growing, you already don’t have enough space. And what if a company needs to fire 100 employees? What do you do with all the space? We relieve the company of having to spend the energy and time it would waste on building. Ultimately, with us, they are saving money.”

The Israeli influence in WeWork is manifested mainly on the company’s technological side: Roee Adler was one of the top people at the Soluto startup, before joining WeWork as head of digital, responsible for the development of technologies. for both the company and its clients. On Freund, the VP for engineering, recently moved from the company’s headquarters in New York to Israel. Last year, the company opened a development center in Tel Aviv headed by Ron Gura, who was the founder and CEO of the Gifts Project and, after the sale to eBay of that company specializing in group gifting, ran the latter’s global innovation center in Tel Aviv.

“The research and development center in Israel is one of the leaders in the company. “When WeWork advertises for a position in our research and development center,” says Neumann, “we can have 900 CVs coming in within a few hours. In Israel, if you are very talented and we don’t have an open job at the moment, we will find a position for you. In the United States that doesn’t happen.” Neumann says it’s WeWork’s Israel office that is working on development of billing systems, systems to attract new members, and a new product that is projected to become one of the company’s biggest products. The firm also trains community managers in Israel.

Adler explains that the technologies developed in-house are used to improve efficiency in its stock management, planning and building maintenance. A principal object is to ensure that at any given time, the spaces in the company’s properties are rented out. In addition, as part of the creation of the sense of community, WeWork provides digital tools for connecting community members.

Neumann also sees potential for WeLive in Israel. “We are also working on WeLive in Israel,” Neumann reveals. “We have to solve the problem of where to live. If you solve that, more people will come.” According to him, at the moment there isa legal obstacle blocking the development of a project of this sort. The company says its local properties are needs to adapt the buildings in Israel to one of its existing goals – office space, a residential building or a hotel.

However, according to WeWork, its buildings are not suited to being defined as residential, and that for that to happen, and in order to make it possible to implement their plans they will have to convert buildings already defined as hotels. “We need help from the government and the municipalities in order to do this. In India they wanted us, so the prime minister invited us for a meeting, and the same happened with Michael Bloomberg in New York, and Rahm Emanuel in Chicago.”

A real estate or a technology company?

One of the most controversial issues surround WeWork is how a company whose main activity is renting out office space has arrived at a valuation of $20 billion, according to multipliers typical of valuations of technology companies and high profit margins. While risk capital investors and financial investors have embraced WeWork as a technology company and in the past year alone have sent hundreds of millions of dollars into its coffers, to the outside observer this may not be so obvious.

“We are not a real estate company. We are not connected to real estate. We are a community company,” says Neumann in response. “We are a part of the sharing economy, part of a group of companies that are not car or hospitality or technology companies. This is a new category – a sharing economy. We look at this as a community company. All those companies are still private. We are going to define a new world in which it is possible to be owners of nothing and have access to everything.”

One objection to WeWork’s valuation says that the company is liable to lose clients when the next financial crisis erupts – the clients will no longer be able to pay for premium offices and will reduce the size of the areas they are renting from it. The concern is that the company, which itself rents buildings for five to 10 years, and then sublets the spaces in them to secondary tenants, will be left with empty spaces. “Anyone who says that just doesn’t understand how this works,” says Neumann. “We aren’t giving an answer to this. It’s one of our professional secrets. You have to understand how the contracts are built.”

While leaving a cloud of mystery hovering over the issue, Neumann boasts that, “Our investors are the biggest investors in the world and include Fidelity, which manages more than $2 trillion, the Harvard Endowment, which has made a direct investment in the company, the Benchmark venture capital firm, J.P Morgan and Wellington Management. These are the investors that buy the largest number of stock issues in the world, and cumulatively they have invested about $1.5 billion in us. You can be sure that they have asked that question, have looked into our history and have answered it.”

The coming years, and economic conditions in the markets, will determine how the future of WeWork will look – whether this will be a bubble company that was just overvalued, or a firm that really has succeeded in making a paradigm change. To help further stress its emphasis on community, WeWork has also recently launched what it calls the WeWork Creator Awards. The program offers monetary grants totalling over $20 million, with the goal of empowering individuals and organizations worldwide that are making a difference in their respective communities. The program is open to WeWork members and non-members alike and registration for the local Creator Awards is now open.

Another asset that WeWork will be able to leverage in the future is its access to small businesses around the world. Currently, a significant portion of community members are small businesses, including designers, accountants and other service providers. WeWork puts these companies together and enables them, for example, to purchase medical insurance on easy terms. In the future, and as the number of businesses it has as clients increases, WeWork will be able to become an access point for organizations that are interested in distributing their products to an audience of small businesses. In the meantime, the critics of WeWork will continue to wonder why it’s a startup and not a real estate company.

If WeWork realizes Neumann’s vision, in the near future it will become an operating system for the life of the younger generation. “In another three to five years, you’ll be able to ask someone age 23 to 25, who, say, studied graphic design at Bezalel, what it is to be a member of a WeWork community,” he says, “and he will say: As part of a WeWork community – I have hotels, homes and offices all over the world. I am part of the community and I use it to be everywhere. Two months in Tel Aviv, two months in New York, another period in London, Mumbai and Shanghai. In the last two months of the year I take a break, and go traveling with friends I have met during the past year.”

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