New York-based co-working startup WeWork has obtained funding of US$ 1.1B from its majority owner SoftBank Group in August 2020. The funding comes after the startup had cut down its cash burn rate by almost half from the end of 2019. Although its second-quarter results showed the effects of the COVID-19 pandemic on its business, WeWork claims their financial position remains sound.

WeWork is an American commercial real-estate startup that provides shared workplaces for technology startups and services for other businesses and was founded in 2010 by Adam Neumann, Rebekah Neumann and Miguel McKelvey. As of 2018, WeWork managed over 4 million square meters of shared workstations. Its parent company is The We Company.

In January 2019, the startup’s valuation was reported to be US$ 47B. Following escalating pressure from investors based on revelations, WeWork had made in its S-1 filing in preparation for a stock market listing (IPO), company co-founder Adam Neumann had to resign from his position as CEO and give up his widely-owned voting control in WeWork.

Amidst rising investor concerns over its corporate governance, valuation and outlook for the business, WeWork also officially withdrew its S-1 filing and declared the postponing of its IPO. During that period, the stated public valuation of the company was around US$ 10B, less than the US$ 12.8B it had raised since 2010. Neumann obtained around US$ 1.7B from stakeholder SoftBank in October 2019 for resigning from WeWork’s board and cutting most of his ties from the company. He was taken back in the startup as a consultant with an annual salary of US$ 46M. Various renowned sources called the company’s failed effort to go public and the resultant chaos, “a disintegration unlike any other in the history of start-ups”, which it credited to Neumann’s tenure and the apparently ‘easy’ money initially provided to him by the SoftBank Group.

The startup had generated US$ 882M in proceeds for Q2 2020, a 9% jump compared to its results a year ago. In Q1 2020, WeWork stated revenue of US$ 1.1B, while its cash burn stood at US$ 482M.

It also had to layoff many of its employees across the world pertaining to huge financial losses and the slow-down of its business due to the COVID-19 pandemic. WeWork ended Q2 with 612K members, down from a figure of 693K in Q1. Over 48% of its members are either business customers or companies with 500 or more employees.

SoftBank’s recent US$ 1.1B commitment is the last among various debt facilities it announced for WeWork in October 2019. Apparently, at that time the Japanese corporation was under negotiations to fund WeWork with almost US$ 4B – US$ 5B for a 70% stake in it, since the co-working firm’s failed attempt to go public.

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Aishwarya writes about the startup ecosystem on VCBay. She is a third-year Computer Science engineering student who looks forward to exploring the world of startups and finance.

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