Less than a year ago, WeWork was a superstar of the startup world, a rapidly growing coworking company with a mission to “elevate the world’s consciousness” and a gargantuan $47 billion valuation.
But in the past few months, the company has devolved into chaos as it canceled its IPO, pushed out its founder, and narrowly avoided bankruptcy with a rescue funding package from its largest investor, SoftBank, which took control of 80 percent of the company.
In an exclusive recording obtained by Recode, on Wednesday the company’s new executive chairman, Marcelo Claure, SoftBank’s COO and the former CEO of Sprint, addressed WeWork’s worried staff in his first all-hands meeting. He confirmed reported layoffs but he declined to give details about how many jobs, or which ones, will be cut. He did promise that the people who leave will do so “with dignity,” and that the ones who stay will have to work hard to help the company make a historical comeback.
“It’s not going to be easy, it’s going to be bumpy roads,” said Claure. “This was a race that we were winning and then suddenly, it’s like we’ve lost momentum, and it’s hard to regain that momentum. We gotta regain the trust of those corporate customers who are going to think twice: ‘Do you really have the financial means?’ We gotta make sure that our employees understand that we are never going to go through the existential crisis we just went through.”
Claure went on to answer tough questions from employees about things like why the company founder and former CEO Adam Neumann exited the firm with $1.7 billion while many employees are facing job insecurity and company equity that isn’t worth much.
This transcript has been lightly edited for clarity.
Miguel McKelvey, WeWork co-founder and chief culture officer
I think I’ve run out of the words to describe what’s been going on, from surreal to crazy to unbelievable to — someone texted me yesterday — “bonkers,” which all of those things are true and yet the reality is is that we’re still here and we’re still here together. I just want to remind all of us that we came here to do something meaningful in the world. While this may have been the craziest thing we’ve been through, we’re not a company that hasn’t been through crazy things before. For everyone who’s been around here for a while, we’ve all experienced things that were challenging for us personally, that were challenging for us as teams, that were challenging for us as a company to get through, and we’ve proven to be extraordinarily resilient. We’ve always come back, no matter what we’ve been through.
The reality is, from the very beginning, we came back every month when we had to deliver a building on the first and we all went through the personal crisis of, “Can we handle it? Can we make it through another building opening?’ all the way up through now to we’re experts in that and we can execute that around the world. We’ve been built on resilience. I think the way we have that resilience is because we believe in each other. We believe in our mission. We believe in what we came here to do. I think what we have today is an incredible vote of confidence in both that mission, as well as in all of us, in all of the work that we’ve done so far to get here, as well as in all of the future work that we need to do.
I just want to say with great gratitude, thank you to all of you, but also to our new partners in SoftBank. Incredible gratitude to them for believing in all of us. Every one of you should understand this investment as a belief in you, as a belief that the people that are investing in us as a company are putting their money behind all of you and the belief that we can do something good in the world.
Now that said, there’s going to be some very difficult times ahead for all of us. It’s not going to be easy. We’re going to go through tough times. Just like I would say always, we’re going to get through it together. If we share positivity, if we approach this with humanity and we look out for each other, then we’re definitely going to make it through it and we’re going to come out on the other side stronger than we’ve ever been.
Thank you to all of you. Thank you to you guys up here on the stage who have been working hard to make this happen. It’s truly humbling to see the effort that people have made in the past month. Like I said, I think we’re on ... Today is a new day. We have as clean a slate as we can get. Now it’s time to move forward and let go of things that have happened and bring that energy back, bring that magic back.
I just want to say, just getting to know Marcelo in the time that we’ve spent together, I had some trepidation: I don’t know who this guy is, but I got a chance to meet him and just spend time with them. He’s a person who you automatically ... I automatically had respect for. I automatically connected with him. He felt like someone ... who was open, who listened. I give him a lot of credit for the way he’s approached things so far. I think all of us, I think that we’re all going to learn to both appreciate Marcelo and the rest of the team, SoftBank team, who is joining and supporting us. I think they’ve been through this kind of stuff before. They have experience, they have expertise and they’re all here. They’re all in on this. With that, again, thank you so much. I’d like to introduce Marcelo.
Marcelo Claure
Today is a ... I would call this a historic day, on two fronts. One is, I’ve never been introduced by somebody that’s taller than me. (audience laughs) That was like, that’s good. It makes you humble. Then secondly, for all of you, this is truly a historic day for one very basic reason. We have guaranteed the future of WeWork, but more importantly is we’re putting the future back into our hands. There’s no more days needed to go fundraising. There’s no more days needed to go prove to the investor community that we’re a viable company. The size of the commitment that SoftBank has made to this company in the past and now is $18.5 billion. To put the things in context, that is bigger than the GDP of my country where I came from. That’s a country where there’s 11 million people.
This is probably the largest bet ever made. That’s because we believe in the mission of this company. We believe in the management team, and more importantly, we believe that we’re on the verge of doing something unique, disruptive. I could not be more excited of being part of a company that is transforming the way people work. Those are easier words to say if you haven’t experienced it.
My last job, I was the CEO of Sprint. I met with some folks at WeWork. They convinced me to basically take over my entire corporate headquarters. I think that was a real first Powered by We experiment. I’ve experienced it myself. Sprint was a 120-year-old company, tens of thousands of employees. When you walk through the corridors, those tall cubicles, people didn’t talk to each other, people didn’t communicate. When we brought them to an open and collaborative space, the magic started to happen. When people used to tell me about the WeWork magic, it was hard to explain it, but once you live it and you understand it ... So I am a true believer in the brand, and ... I love the experience because I’ve experienced it myself.
Today, being here today was interesting. I decided yesterday, I said, hey, we finished negotiating this deal and we’re going to talk about ... or you can ask all the tough questions that you want. I think we finalized signing the papers, I was leaving the hotel at 7:45 pm. I came here at eight. I met with Sebastian, I said, “I want to do a town hall with all the employees. “All my ... Where’s my SoftBank head of communications? He’s right there. He’s a little more conservative. He says, “You’re out of your mind. People are pissed off, people are confused. You should not show up.” Somebody else told me, “Wait till the layoffs are done and then come in.” That’s not my style. My style is I want to be frontal, open. I believe that we’ve got to be very honest with each other. Here I am, against every recommendation, and I want to make sure that we have a very honest Q&A and we can talk to each other. Thank you.
I’ll give you two minutes about me. I come from a country, from a tiny, small country, Bolivia. I’m one of those stories of something that’s not supposed to happen. I started my life in soccer. I was part of a team, of our Bolivian national team, not playing, but part of the management that took Bolivia to the World Cup. To put things in perspective, Bolivia to the World Cup is like a middle school team winning the World Cup. It’s not supposed to happen. It’s like the high school NBA winning the World Series, never happened. It only happened once. That was the life learning experience for me because it taught me that everything is possible if you have a clear goal and if you have clear plans. That, basically, I will say made me who I am today.
I started my first business. I went to a cellphone store to buy a cellphone, ended up buying the store on credit, grew it to be the largest retailer of mobile phones in the Northeast, expanded like crazy, changed the business model, started a distribution company from the back of my car, grew it to be the world’s largest distribution company, the world’s largest supply chain company in the wireless industry. It reminds me so much to WeWork. We expanded to 70 countries. We grew from zero to $10 billion. We were profitable. We always kept that in mind. Cash is king (audience laughs), quite important.
Then, I was sitting in a trade show in Barcelona and I had a Japanese guy sitting next to me and I told him my story. He told me, “You have to meet this guy called Masa. You and Masa are going to get along good.” I had no clue who Masa was. I googled Masa, and for those of you who haven’t googled Masa, he’s quite a character, one of the most successful entrepreneurs, and I would say the largest visionary in the world. We met, he immediately understood what I did in terms of buying used phones, used Apple phones and so on. He asked me, “How long did it take you to implement in Verizon?” I told him it took me nine months. He says, “Can you do it in three days in Japan?” Flew a team of engineers, translated a software, we were live in 5,000 shops. He says, “You can execute. Great.”
Started working, a few months later I hear back from Masa. He bought Sprint. He was trying to merge it with T-Mobile. He got a call from the government that said, “We love you, Masa, but it ain’t happening.” I remember they said, “It is DOA.” Then Masa looked at me and said, “What’s DOA?” I said, “Dead on arrival.” He says, “Oh my God, we’re toasted.” He looks at me and he says, “What should we do?” I said, “First thing we should do is we replace the CEO. He’s not the right leader.” He looked at me and said, “That’s great. Do you want to be the CEO of Sprint?” I said, “There’s probably a million people that are more qualified than me.” I said, “I have my own company ...” I had my own company, Brightstar. By then, Brightstar was the No. 1 in the world with the largest Hispanic business ever created.
Then I told Masa, “I can’t, I have a big company. It’s worth many billion. It sells a lot of billions of dollars of mobile phone.” He says, “Don’t worry about it. I buy it from you if you commit to run Sprint for me.” I went to Sprint. Sprint was on the verge of bankruptcy, three to four weeks left of cash, one of the most iconic 120-year-old company, tough competitors, Verizon, AT&T, losing millions of customers, burning something like $5 billion of free cash, had never made money in the last 11 years. We put a very clear plan together. Everybody knew what they had to do.
Four years later, the first time ever that they generated net income. We delivered the best financial results in the 120-year history. As relentless as we are, we say, now we’re going to go do this T-Mobile thing again. We’re in the final stages of hopefully combining Sprint and T-Mobile, which will be by far the best and most disruptive to the communications company in the world. So, done my job, ready to quit and go back to Miami to be an entrepreneur, and then Masa told me, “You’re a great entrepreneur. You built a company from scratch, very successful.” He says, “You’re a good operator. You fixed Sprint.” He says, “But you suck at investing. You know nothing about investing.”
He invited me to go to Tokyo. I lived in Tokyo for one year. I’m in charge of seeing all the operating companies of the group, meaning all the companies that we own more than 50 percent. In addition, I run a Latin American fund that I was just getting started, happily move with my family of six kids, moved back to Miami, and then WeWork showed up. We’ve had many, many endless nights with Masa in terms of what was the next thing to do with WeWork. I would say that 99 percent of advice that we got is to cut your losses and run away, but Masa absolutely is a believer in WeWork and the mission and disruption.
You say why, right? The easy thing was just run away. There were no need. We didn’t have to come in and make an investment of this size. We’re basically betting SoftBank. We’re betting our reputation and we’re betting everything we have that this is going to be a success story. We want people to look at this move as not a failure, but we want this move as a genius move. We had many, many nights of debate. Everything that we look at the business, the more we dig, the more we love the business, the more community managers we interact with, the more we love the business.
I went to a few WeWorks, hung out, looked at what was going on. Masa spent hours, he went to WeWork in Japan, sat, how many empty desks, who comes in and what time? Then we had to make a decision. We started saying, how big is this? The commercial real estate market is $70 trillion. It’s just enormous. The possibility to disrupt something of that magnitude, I look at it, it happens once in a lifetime.