Just nine months after investors placed a $10 billion valuation on WeWork, the office-rental company has raised another round of funding at a $16 billion valuation, according to documents filed on Tuesday in Delaware.
The valuation was confirmed by a source with knowledge of the deal. Hony Capital and its parent company, Legend Holdings, led the round. Neither have been involved in previous WeWork funding rounds. Hony will help with WeWork’s China launch, according to this source.
“Not only does WeWork have one of the largest addressable markets I have ever seen, but the quality of its execution and fit for the Chinese culture is unparalleled,” Hony Capital CEO John Zhao said in a WeWork blog post about the funding. “Our investment in WeWork is both strategic and obvious.”
The new valuation makes WeWork the sixth most valuable private company, eclipsing SpaceX and Pinterest. On paper, WeWork is nearly as valuable as the largest publicly traded office real estate company, Boston Properties, which has a market cap of about $18 billion.
Boston Properties owns 47 million square feet of office space. WeWork does not typically buy real estate, but instead rents office space wholesale and then subleases that space to smaller tenants at a profit.
WeWork has signed up 50,000 members (how it refers to customers) at 77 locations around the world, and is ambitiously expanding. According to investor pitch documents leaked last year, WeWork plans to open 376 office locations by the end of 2018. WeWork also plans to launch and scale a residential offering. Residents moved into the first of its dorm-like apartment buildings, dubbed WeLive, in January. According to the leaked pitch documents, WeWork plans to launch WeLive in 68 more buildings by the end of 2018.
Critics have pointed to WeWork’s simple arbitrage business model when arguing that the company’s valuation does not match realistic business expectations. “Their multiples are more like a tech company than what a real estate company would get,” Charles Clinton, the CEO of a real-estate funding platform called “EquityMultiple” told me during the months I spent reporting a feature on WeWork for Fast Company’s upcoming April issue. “There’s a feeling that that doesn’t really make sense.”
WeWork, however, sees itself much more as an operating business than a real estate company. COO Artie Minson, who joined WeWork from Time Warner Cable, calls the business “programming for real estate.” Just as channels bring a television to life, WeWork wants to be the business that makes space hum. Adam Neumann, the company’s 36-year-old founder, envisions “WeNeighborhoods” or a “WeStreet.”