Silicon Alley's First $10 Billion Tech Startup Isn't A Tech Startup

WeWork is worth a sh*t ton of money, but that means very little to NYC's tech scene.

New York City's tech scene has always lived unhappily in the tall shadow cast from the west. While Brooklyn toils for years to grow Etsy, The Valley feasts upon the fruits of huge trees like Google and Apple, then casually spits out seeds and watches Airbnb and Uber grow like weeds.

The competition has been...well...wildly uncompetitive.

In the Silicon Alley narrative, the way to really get in the game has been to foster the growth of its own whale, an enormously high valuation startup that proves once and for all NYC is a viable place to become a tech bro billionaire.

So Silicon Alley is understandably bursting at the seams with pride lately, bragging to everyone within earshot that a local startup has finally been valued at $10 billion.

WeWork, which sublets office space to budding entrepreneurs, is raising a new round of capital at a valuation of $10 billion, people with knowledge of the matter said.
That is twice what the startup was worth in its Series D round last December, said the people, who asked not to be identified because the information is private. The financing may be announced as soon as this week, the people said.

The day is finally upon them! Time for a naked champagne fight in Madison Square Park y'all! Silicon Alley is fo' real motherf*ckers!

Just one small thing. WeWork is a tech startup in much the same way that BlackRock is an early childhood education non-profit. It's not one... At all.

WeWork is a real estate company for the modern age of vagabond millennial freelancers. It rents communal, "co-working" office space to people that don't want or need their own real office and/or can't afford to get tied down by a lease.

WeWork, with 23,000 customers in 32 locations from Seattle to Tel Aviv, offers memberships for as little as $45 per month. The New York-based company portrays itself as a new kind of workplace, complete with beer and neon-lit slogans such as "Never Settle Ever."

But all the craft beer and neon koans can't hide the fact that WeWork is not a tech startup, it's a real estate play trussed up to look like a tech startup.

Sure, it has a cool web platform that allows member users to find and rent space, but so does Corcoran. Its membership model might be used predominantly by tech firms, but the guys who lease space to Bank of America for ATMs and branch locations aren't bankers, they're landlords.

This is not a screed against WeWork. One could go so far as to say that taking NYC real estate and positioning it as an affordable commodity to young entrepreneurs is akin to alchemy. It's real estate arbitrage with some Uber-eque stank on it, and they've replicated the NYC success in six other markets.

It's not hard to see why WeWork is soaring to a $10 billion valuation with help from investors like Goldman Sachs and JPMorgan, but it is hard to congratulate NYC's "tech ecosystem" for that success.

That's not to say that the city won't have a $10 billion tech baby in the near future - between Mongodb, ZocDocs and others, the bench is deep - but it's beyond disingenuous for Silicon Alley to celebrate another win by NYC's legendary real estate sector.

WeWork Said to Double Valuation to $10 Billion in New Round [Bloomberg]