By now, we all know what a “unicorn” is in finance parlance – but for those who make it a point to be cozy under a rock, a unicorn in finance jargon (specifically in the ductile world of venture capital) is a startup company that has achieved a value above $1 billion.
Crunchbase, a startup/venture capital information resource currently lists a total of 262 unicorns as of the end of June 2017. Well-known companies currently on the unicorn list include Uber ($62 billion valuation), Airbnb ($31 billion valuation), Pinterest ($12 billion valuation), Space-X ($12 billion valuation), Dropbox ($10 billion valuation), Spotify ($8 billion valuation), and many more.
There is no doubt that software is eating the world and there are numerous software-enabled billion-dollar companies to prove this phenomenon. Millennials with a mindset around sharing rather than owning have enabled entrepreneurial juggernauts to exploit and disrupt markets that would have seemed impossible to penetrate five to ten years ago.
The company we want to highlight today is WeWork. Founded in 2010, the WeWork startup is part of the sharing economy revolution that lets companies share working space instead of taking on the overhead of a permanent office. As of the end of 2016, WeWork had 110 locations across various world geographies and is currently planning to expand to cities such as London, Beijing and Paris this year.
In a Series G funding round (a capital financing event when startups obtain investments) that occurred earlier this week, WeWork raised $760 million at a $21 billion valuation. This is quite amazing because not only does this make WeWork more valuable than established real estate heavyweights like Boston Properties (valued at $18 billion) and Vornado (valued at $17 billion), it is also a $4 billion jump in valuation from February 2017 when it raised $1.7 billion at a $17 billion valuation.
If all this is starting to sound like board game money, you are not alone because everyone seems a little spooked by the record valuations that are becoming quite pervasive in venture capital these days. There is always someone predicting a dotcom crash type event but then there is also always someone telling you that this time is different.
In defense of WeWork, it must be noted that its founder Adam Neumann mentioned last week that WeWork generates $1 billion in revenue a year. This is a significant number and may hold within it evidence as to why investors are willing to fund WeWork’s growth at what some would call extremely lofty valuations.
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