Joanna Strange was ahead of her time when she called out issues at WeWork ($PRIVATE:WEWORK), her employer, in 2016.
Strange was the first whistleblower to shatter the illusion of the explosive growth WeWork had pitched to investors and employees. When Strange came forward with internal documents that showed the company’s failure to meet financial goals, she was sued and questioned by the FBI.
Today, WeWork is facing some of its darkest days. The company’s founder, Adam Neumann, stepped down as CEO last year after the company infamously pushed back its planned $20 billion IPO.
WeWork has been thrust into greater darkness and uncertainty amid an ugly legal battle, reports of a dysfunctional company culture, and the global pandemic that has shuttered offices around the world. The company is estimated to be worth $2.9 billion today, a 97% decline from its peak.
Strange’s private hell as a WeWork whistleblower
Many of WeWork’s issues still run rampant in startup culture, where overvaluation and toxic cultures often walk hand-in-hand, Strange told Thinknum in an exclusive interview. Since leaving WeWork, she has devoted her career to helping other companies avoid the same pitfalls as lead coach for Ari Meisel’s firm Less Doing.
Strange joined WeWork in 2016 when the company acquired her former employer Case Inc. After her repeated attempts to bring issues to management fell on deaf ears, she felt she had no choice but to go to the press.
She leaked documents to Bloomberg showing WeWork’s financial woes, and the company threatened to sue her. “The experience completely shattered my faith in humanity,” she said. “I was always on edge, always waiting for the other shoe to drop.”
WeWork’s founders ‘drank their own Kool-Aid’
Strange asserts that WeWork founders Adam Neumann and Miguel McKelvey were in denial about problems with the company’s financials and culture.
“Adam and Miguel certainly drank their own Kool-Aid...they didn’t think they had a toxic culture,” Strange added. “On the surface at HQ — with a music room, a quiet room, a barista, a cool workspace — all of that looked good. But that was a veneer.”
As the company’s headcount expanded, Strange said the perks disappeared from the office. Coworking spaces were replaced with “hot desking,” where employees weren’t given their own desks and instead practiced a 'first come, first serve' format.
“Adam and Miguel certainly drank their own Kool-Aid...they didn’t think they had a toxic culture,” Strange added. “On the surface at HQ — with a music room, a quiet room, a barista, a cool workspace — all of that looked good. But that was a veneer.”
From the start of 2018 to the end of 2019, WeWork’s employee headcount exploded by over 300%. Now, that number is in sharp decline.
WeWork had a tradition called “Thank God It’s Monday,” an after-hours team bonding event that Strange claimed was designed to get people to work later into the evenings. The founders once complained because they walked through the office at 9 p.m. and no one was working.
“WeWork was a work smarter, not harder, kind of place,” Strange said, adding that 90-hour workweeks were common.
The company was also incredibly sensitive to any criticism. WeWork kicked Thinknum out of its office in 2016, three days after a blog post questioned its high valuation and how it stood up next to competitors.
Thinknum found that WeWork’s churn rate (the number of cancellations divided by the number of total members), which had historically been around 1.2% annually, increased five times to over 6% that year. That means WeWork was losing one out of every 200 customers on a monthly basis. (Read the original blog post that got Thinknum evicted from WeWork here.)
“They were not in the habit of firing clients, but they were in the habit of coming after anyone and anything hard who might have said something mean about them,” Strange said. Apparently, many of WeWork’s workers turned a blind eye to inconsistencies in the company’s S1 filing because they were mentally calculating their payouts once the company went public.
“They were not in the habit of firing clients, but they were in the habit of coming after anyone and anything hard who might have said something mean about them.”
Red flags of toxic cultures and overvalued companies
According to Strange, employee “perks” are often a symptom of a toxic company culture.
“Beware of companies that have so many awesome things in the office that make you want to come early and leave late,” Strange said. “That's a tactic. WeWork had 8 a.m. workouts and beer on tap after 6. They can keep you there by offering you ‘stuff’ but are they really that giving, or do they want you working more?”
Strange says some of the most telling insights come from how the company treats its lowest-paid workers, like the sub-contractors who clean the offices.
“That’s a clue to whether or not they actually value human beings,” Strange said. “Look at Amazon’s warehouse workers. Exploited. Punished. Working in terrible conditions. My guess is that Bezos was always a toxic personality and it just got worse.”
“Beware of companies that have so many awesome things in the office that make you want to come early and leave late,” Strange said. “That's a tactic. WeWork had 8 a.m. workouts and beer on tap after 6. They can keep you there by offering you ‘stuff’ but are they really that giving, or do they want you working more?”
WeWork labels itself as a tech company, but it’s worth considering whether a company is actually offering something new and novel or simply taking a new approach to something that already exists.
“They were really a real estate company. Is the startup solving a problem or are they putting a fancy cover on an old solution?” Strange asked. “Uber and Lyft are really taxi companies. As soon as they have to explain WHY they're better than a taxi, they've lost.”
Holding VCs accountable
Strange believes that most startups are overvalued by venture capital firms that hype them up for a bigger payout without properly vetting the company’s long-term profitability. She says reform will have to come from government institutions, which is unlikely under the current Trump administration.
“It’s an issue of greed, where no one — not the entrepreneur, the investors, or employees — want to see any kind of reason to be cautious,” Strange says. “So these companies often end up failing in the end, because they should have never been valued at that level.”
The future of commercial spaces in NYC
More than half of Strange’s clients are considering dumping commercial leases entirely after the global pandemic ends. “They’re realizing they don’t need a home base,” Strange said. “Coworking will probably continue to exist, much more scaled-down, and with ‘hourly’ renters.”
“They’re realizing they don’t need a home base,” Strange said. “Coworking will probably continue to exist, much more scaled down, and with ‘hourly’ renters.”
She cites the coworking space Convene as a good example of a company that has pivoted for future success. The company has rentable events spaces, and a high-end restaurant and club for important business meetings. “Places like WeWork will need to pivot, and fast.”
About the Data:
Thinknum tracks companies using the information they post online - jobs, social and web traffic, product sales, and app ratings - and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.