Airbnb CEO Brian Chesky is preparing to IPO next year. Here are 2 lessons he learned from the WeWork fiasco.
Mike Windle/Getty Images
Mike Windle/Getty Images
- WeWork's IPO fiasco showed tech companies exist on a spectrum and underlined cofounder and CEO Adam Neumann's lack of preparation, Airbnb CEO Brian Chesky said at the New York Times DealBook Conference last week.
- Chesky, who plans to take his home-rental platform public next year, highlighted WeWork's slim profit margins and suggested Neumann wasn't ready for all the attention and responsibility.
- "We're all realizing we have a significant amount more responsibility," Chesky said. "It's a growing up experience for a lot of founders."
- Read more of Business Insider's WeWork coverage here.
WeWork's IPO fiasco showed tech companies exist on a spectrum and underlined cofounder and CEO Adam Neumann's lack of preparation, Airbnb CEO and cofounder Brian Chesky said at the New York Times DealBook Conference last week."Tech companies live on a continuum," Chesky said, implicitly distancing his home-rental platform, set to go public next year, from the embattled coworking startup.Advertisement
Chesky's comments come as his own firm preps for a public listing next year.
"The best way to understand the continuum is your gross margins, or, what is your gross profit," he added. "Microsoft and these really big tech companies have really high margins and other companies [have] really low margins. And I think that's the first lesson of WeWork."Microsoft's gross margin was 69% last year, dwarfing WeWork's approximate gross margin of 19.7% in the first six months of this year. Meanwhile, Airbnb's gross margin was 67% in the first quarter, according to The Information.
On the other hand, Apple's gross margin of 38% last year is almost half of Microsoft's, yet the iPhone maker ranks among the world's most profitable companies with over $55 billion in net income last year.
Neumann wasn't ready for the attention he receivedNeumann, who reportedly made millions by leasing properties to WeWork, charged his company nearly $6 million to use the "We" trademark, and cashed out $700 million by selling and borrowing against company stock ahead of its IPO, may well have been unprepared for the intense attention he's received."You have to be really thoughtful about the actions you have," Chesky said. "I think that young founders sometimes forget that they are gonna one day have a huge amount of scrutiny."Advertisement
"I used to get advice from somebody: Imagine everything you do will be on the cover of 'The New York Times,' because one day it very well could be," he added.
Neumann has come under fire for his reckless spending of company cash - WeWork reportedly flew 8,000 employees to London last year for a retreat. He's also been criticized for his management style: he followed a discussion of cost-saving layoffs with a round of tequila shots for employees, and has reportedly secured a $1.7 billion leaving package for himself as SoftBank prepares to fire thousands of WeWork staff."It's also easy to underestimate the amount of responsibility we have," Chesky said. "Most people never intend to have as much responsibility. You have an idea. You build something. You launch it, then one day you have all this adulation.Advertisement
"We're all realizing we have a significant amount more responsibility," he added. "It's a growing up experience for a lot of founders."
Given the similarities between WeWork and Airbnb, it's unsurprising Chesky tried to draw a distinction.WeWork's operating losses more than doubled to $1.4 billion in the first half of 2019; Airbnb's operating losses also more than doubled, to $306 million, in the first quarter of this year, The Information reported.Advertisement
WeWork secured a valuation of $47 billion in January, only to see that fall below $5 billion at the end of September, shortly before it struck a $9.5 billion rescue deal with SoftBank that gives ownership to the Japanese conglomerate. Airbnb raised funds at a $31 billion valuation last year, and investors are valuing it as high as $42 billion, according to the Financial Times.
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