WeWork closes latest funding amid China push

Hony Capital and parent company Legend Holdings plan to expand the US shared-office-space startup WeWork in China after leading its latest round of financing.

Beijing-based private equity group Hony Capital and its parent company Legend Holdings plan to help US startup WeWork expand in China after leading its latest round of financing.

WeWork, which leases out offices and other co-working spaces, has raised about $750m from its series F round of fundraising, giving it a valuation of around $16 billion, according to one person with direct knowledge of the matter.

That is a big jump from $10 billion valuation WeWork achieved at its last financing round in June 2015. The company is now among the most valuable startups in the world, higher than music streaming service Spotify and content sharing website Pinterest.

“Economically, WeWork is quite expensive," Hony founder and chairman John Zhao said in a small group interview on Friday. "But we think China has [the market potential] for the sharing economy. With our help, WeWork could develop better [in the country].” 

Zhao said he had just flown into Beijing from New York, where he had discussed WeWork’s Chinese expansion plan with its management.

One representative from Hony and Legend, understood to be Zhao — who is also Legend’s executive vice president — has joined WeWork’s board specifically to help its push into China.

Hony and Legend were not the only investors who committed to WeWork's latest funding round. The office space firm also drew contributions from a number of other big Chinese investors, the full list of which will be announced in October.

China is an obvious next target for the six-year-old company, which has already established a presence in Mexico, Israel, Canada and a few European countries, including the UK and France.

WeWork opened its first space in Shanghai in early July, and saw the occupancy rate quickly hit 100%. That success story could become a gateway for WeWork to tap into other Chinese cities, including Hong Kong, in the future.

WeWork now has about 55,000 paid members globally, according to Ji Chaofeng, managing director of Legend’s asset management department. That spans 80 co-working spaces in 25 cities. But most of its business remains in the US.

“Unlike many other start-ups which burn cash instead of making money, WeWork has a good profit margin and cash flow yield," Ji said in a separate group interview on Friday. "Its occupancy rate is almost 100% [in the US]. It’s not a concept but already a [profitable] business model, which has a solid customer base and can be copied in other areas."

WeWork was co-founded by Adam Neumann and Miguel McKelvey in New York in 2010. They came up with a simple business model: lease office space from landlords wholesale, redecorate, and sublet it to tenants at a profit.

It first attracted freelancers and displaced workers in the wake of the American recession following the 2008 financial crisis but has gradually become part of the sharing economy, luring millennials who prefer trendy co-working spaces and flexible work hours.

“WeWork has [successfully] explored the [sharing-economy] model in the US," said Legend's Ji. "The sharing-economy will become a trend in China as the country’s young generation starts to recognise it."

But despite Chinese investors' optimism, WeWork is likely to face competition from local rivals, notably Kr Space and URwork, two Beijing-based incubators which have footprint in a number of Chinese cities and provide startup entrepreneurs with office space, training and introductions to investors.

As WeWork itself doesn’t incubate startups, it could potentially team up with Legend Star, an incubator and angel investment fund of Legend Holdings.

“Our angel investment fund needs such companies” to help Chinese start-ups, said Ning Min, CFO of Legend Holdings. 


A previous version of this article referenced a cash flow yield of 3% in WeWork's US business, a figure provided by a senior manager at Legend. The Chinese company has since said that this number is inaccurate.

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