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WeWork’s S-1 misses these three key points

After much discussion, WeWork finally dropped its S-1 filing with the SEC today as it makes preparations for its IPO. While the company has been producing sizable revenues the past few years, the company didn’t disclose everything I think it needed to in order for investors to make a judgment about its financial future.

It’s not as though WeWork hasn’t tried to give us some insight in its S-1. One of WeWork’s core operating metrics is “contribution margin including non-cash GAAP straight-line lease cost” (or what I will abbreviate just this one time as CMINCGAAAPSLLC). Through this metric, the company offers us a single number into the health of its business — essentially a way for investors to understand the performance of the company’s mature office locations.

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What’s missing here though is that WeWork has aggregated its finances for hundreds of locations down to a summary statistic, complemented with a huge amount of text devoted to describing the evolution of a property from lease signing to mature profit-making office. At no time does the company describe the contribution margin and how it changes throughout the course of a single lease. Instead, it provides the following completely numbers-free chart showing that … it makes more money as time goes on.

How even the best marketplace startups get paralyzed

Marketplaces are hard to build. You have to generate both supply and demand, and if that isn’t bad enough, you then have to work to match both sides of the marketplace to get a transaction to clear (and therefore generate revenue).

Slack has been working to beef up the product recently for its larger customers. A couple of weeks ago that involved more sophisticated security tools. Today, it was the admins’ turn to get a couple of new tools that help make it easier to manage Slack in larger settings.

For starters, Slack has created an Announcements channel as a way send a message to the entire organization. It would typically be used to communicate about administrative matters like changes in HR policy or software updates. The Announcements channel allows admins to limit who can send messages, and who can respond, so the channels stay clean and limit chatter.

Illan Frank, director of product for enterprise at Slack, says that companies have been demanding this ability because they need a clean channel with reliable information from a trusted source.

“With this feature, [admins] can set this channel up as an announcement-only channel with the right folks in [IT or HR] who can who can make announcements, and now this is a clean, controlled environment for important announcements and updates,” Frank explained.

The other piece Slack is announcing today is new APIs for creating templated workspaces. This is especially useful in environments where users have to create a bevy of new spaces frequently. Picture a university with professors setting up spaces for each of their classes with a set of tools for students, who all have to join the space.

Doing this manually, especially when everybody is setting them up at the same time at the beginning of a semester, could be tedious and chaotic, but by providing programatic templated workflows, it brings a level of automation to the process.

Frank says while workspaces in and of themselves are not new, the automation layer is. “What is new about this is the API and the ability to automate the creation and management of these connectors [programmatically with code],” he said.

For starters, it will allow automated workspace creation based on information in Web forms. Later, the company will be adding scripting capabilities to build even more sophisticated workflows with automated configuration, apps and content.

Finally, Slack is automating the approval process for tools used inside Slack channels or workspaces. Pre-approved applications can be added to Slack automatically, while those not on the approved list would have to through a separate process to get approved.

The Announcements tool is available starting today for Plus and Enterprise Grid plans. The API and approval tools will be available soon for Enterprise Grid customers.

Skip is beginning to test the first electric scooter that the startup built entirely in-house. They’re not quite ready for primetime, but Skip expects to deploy them in San Francisco this October.

That’s notably when San Francisco plans to allow service providers to deploy electric scooters as part of the city’s first permanent permitting program. Skip’s current permit expires on October 14, but the company plans to reapply for a permit, Skip CEO Sanjay Dastoor told TechCrunch.

For riders, they will likely notice the sheer difference in the size of this scooter compared to Skip’s previous models. Skip’s S3 is much larger than the company’s previous models in order to help riders feel more stable and secure on the scooter. The S3 also ditches the regenerative brake for a traditional hand brake and rear foot brake.

This comes shortly after Skip announced it would bring back its scooters to Washington, D.C. following some battery-related issues that led to fires.

The scooter fire in D.C. was caused by a damaged battery, though, it’s not clear if it was intentional or accidental. With this new scooter model, the battery was custom built for the shared electric scooter service use case and is also completed enclosed, which should help prevent it from getting damaged, Dastoor said.

This swappable battery should also help with unit economics, given that it won’t need to be replaced as often. The battery pack, Dastoor said, can last for about 20 rides with a range of 35 miles per ride. The custom battery also features diagnostic capabilities that can detect if it’s wet. Though, the battery is designed to be able to survive submerged in 1 meter of water for up to 30 minutes.

“What we’re looking at now is how do we actually do the swap,” Dastoor said. “We’re changing the model from taking vehicles off of the road to taking swapping out the batteries.”

Dastoor said he currently envisions a warehouse with a bunch of electric vehicles lined up charging the batteries. Given that the current model relies on independent contractors to take vehicles home to charge them, you could imagine a world in which the independent contractors instead are responsible for picking up fresh batteries at the warehouse and then swapping them out with the depleted ones.

Previous models of Skip’s scooters had swappable batteries and even cameras, but the cameras didn’t make it into the version.

“We are testing a variety of sensor systems to solve some of our key priorities, like parking compliance, rider safety and etiquette, and reliable location tracking,” Dastoor said in a follow-up email.

And thanks to the modular design of the scooter, Skip can easily add and remove elements, such as cameras, locks and even regenerative braking.

No startup is as polarizing as WeWork, and for good reason. The company, whose relentless growth has seen it open 528 locations across 111 cities in just about nine years, has never been entirely forthcoming on exactly how the unit economics add up at its locations. And so we have had a beautiful Rorschach test for the financial class these past few years regarding the company: it’s either the greatest financial return of all time or a Ponzi scheme (and absolutely nothing  in between dammit).

That ambiguity is supposed to change with the company’s S-1, where it is required by law to show a reasonably comprehensive set of numbers to investors in order to go public. Unfortunately, despite all the verbiage (“Our mission is to elevate the world’s consciousness.”) and data, we still don’t know the health of the core of the company’s business model or fully understand the risks it is undertaking. 

Here are three questions that remain unanswered so far by the company’s filing.

No cohort data on contribution margin

As I pointed out a couple of months ago, the ability for investors to understand the true unit economics of WeWork’s business is critical for cutting through the debate over its financial future.

It’s not as though WeWork hasn’t tried to give us some insight in its S-1. One of WeWork’s core operating metrics is “contribution margin including non-cash GAAP straight-line lease cost” (or what I will abbreviate just this one time as CMINCGAAAPSLLC). Through this metric, the company offers us a single number into the health of its business — essentially a way for investors to understand the performance of the company’s mature office locations.

This metric is reasonably complicated given the complexity of WeWork’s business. For instance, the company has to build out new spaces and fill them, which is costly, but is also a one-time expense that shouldn’t affect the financial performance of the location over time. There is also the consideration of how to handle free rent in the early years of a lease and rent increases in the later years that comes with being a tenant of a building (that’s the “straight-line lease cost” part of the metric).

The company has set a target contribution margin of 30% for mature locations (defined as those locations open for at least 24 months). It’s been hovering around 27% for much of the past few years, with a slight dip in the second quarter of 2019 to 24%. Regardless, this sounds reasonably good in a sort of pure “hand-wavy” way.

What’s missing here though is that WeWork has aggregated its finances for hundreds of locations down to a summary statistic, complemented with a huge amount of text devoted to describing the evolution of a property from lease signing to mature profit-making office. At no time does the company describe the contribution margin and how it changes throughout the course of a single lease. Instead, it provides the following completely numbers-free chart showing that … it makes more money as time goes on.

How is margin changing at its older locations? How is margin changing as it opens up in places like India, with very different costs and revenues? How do those margins change over time as a property matures? WeWork spills serious amounts of ink saying that these numbers do get better … without seemingly being willing to actually offer up the numbers themselves.

The declining fortunes of international WeWork

WeWork might have started in New York City, but it is absolutely a global company. According to the S-1, “over 50% of our members are located outside of the United States as of June 2019.” Those locations can be quite successful; London, for instance, has an occupancy of 93%. Growth is continuing at a staggering rate. The company’s greater China revenues increased more than 300% and 270% in non-UK/China foreign markets year over year to 2019.

That’s an exciting story, but this is also perhaps where WeWork was the least transparent in its prognostications for the future of its business. In its market sizing section of the S-1, it says that “When applying our average revenue per WeWork membership for the six months ended June 30, 2019 to our potential member population of 149 million people in our existing 111 cities, we estimate an addressable market opportunity of $945 billion.”

Yet, the revenues from those expansion locations are a different story. WeWork itself admits this, writing “For example, average revenue per WeWork membership has declined, and we expect it to continue to decline, as we expand internationally into lower-priced markets.” Indeed, according to the footnotes, the numbers must be so bad that it actually excludes India memberships from its average membership revenue (“in each case for the six months ended June 30, 2019, and in each case excluding WeLive and IndiaCo”).

That might be one reason why despite its rapid international growth, WeWork has only reduced its revenue concentration inside the United States from 62% to 56% over the past year.

The missing information here is the number of memberships by country — a set of numbers that I couldn’t find anywhere in the S-1. Without some comparison of average revenues by country, there is no way to determine whether the “addressable market opportunity of $1.6 trillion” is in any way realizable by WeWork.

Anti-corruption and anti-money laundering controls

Construction (and vicariously, real estate) are among the most corrupt industries in the world. In New York City, corruption in interior construction — like the build-outs that WeWork has to perform when it signs a new lease to prepare an office building for tenants — have been described as “commonplace.” Unlike software platforms that can exist in the cloud, owning and operating real estate can be a very intricate and complicated business.

And so as I wrote a few months ago, “Real estate is a messy and occasionally corrupt business, and as WeWork has soared to become the largest landlord in New York City, its compliance and risk mitigation is extremely critical to its long-term sustainability as a public company. The range of disclosures here can be as simple as a short risk factor, to what I would expect to be something more substantial.”

Well, all I got was a risk factor, and this remains a gaping hole.

In its risk section for international expansion, WeWork says that one of its risks is “corrupt or unethical practices in foreign jurisdictions that may subject us to compliance costs, including competitive disadvantages, or exposure under applicable anti-corruption and anti-bribery laws.”

Worse, WeWork is particularly brazen in the company’s lack of control over the issue. Here’s the text describing its mitigation: “Under the Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws and local laws prohibiting certain corrupt payments to government officials or agents, we may become liable for the actions of our directors, officers, employees, agents or other strategic or local partners or representatives over whom we may have little actual control.” (My emphasis added).

I get that this is legal boilerplate in some ways, but for a company that literally has to handle corruption on a day-to-day basis, I expected more than, well, we can’t control anything anywhere ever.

There’s a lot to like in the WeWork S-1, but these three information gaps (among many others I haven’t gotten into) make it challenging to dissolve that financial Rorschach test into better analysis.

Facebook is launching two new ad units designed to help movie studios promote their latest releases.

The first unit is called a movie reminder ad, and it does exactly that —since studios usually start marketing their titles months or even years before release, they can now include an Interested button in their Facebook ads, allowing users to opt-in to a notification when the film is released.  Then, on the Friday before opening weekend, interested moviegoers will get a reminder pointing them to a page with showtimes and ticket purchase options from Fandango and Atom Tickets.

Meanwhile, a showtime ad is designed for a later stage of a marketing campaign, when the movie is already in theaters. These ads feature a Get Showtimes button that will direct users to that same detail page with nearby showtimes and ticket purchase links.

In Facebook-commissioned research from Accenture published earlier this year, 58% of moviegoers said they discover new films online, and that 39% are doing so on smartphones and tablets.

Jen Howard, Facebook’s group director for entertainment and technology, told me that this should provide the Hollywood studios (who, aside from Disney, are having a rough summer) with a seamless way to connect their ads with movie ticket purchases. She also argued that it allows them to address “the full funnel” of viewer interest, and is “really starting to get them closer to a direct-to-consumer experience with moviegoers.”

Facebook says it’s already been testing the ad formats with select studios. For example, Universal Pictures used showtime ads to promote “The Grinch,” resulting in what Facebook said was “a significant increase in showtime lookups and ticket purchases.”

Movie reminder ads and showtime ads are now available to all studios in the United States and the United Kingdom.

It’s almost certainly no coincidence that Misfit’s new smartwatch bears more than a passing resemblance to the Fossil devices announced a week or two back. The one-time modular fitness startup has been part of the Fossil family since 2015, introducing its first full-on smartwatch two years later.

The lines have continued to blur between the brands, and the new Vapor X shares a number of superficial and internal characteristics with the new 8th gen Fossil devices. That’s not bad from a product standpoint — like the Fossil branded product, the X brings both the new Snapdragon 3100 chip and the latest version of Wear OS.

Google’s stagnant wearables offering might finally be picking up some steam on the back of its close work (and IP acquiring) relationship with Fossil. While Apple was off making its own smartwatch and OS and Samsung was essentially forking Tizen for its own needs, Google had largely been relying on third parties for hardware.

The three button design also reflect Fossil’s efforts, though Misfit’s device is being positioned as the company’s “lightest and most comfortable.” Both are factors that are sadly often overlooked in wearable design. The 42mm case, meanwhile, is small and likely more accessible for more wrists.

It seems Fossil is using the Misfit line to go after the audience Fitbit has had recent success with via its Versa devices. And indeed, the Misfit brand has traditionally had some success taking on more casual users looking for something relatively simple but still fashionable.

The Vapor does fall short on pricing. The “limited time introductory price” of $200 sounds great, but after that, the MSRP bumps back up to $279. That’s $20 less than the Fossil, and $79 more than the Versa. The sub-$200 price point really feels like the sweet spot for these devices.

The Vapor X is available through Misfit’s site starting today.

Obviously, not everyone owns their boat, and boat ownership is far more unique than car ownership – which makes it maybe an ideal category for peer-to-peer marketplace rentals. P2P boat rental startup Boatsetter recognized this opportunity, and is now announcing a $10 million Series A “extension” funding round to help it grow its business, with investment led by WestCap Group and Valor Equity.

Boatsetter counts itself the top peer-to-peer boat rental marketplace in the U.S., and offers insurance to boat renters, owners and captains alike through a just-announced strategic partnership with Geico. The Miami-based startup estimates he size of the peer-to-peer boat rental market at as much as $50 billion annually, and plans to use its investment to expand its offering, both from a product perspective and expanding its presence in key markets globally.

To date, Boatsetter has raised $31 million, including earlier portions of this Series A raised over the past two years. The company focuses on rentals for anywhere from two to more than a dozen passengers, and a range of boat options that can also include qualified captains for larger vessels. It’s a bit like an Airbnb crossed with an Uber, and there are rentals available in vacation hotspots around the world. AS part of this new funding, Boatsetter is also adding a new board member – Laurence Tosi, the former CFO of Blackstone and Airbnb, who is also a founder and partner at new investor WestCap.

The funding will help the startup invest in bringing in new talent focused on design, engineering and brand building, in addition to product work and market expansion.

Starsky Robotics has been building its self-driving — and human-driven — truck business for three years now. And it’s finally ready to show off its first product.

It’s not, as one might presume, a self-driving truck. This product, called Hutch, offers what in Starsky’s view is far more valuable: automatic access to its trucking capacity, no phone calls or paper logs necessary.

The trucking industry is a giant and fragmented system of shippers, freight carriers, brokers and, of course, drivers. This system is almost always out of whack with more demand for capacity (and, in turn drivers) than is available.

Traditionally, large shippers partner with freight brokers like CH Robinson to manage capacity. Startups including Convoy, Loadsmart, Transfix and Uber Freight are aiming to disrupt the freight brokerage part of the trucking world by developing apps that match truckers with shippers.

Meanwhile, traditional trucking companies like Schneider have set up their own brokerages because — again — sales typically outpace capacity.

Starsky believes it can solve the capacity problem with its self-driving trucks. But instead of selling its self-driving trucks to trucking companies like Schneider or locking in contracts with major shippers, Starsky built the Hutch API to put its capacity out into the market.

Hutch is an API that gives freight brokers and major shippers access to Starsky’s trucking capacity without what co-founder and CEO Stefan Seltz-Axmacher describes as “back office intervention.” The API allows partner brokers and select shippers to integrate directly with Starsky’s operations. Using the Hutch API, a broker can bid for space in Starsky’s autonomous and human-driven trucks without calling the company.

“It’s simple, we are selling the capacity of our self-driving truck,” Seltz-Axmacher said, admitting that in most industries, an API like Hutch would be ubiquitous.

“If this was an API to find the nearest scooter, we wouldn’t be talking because I think 25 of those exist,” Seltz-Axmacher said. “In trucking, it’s been surprising to us how manual the industry is — all the technology that you would assume exists, doesn’t.”

Today, Starsky’s trucks, most of which are driven by humans, haul 40 loads a day. Starsky hauls most of that freight through brokers Schneider Logistics and CM Hamilton. The company wants the majority of its loads to be brokered through the API, and eventually have no loads that don’t go through Hutch.

Hutch is essential to Starsky’s growth as a company, Seltz-Axmacher contends. With Hutch, Starsky employees can focus on building a robot that can safely drive, and in turn, bring some relief to the capacity-constrained trucking market.

“I don’t want to sell that capacity with a whole bunch of phone calls to brokers, long negotiations and yada, yada, yada,” Seltz-Axmacher told TechCrunch. “I want to make that available to brokers via an API, where it’s all programmatic.”

More importantly, it gives Starsky control over where it hauls freight. Starsky has been operating a traditional trucking business that employs human drivers to haul loads for customers. It also has several autonomous trucks that are driven and supported by a handful of test drivers.

Starsky can limit the API to only the safest, easiest and legal routes for its self-driving trucks. That means Starsky will miss out on hundreds, even thousands, of routes across the country.

Even with those limitations, Starsky sees ample opportunity. “We believe that there is a $50-billion-plus freight market on routes that appear easy for our current system to drive in states where it is legal,” Seltz-Axmacher said. For now, that means routes in Alabama, Florida, Louisiana and Texas.

Hutch is already in action. The Hutch API integrated with Loadsmart’s Automated Dispatch API to dispatch an autonomous truck just a few weeks ago. The Hutch API is also used internally to more productively test its fleet of autonomous trucks.

Enterprise carpooling startup Scoop just closed a $60 million round led by Activate Capital with participation from Goldman Sachs, NGP Capital, Total Group, BNP Capital and others.to fuel its expansion and growth. This round brings Scoop’s total funding to $106 million.

Scoop, which launched back in 2015, is a corporate carpooling service that works with the likes of LinkedIn, Workday, T-Mobile and more than 50 other companies to help their employees get to and from work.

With Scoop, trips are pre-scheduled, so you can select from one or more times you’d be willing to leave in the morning and afternoon, and have up until 9pm the night before for morning trips and 3:30pm the day of for afternoon trips to schedule your ride. After the deadline, Scoop’s algorithms work to automatically create the most efficient carpools based on routes, detours, company preference, favorites and more.

Currently, Scoop operates in more than 2,000 cities across six major metro areas, including the San Francisco Bay Area, Seattle, Portland, Reno and Los Angeles. To date, Scoop has facilitated 7 million carpool trips.

Scoop is not the only, nor the first company to do carpooling. Lyft, for example, began as a carpooling service called Zimride, which is now owned by Enterprise. There’s also Carma, which partners with federal and state transportation agencies.

Late last year, Scoop partnered with Lyft to supplement its offerings to its customers. That partnership has continued into the present day.

“By partnering together, Scoop and Lyft are ensuring that commuters not only gain a stronger sense of community by carpooling to work with co-workers and neighbors, but that they also feel supported in the event of last-second schedule changes and know they have guaranteed transportation home,” Scoop co-founder and CEO Rob Sadow said in a statement to TechCrunch. “With this program, carpoolers are able to request a Lyft or view public transit options through the Scoop app.”

Today, Procore, a construction software company, announced Procore BIM (Building Information Modeling), a new tool that takes advantage of Apple hardware advances to bring the 3D construction model to iOS.

Dave McCool, senior product manager at Procore, says that architects and engineers have been working with 3D models of complex buildings for years on desktop computers and laptops, but these models never made it into the hands of the tradespeople actually working on the building. This forced them to make trips to the job site office to see the big picture whenever they ran into issues, a process that was inefficient and costly.

What Procore has done is created a 3D model that corresponds to a virtual version of the 2D floor plan and runs on an iOS device. Touching a space on the floor plan, opens a corresponding spot in the 3D model. What’s more, Procore has created a video game-like experience, so that contractors can use a virtual joystick to move around a 3D representation of the building, or they can use gestures to move around the rendering.

The app has been designed so that it can run on an iPhone 7, but for optimal performance, Procore recommends using an iPad Pro. The software takes advantage of Apple Metal, which gives developers “near direct” access to the GPU running on these devices. This ability to tap into GPU power, speeds up performance and allows this level of sophisticated rendering quickly on iOS devices.

McCool says that this enables trades people to find the particular area on the drawing where their part of the project needs to go much more easily and intuitively, whether it’s wiring, ductwork or plumbing. As he pointed out, it can get crowded in the space above a ceiling or inside a utility  room, and the various trades teams need to work together to make sure they are putting their parts in the correct spot. Working with this tool helps make that placement crystal clear.

It’s essentially been designed to gamify the experience in order to help tradespeople who aren’t necessarily technically savvy to operate the tool themselves and find their way around a drawing in 3D, while reducing the number of trips to the office to have a discussion with the architects or engineers to resolve issues.

This is the latest tool from a company that has been producing construction software since 2002. As a company spokesperson said, early on the company founder had to wire routers on the site to allow workers to use the earliest versions. Today, it offers a range of construction software to track financials, project, labor and safety management information.

Procore BIM will be available starting next month.