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WeWork’s IPO Fail: Do’s and Don’ts When Fundraising

Communications lessons from WeWork’s almost-IPO – what not to do when fundraising

WeWork’s rapid rise ruling an empire of trendy workspaces and office services for entrepreneurs, startups and some of the largest corporations grabbed the attention of some of the world’s leading venture investors and banks. J.P. Morgan’s management and capital advisory support and SoftBank’s $11 billion investment put WeWork into the rarefied ranks of the “unicorn” joining the likes of Uber and Airbnb. WeWork’s run-up to its IPO, though, was marked by concerns about its plunging valuation, a dubious path to profitability and leadership issues. It was a sobering return to earth for the visionary-driven company whose path, and even survival, is now uncertain.

There are lessons here for startups which, though operating on a much smaller scale, still need to address the same investor perspectives and concerns.

Vision does not displace reality

No matter how compelling the vision, it has to accord with reality: and ultimately that reality is defined by investors. They’ll go along, to a point, with investing against the promise of profitability, but if the path to returns gets fuzzy, let alone drops from reasonable view, no vision is strong enough to win the day.

Define the communications role of management

Leadership has a very specific role when it comes to communicating the company’s key corporate and financial messages. The tone leadership sets is as important as the messages it wants to deliver.

Although the unconventional leadership of WeWork’s ex-CEO, Adam Neumann, catapulted the company, his impulsive decision-making on small and large initiatives, when combined with the fault lines in the IPO filing, brought into question his own fundamental ability to execute… on anything. The “tone” became one of a CEO not in touch with his own limitations, let alone the realistic prospects of the organization.

Take a step back and listen

Communications is a two-way street and getting your message out is only one side of the coin. Maybe less obvious but just as important is the listening part. Investors expect to be listened to and their questions need not just to be taken seriously but responded to in measured, material terms. Sophisticated investors can also provide counsel from their experience with other startups. Mr. Neumann not only ignored Softbank’s advice on when to go public. His removal from the CEO’s job suggests that investors don’t believe he will take key advice going forward.

Driving growth is not always a family affair

Mr. Neumann’s wife, Rebekah, was involved in the final stage of creating the IPO document. She apparently put more attention on what the form looked like than what it actually said. That didn’t go down too well with investors. They will support family involvement in the management of the company – and the spending of their money – if it’s done prudently and with the right results. If not, founders will pay an even higher price for the company’s failings.

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