- WeWork, the coworking-space startup that just changed its name to The We Company, was recently informed it wouldn't receive the full $16 billion investment it was expecting from SoftBank.
- Plans for the major investment reportedly upset some of SoftBank's government-supported financial backers in Saudi Arabia and Abu Dhabi, who questioned putting so much capital into a startup that was losing money.
- It reportedly took only a day for Adam Neumann, CEO of The We Company, to shake off the blow and resume negotiations with SoftBank to hammer out a revised deal for $1 billion in new capital and another $1 billion that would go to shareholders.
After hearing that SoftBank could no longer invest $16 billion into his startup, The We Company CEO Adam Neumann was reportedly able to salvage $1 billion in new capital by refusing to accept the deal was completely dead.
It reportedly took only "a day" for Neumann to recover from the bad news, Fast Company reported. The CEO then quickly hashed out a revised deal, announced Tuesday, with the Japanese investment firm that will provide The We Company with $1 billion in new capital, $1 billion that would go to shareholders, and the promise of an additional $1.5 billion that would arrive in 2020.
SoftBank has previously invested $8 billion into The We Company, the new name for the coworking startup WeWork. The rebranding will allow the company to expand its offerings beyond collaborative workspaces and into new ventures in co-living housing units, education, and banking services, the company said when announcing the name change.
It was initially reported back in October that SoftBank planned to invest $16 billion in The We Company, which would give the Japanese firm a majority stake in the startup. However, SoftBank's backers - which notably include government-backed funders in Saudi Arabia and the United Arab Emirates - reportedly balked at such a hefty investment in a company that saw a net loss of more than $1 billion in 2018.
The last straw that broke the $16 billion deal was the poor debut for SoftBank's telecommunications unit when it went public on the Japanese stock market in December, Fast Company said. Neumann said that not long after the tumultuous IPO showing, he received a call from SoftBank's CEO Masayoshi Son to cancel the multimillion-dollar investment.
Here's how Neumann reacted to hearing SoftBank would no longer invest $16 billion, according to Fast Company:
[Softbank CEO Masayoshi] Son "called me," Neumann recalls, in an interview on Monday with Fast Company. "He said, 'We're partners. What should we do?'" Son told him that the deal SoftBank and WeWork had spent months negotiating was no longer viable.
It was a blow, but those inside WeWork who worked closely with Neumann on the deal say that, almost immediately, he returned to the negotiating table. "It took a day for Adam to recover," says one source who was close to the negotiations.
Working around the clock, through the holidays into early January, WeWork and SoftBank hammered out a revised deal, announced this week, for $2 billion of new capital at a $47 billion valuation. WeWork now has more than $10 billion of funding from SoftBank and close to $7 billion on its balance sheet.
You can read more about SoftBank's latest investment and the thinking behind WeWork's name change over at Fast Company.