Start-up Ecosystem In India

What start-ups get wrong: Lessons from WeWork


From UPSC perspective, the following things are important :

Prelims level: Blitzscaling

Mains level: Quotes and key phrases


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Central idea

WeWork’s rise and fall highlight the risks of market confusion, flawed strategies, and capital mismanagement for entrepreneurs. The lesson is to learn from mistakes, align strategies with industry needs, and wisely respect and utilize capital for lasting success. Build businesses with a clear market understanding, thoughtful strategies, and prudent financial management.

Quotes and key phrases for mains value addition

  • “Cautionary tale of what entrepreneurship is not.”
  • “Entrepreneurship is the pursuit of unrealistic ambition against odds.”
  • “WeWork confused a large market with a large addressable market.”
  • “Blitzscaling – prioritizing growth over avoiding losses – formulated by Reid Hoffman.”
  • “How much money you spend to make the money you make matters.”
  • “Boards that act as hearing aids, mirrors, and seat belts.”
  • “Society benefits from innovation but doesn’t know which ventures will succeed.”
  • “Most startups fail, society only needs a few successes for gains.”
  • “Rise and fall of WeWork suggests caution for entrepreneurs about presentism.”
  • “Learn from experience, not just through experience.”

Key Highlights:

  • WeWork’s Rise and Fall: WeWork went from a startup with a $47 billion valuation to bankruptcy, cautioning against presentism in entrepreneurship.
  • Entrepreneurial Reality: Most startups fail, but society benefits from the innovation, productivity, and job creation that successful ventures bring.


  • Market Confusion: WeWork misunderstood its market, confusing office space with the addressable market for co-working spaces, leading to a flawed strategy.
  • Blitzscaling Misapplication: The concept of blitzscaling, prioritizing growth over avoiding losses, doesn’t universally apply, and WeWork’s attempt in property leasing proved unsuccessful.
  • Capital Mismanagement: WeWork excelled at fundraising but failed to respect and utilize capital effectively, overlooking the importance of return on equity.
  • Governance Issues: WeWork’s board allowed questionable actions by founder Adam Neumann, compromising integrity, and applauding instead of questioning decisions.
  • Sustainability Neglect: WeWork’s culture discouraged dissent, hindering a balance between short-term gains and long-term corporate health.


  • Addressable Market Confusion: WeWork’s mislabeling of itself as a “tech-enabled physical, social network” led to unrealistic ambitions and unsustainable business practices.
  • Blitzscaling Misfit: Blitzscaling, effective in specific markets, didn’t suit property leasing, highlighting the importance of aligning strategies with industry dynamics.
  • Capital Management Lesson: The quantity of capital raised couldn’t compensate for the lack of a solid strategy, emphasizing the importance of smart spending.
  • Governance Oversight: Weak governance allowed unchecked actions by the founder, showcasing the need for vigilant boards to ensure ethical practices.
  • Cultural Impact: WeWork’s culture stifled dissent, hindering a healthy exchange of ideas between thinkers and doers, impacting long-term sustainability.

Key Data:

  • WeWork’s Funding: WeWork raised $16 billion in equity and $19 billion in debt, showcasing significant financial backing.

Key Terms:

  • Blitzscaling: The strategy of prioritizing rapid growth over avoiding losses, proven effective in specific industries.

Way Forward:

  • Learn from Mistakes: Entrepreneurship requires learning from failures, and the WeWork example highlights the importance of reflection for future success.
  • Strategic Alignment: Entrepreneurs must align strategies with the nature of their industry, avoiding misapplications like blitzscaling in unsuitable markets.
  • Capital Respect: Fundraising is crucial, but respecting and utilizing capital wisely is equally important for sustained success.
  • Enhanced Governance: Strong governance practices, including vigilant boards, are essential to prevent unethical actions and ensure long-term corporate health.
  • Cultural Adaptation: Encourage a culture that values dissent and promotes a healthy balance between short-term gains and long-term corporate sustainability.

In conclusion, WeWork’s downfall serves as a lesson in avoiding presentism in entrepreneurship, emphasizing the need for strategic alignment, effective capital management, vigilant governance, and a culture that encourages diverse perspectives.

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