As WeWork prepares for its public debut, chatter swirls around its ability to achieve profitability and how reliant it will continue to be on outside funding to keep operations afloat. While the company has been able to produce impressive year over year revenue gains doubling on an annual basis, it is still burning a significant amount of cash. In the first quarter it lost $264 million. Investment analysts are now asking how the company intends to solve the classic business questions of fueling growth while trimming costs.
Perhaps the company is seeking to find that answer in new high margin business lines. Recently, it has been acquiring software solutions related to its core operations that could result in tremendous cross selling opportunities. These software concerns typically have a predictable recurring revenue model, while like WeWork’s, they have one significant exception, their revenues are produced at extremely high margins upwards of 80%. If the software products reach scale with those kind of margins, WeWork could see software revenue helping to mitigate the quarterly losses it’s gotten used to producing.
WeWork is reportedly in talks to acquire SpaceIQ, a silicon valley startup that helps users optimize and make more efficient use of open spaces. The startup is still in early days, having raised $11.5 million in venture funding, and is supported by approximately 40 employees.
SpaceIQ was founded by seasoned business and technology leaders to provide a workplace management platform as a smart solution with a suite of powerful and intuitive features such as space planning, move management, and real estate forecasting. The company aims to help businesses of any size to increase engagement, fuel productivity and reduce costs through operational efficiency and centralized visibility. It is headquartered in Mountain View, California with offices in Salt Lake City, Utah.
SpaceIQ would be WeWork’s sixth acquisition in 2019. WeWork’s other recent acquisitions have included Waltz, which has pioneered a new smartphone-based access technology, revolutionizing how people interact with the physical world around them, and Managed by Q, which provides subscription and on-demand office services, from cleaning and maintenance to supply replenishment and wellness.
Taking a closer look into its acquisition history, one could get the sense that WeWork is on its way to repositioning itself as a technology company. And why not, it’s the sensible thing to do to sustain a high growth trajectory with the hopes of one day achieving profitability.