In our time of lofty valuations and messianic rhetoric surrounding the business of tech, it’s getting hard to make out the real processes that go into building a healthy company. Sadly, it was WeWork’s abrupt failure to list on NASDAQ that woke us up to this flawed trend, not the old-fashioned critical thinking. And now, as Asia’s biggest office space provider Ucommune is preparing to repeat its rival’s miscarried feat, the question arises as to what it can offer that WeWork couldn’t.
The American co-working giant seemed to have it all, charismatic leadership, hip work culture and huge piles of cash at its doorstep – all the prerequisites for a quality Hollywood biopic and a bestseller paperback. Yet, under these gauds, WeWork’s credentials mostly comprised of disproportionate debt, mismanagement, and hollow optimism.
Ucommune has been following in WeWork’s mischievous footsteps, taking on debt, struggling with profitability and now eyeing an IPO. However, in one important domain that WeWork disregarded, Ucommune excelled – tech.
Some of the most outspoken critics of WeWork have been incessantly pointing fingers at a seemingly obvious fact that somehow escaped the attention of the general public and certain investors who regarded the co-working operator as a tech company thus inflating its valuation. In truth, WeWork is tech adjacent at most, and real-estate in essence.
Mao Daqing, the level-headed founder of Ucommune, is a real-estate whizz, who prior to founding the company in 2015 served in executive roles at Vanke and CapitaLand, China’s largest property developers. Thanks to that alone, he managed to successfully contain WeWork’s advances in the Asian markets. Mao’s coworking spaces have swept all over Mainland China, Hong Kong, Singapore and have even reached New York. But what gives the Chinese tycoon a real edge over his American rivals is that his product is not just tech adjacent, it’s tech-reliant.
Ucommune offices are something out of a sci-fi film with facial recognition and Bluetooth door locks, IoT tables, Printers connected to WeChat and a user-friendly mobile app. Mao Daqing’s company is actively integrating with the world of China tech, not only providing startups with workspaces but also encouraging in-house innovation and acquiring promising companies, all of which could turn Ucommune into a tech force to be reckoned with.
What caused WeWork’s IPO to fall apart was not only the well-publicized reckless behavior of its founder Adam Neumann and the overburdening debt but also the capital market’s mistrust towards the sublease business model, under which the company operates.
While the real estate industry in China bears an air of inviolability, Mao Daqing seems to know enough about the true limitations of Ucommune’s original business model and goes out of his way to expand his company’s offerings. Ucommune currently operates properties under six different models – U Space, U Studio, U Design in a self-operated model, and U-Brand and U-Partner in an asset-light model. Not to mention, that a large part of the firm’s revenue comes from corporate and individual services, incubation, venturing, digital services as well as advertising and branding.
Different from WeWork’s “community” model, Ucommune has built a complete online service platform around small and medium-sized enterprises and has opened it to third parties. Ucommune’s main value proposition is not the office space per se, but this “net” that reflects the needs of modern enterprises.
To support its leading position as the more innovative co-working space operator of the bunch, Ucommune has made a slew of technology investments and acquisitions, with a focus on the ventures with expertise in the Internet of Things, shared parking spaces, unattended containers, unmanned gyms and more.
However, not everything in Ucommune’s story is so awe-inspiring, after all the company’s loss to income ratio is currently roughly 0.64, more than WeWork’s 0.59. In other words, for every $1 of income, WeWork loses $0.59, whereas Ucommune has to bear a loss of $0.64. And while the company is currently doing better than its American rival in terms of asset-liability ratio, to truly outshine all the competitors and step on a path of stability it would need to keep expanding its digital footprint and moving from hard assets to services slightly more innovative than free craft beer on tap.