The company that helps other startups save money is having trouble keeping its own spending in check.
That's the gist of a Bloomberg news report out late last week that showed WeWork, the co-working phenomenon of the past few years, had to slash its profit forecast this year by 78 percent.
Even more interesting was why. Yes, there are building delays, and landlords are getting cheaper with their remodeling subsidies. That's hitting revenue. What's hitting profit--or at least a good part of it--is that WeWork has become too rich for its own good. Having raised more than $1.4 billion in six years, WeWork has turned from a scrappy startup into a fat cat workplace--at least from what can be gleaned from an internal video featuring the founder, Adam Neumann, standing in front of his employees.
"We did not use to be this way," he reportedly said in the video. "We used to fight for every dollar. We did not spend."
Now Neumann is pulling back on $350 breakfast buffets and imploring staff to turn off all the lights at night. He's appealing to the Millennial's care for the world by noting that the "universe does not allow waste."
We've all seen this movie before--and we seem to be watching newer productions every few months. I grew up in the 1990s, when all I'd see late at night were commercials for "Girls Gone Wild." This might be Silicon Valley's "Startups Gone Wild." Think Theranos. Zenefits. Now WeWork.
WeWork is nowhere near cheating customers or defrauding regulators. However, there is a disturbing line among companies that grow too fast and raise insane amounts of money. They equate success and momentum with genius and longevity. And that breeds hubris. Silicon Valley likes to glorify the young billionaire founder without taking any responsibility for the company that creates afterward.
It reminds me of what Scott Galloway, the NYU professor and arbiter of the startup world, said recently in our live Q&A for Radiate (registration to Radiate required). Entrepreneurs tend to think that when business success is fantastic--like billion-dollar fantastic--it's because you're a genius. And you know what? Everyone tells you so. In reality, you're probably pretty good and also very lucky. You have good people around you. That's a more boring story, but it's likely closer to the truth.
The one remedy to this is to make sure from the outset you have a strong culture. It seems odd to be a one-person or two-person team in a startup and iron out a "culture playbook" for hundreds of nonexistent employees. But as Scott Kurnit, the founder of About.com and a Radiate adviser, told me in our video guide for entrepreneurs, culture is so critical for a startup's success. He believes the strong culture at About.com is exactly why the company has lasted 20 years on while others from the 1990s imploded.
As the late management guru Peter Drucker once said, "Culture eats strategy for breakfast." And it shouldn't cost $350.