MORT ZUCKERMAN, THE 77-YEAR-OLD BILLIONAIRE CHAIRMAN of Boston Properties, controls $19.6 billion (market cap) worth of prime office buildings in cities like New York, Washington and San Francisco, and in June 2013 he took a walk through a little real estate business called WeWork that Adam Neumann and his partner, Miguel McKelvey, were building.  Neumann, then a 34-year-old former Israeli naval officer with a thick mane of black hair, met Zuckerman at the elevator of his second WeWork office in New York’s SoHo neighborhood. “Surprise, surprise–another upstart wanted in on the office rental game,” Zuckerman remembers thinking to himself. Neumann explained the business model: WeWork takes out a cut-rate lease on a floor or two of an office building, chops it up into smaller parcels and then charges monthly memberships to startups and small companies that want to work cheek-by-jowl with each other.  Neumann led Zuckerman past WeWork’s 38,000-square-foot warren of small, glassed-in offices packed with young creative-economy types, the coffee lounge that converts into a beer-and-wine event space during happy hour, the conference rooms brimming with videoconferencing gear and the office managers smiling and taking care of package deliveries and replenishing the free coffee and laser printers. “We’ve got a waiting list months long,” Neumann told him. And the buzz in the air was going to be repeated across seven cities in a dozen new locations before 2015.  Zuckerman warmed up. Here were dozens of members with needs very different from the tenants who sign leases at Boston Properties buildings on Park Avenue. These startups need each other. They feed off each other. They want to belong to something. “Adam understood in a very serious way that we are in a new culture,” Zuckerman says. “I found it extraordinarily creative and original after being in this business for God knows how many years.” (For the record, it’s 50-odd.)  Zuckerman asked Neumann to lunch. Then another. By their fourth meeting he made Neumann promise to let him invest personally in WeWork the next time it raised money. And in 2015, almost two years since that first tour, a 200,000-square-foot WeWork will be the anchor tenant of the $300 million redevelopment co-owned by Boston Properties in the Brooklyn Navy Yard. Plans are afoot for another partnership in San Francisco and perhaps Boston down the road.  WeWork’s founders have been content to stay quiet about their story until now, swearing investors to secrecy. No longer. Over the next 12 months the company expects to triple its membership from 14,000 to 46,000 and expand to 60 locations from 21 today and 9 just a year ago. WeWork’s first location four years ago was just 3,000 square feet in SoHo with creaky floorboards and walls power-washed by its founders. Now WeWork is the fastest-growing lessee of new office space in New York and next year will become the fastest-growing lessee of new space in America as it spreads to cities such as Austin and Chicago, not to mention London, Amsterdam and Tel Aviv.  WeWork will gross an estimated $150 million this year with operating margins of 30%. Current plans will push revenue to more than $400 million next year. In February JPMorgan led a massive (and secret) $150 million investment in the company along with the Harvard Corp., Zuckerman and Benchmark. The deal valued WeWork at $1.5 billion. The founders suspect they will be out raising another round next year that could easily fetch a valuation north of $6 billion. If that comes to fruition, Neumann and McKelvey, who each own an estimated 20%, would be paper billionaires.  WeWork is the leader, by far, in a surging co-working space movement. Some 5,900 shared office operations dot the globe today, compared with 300 five years ago, according to Deskmag.com, a site dedicated to tracking co-working trends. Back then there were fewer than 10,000 people working in such locations worldwide. Today that number is closer to 260,000. Niches have begun appearing: Grind caters to repeat founders and veteran professionals. Hera Hub runs three locations in California just for female entrepreneurs. “People want less stodgy offices,” says Julien Smith, CEO of Breather, a startup that takes flexible space to its extreme, offering private office rentals by the hour to members constantly on the go.  WeWork members freely acknowledge the space is scandalously priced per square foot: $350 a month for a desk and $650 per person for 64 square feet per office. But when WeWork opened its latest building in London’s South End, it was 80% full at launch and like the rest will be at near capacity in just a couple months. That’s because members can save hundreds per month when you factor in included services such as security, reception, broadband, printing–and fewer headaches.  But the real perk is having other people around. WeWorkers network at weekly bagel-and-mimosa parties, where they might find a software developer to produce an app for them. Members pitch their ideas at informal demo days and get free advice during office hours from willing outside partners like ad agency Wieden+Kennedy. Handshake agreements and job referrals are made over the wagging tails of members’ dogs.  “Other offices are just depressing compared to here,” says Nicole Halmi of Neon, an image-selection platform in the WeWork Tenderloin location in San Francisco. “The old model of office space is dead,” adds startup veteran Gary Mendel, who runs Yopine from a WeWork in the renovated Wonder Bread factory in Washington, D.C.  Facebook, Google and other Silicon Valley firms years ago embraced the practice of throwing everyone into a giant room. WeWork lets big companies join the fray. PepsiCo, for example, put a few people in the SoHo WeWork in 2011, with the understanding that these staffers will be available to give advice to smaller member companies. “There has to be a commitment to the bigger picture,” says McKelvey.  City governments are all-in on the benefits that such spaces can bring to the local economy. In San Francisco Mayor Ed Lee rerouted police patrols and opened a precinct outpost in the ragged Tenderloin district to keep the WeWork members there safe. Chicago Mayor Rahm Emanuel insisted on personally showing Neumann his unannounced plans for new bike paths and other startup-friendly projects to convince WeWork to move to the West Loop. New Boston Mayor Martin J. Walsh chose the new WeWork as the location for one of his first public speeches after taking office. “This is somewhat new to Boston, the innovation economy, but as more and more people see the type of idea of WeWork, more people will get interested in starting companies,” says Walsh.  “WeWork plays both sides of the coin,” says James B. Lee, Jr., the famed investor and JPMorgan Chase vice chairman who has guided the public offerings of Facebook, Alibaba and General Motors. “Institutions have space that young entrepreneurs could use, but they want to start their own business and cut their own trail. WeWork gives them a home and says, ‘We want you here, we will help you and build you.’ “
Wework has emerged as one of the most valuable startups in america by combining the savvy of a real estate developer with the soul of a kibbutz.