Co-working startup The Wing sees its worth shrink in WeWork deal

[NEW YORK] The Wing, a female-focused co-working startup, was valued at roughly US$365 million in the heady days of 2018, before WeWork's botched initial public offering cast a pall over the industry. Now, investors have pegged The Wing's valuation at substantially less - about US$200 million - according to people familiar with the matter.

In January, WeWork parent We Co, sold its stake in The Wing to a group of investors that included Hollywood talent powerhouse Creative Artists Agency (CAA).

The sale implied a valuation for The Wing of about US$165 million, a significant discount to its earlier value, according to some of the people familiar with the deal, all of whom asked not to be identified discussing private information. Investors also injected an additional US$15 million of funding in the form of a convertible note which is slated to convert at a roughly US$365 million valuation when the company raises future capital. Including the WeWork stake sale, the implied valuation of The Wing from the secondary transaction was about US$200 million, some of the people said.

WeWork recorded a loss of about US$17 million from its bet on The Wing, according to one of the people with knowledge of the matter. Representatives for WeWork and The Wing declined to comment on specifics of the deal.

Besides CAA, the group of investors that purchased WeWork's stake includes Addie Lerner's Avid Ventures, DAG Ventures and real estate investment firm DivcoWest. Existing investors such as the Crankstart Foundation, the charity run by billionaire Michael Moritz and his wife Harriet Heyman, also participated. Zara Rahim, a spokesman for The Wing, confirmed the identities of those investors, which have not been previously reported.

"Our investors were able to take advantage of a unique and unexpected opportunity with WeWork," Ms Rahim said. "They doubled down on their commitment to the company by increasing their ownership and putting an additional US$15 million in new capital that will help us grow and scale."

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The sale of WeWork's stake was led by GV, previously known as Google Ventures, Sequoia Capital and NEA, Fortune earlier reported. The Wing's earliest investors include Serena Williams's Serena Ventures and SoulCycle co-founders Julie Rice and Elizabeth Cutler.

"We are proud to be investors of The Wing," said CAA's Michael Blank. "So many of our clients have shared their projects and causes at their spaces and with their members, and we are thrilled to partner with them to help further their important mission of advancing women."

Since its start in 2016, The Wing has focused its offerings on women, aiming to differentiate itself from other co-working spaces that catered primarily to men with amenities like free beer on tap. The Wing operates 12 locations across the US and in London, and is set to open additional workspaces in Toronto, Seattle and Los Angeles, according to its website. In addition to traditional workspaces and conference rooms, The Wing also offers its members rooms designed for pumping breast milk, a women-focused library and lectures. CAA clients including Nicole Kidman and Meryl Streep have made appearances at events for Wing members.

WeWork first invested in the Wing in 2017. At the time, Jen Berrent, now WeWork's chief legal officer, wrote that the companies would "create magic together". But last year, WeWork's IPO (initial public offering) collapsed and - strapped for cash - the company started selling off assets that were unrelated to its core business. It began seeking a buyer for its stake in The Wing in the fall, Bloomberg News reported at the time. Audrey Gelman, chief executive officer of the Wing, gave birth on the same day in September that WeWork co-founder Adam Neumann was forced out of the company, Ms Rahim said, and spent time postpartum helping to secure a deal.

Besides selling its stake in The Wing, WeWork has also recorded losses from the sale of other businesses, including Managed by Q, which it sold earlier this week.

Today, The Wing has 12,000 active members and has grown quickly, posting triple-digit annual revenue growth in each of the past three years, Ms Rahim said. Like WeWork and many of its other flexible workspace rivals, the company is not yet profitable, according to a person familiar with the company who asked not to be identified discussing private information.

BLOOMBERG