As a long-time tech journalist, I’ve noticed an interesting trend over the years. Companies who aren’t really tech companies will call themselves that anyway.
This is because “tech” is a lot like “new,” “free,” or “sale.” These words get people’s attention. So a lot of companies say they’re “tech” for the free publicity.
One such company is WeWork, a real-estate company that leases short and long-term office space stocked with free beer, cool lighting, and a community-for-hire for remote workers like myself.
In one of the most criticized filings I have ever seen, WeWork used the word “tech” 123 times in their paperwork, while disclosing billions in losses, gaudy conflicts of interest, and ridiculous phrases like this: “We dedicate this to the energy of we — greater than any one of us, but inside all of us.”
Understandably, most bankers and investors and analysts are calling the filing a “masterpiece of obfuscation,” which is something WeWork needs to justify its $47 billion dollar valuation on $2 billion in negative annual income.
Meanwhile, its largest competitor, IWG, generated nearly twice as much revenue last year ($3.4 billion versus $1.8 billion) and turned a profit of $600 million to WeWork’s negative $2 billion. Nevertheless, this healthier and bigger company, which refers to itself as a real estate company, is only valued at $3.7 billion.
So what makes a real tech company then? Harvard says you need at least one but preferably several of the following five ingredients, of which WeWork has none:
- Low variable costs (i.e. cheap to grow such as selling more software without incurring anymore development or physical costs)
- Low capital investments (such as not having to buy lots of equipment or real-estate)
- Customer intelligence (think Google knowing what, when, and how you like to browse and shop online)
- The network effect (which I wrote about before and makes something more valuable as more people join the network, i.e. cell phones and Facebook)
- Expanding ecosystems (such as Amazon’s ability to cheaply sell personal assistants called Alexas that add value to users while helping Amazon sell more stuff)
Fun fact: De facto tech companies such as Amazon, Tesla, and Apple meet three of the five criteria.
The more you know.