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WeWork is doing increasing amounts of business with SoftBank, which is also its biggest investor

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WeWork is doing increasing amounts of business with SoftBank, which is also its biggest investor

Category : entrepreneur

SoftBank, which is WeWork’s biggest backer, has also become an increasingly important customer of the commercial real-estate company.

The Japanese conglomerate accounted for 2% of WeWork’s revenue in the first 6 months of this year, according to documents the latter filed in preparation for its planned public offering. That portion was up from just 1% for all of last year and nearly 0% in 2017.

The company also counts Rhône Group, another one of its investors, as a customer. But Rhône accounted for a much smaller portion of WeWork’s revenue.

“We have entered into membership agreements and/or other agreements relating to the provision of Powered by We solutions with SoftBank entities and affiliates of the Rhône Group,” WeWork said in its IPO paperwork. “We believe that all such arrangements have been entered into in the ordinary course of business and have been conducted on an arm’s-length basis.”

WeWork’s Powered by We service involves building out and managing office space that other companies own or have leased.

SoftBank declined to comment. Representatives of WeWork did not respond to an email seeking comment. Rhône Group did not immediately respond to an email seeking comment.

WeWork is seeing more revenue from SoftBank

In the first six months of this year, SoftBank paid WeWork $28.2 million for leases and other services, according to WeWork’s IPO filing. For all of last year, the Japanese company paid WeWork $18.8 million for such services, according to the filing. In 2017 and 2016, SoftBank paid the real estate company about $200,000 and $100,000, respectively.

The ramp-up in WeWork’s SoftBank revenue followed SoftBank’s investment in the company. SoftBank took its first stake in WeWork in an August 2017 funding round, according to PitchBook. It has invested $10.65 billion in total in WeWork and is reportedly planning on buying another $750 million worth of its stock in the IPO.

Read this:Venture investors still aren’t sure what to make of SoftBank’s $100 billion Vision Fund. Depending on who you ask, they’re either rooting for it, or gleeful that it’s struggling with WeWork and Uber.

Ron Fisher, SoftBank’s vice chairman, sits on WeWork’s board of directors.

Meanwhile, Rhône Group paid WeWork $1.3 million in all of 2018 and $1.1 million in the first half of this year for leases and other services.

Rhône is a partner with WeWork in a real estate venture designed to acquire buildings that WeWork will lease out to customers. Its cofounder, Steven Langman, is a WeWork director.

WeWork has come under fire for its long list of so-called related-party transactions, which are deals involving employees, executives, investors, or other people that could create conflicts of interest. The company has hired relatives of CEO Adam Neumann, given Neuman numerous large loans, and rented space in buildings he partially owned. WeWork also reportedly struck deals with the family members of other top executives, including hiring the parents of Vice Chair Michael Goss as real-estate brokers for a lease in Miami.

The coworking giant has struggled to line up investors for its public offering. Potential investors are reportedly worried about these related-party transactions, its valuation, business model, and potential resilience in an economic downturn.

WeWork is reportedly considering going public with a market capitalization of $10 billion. SoftBank valued the company at $47 billion in January when it made its most recent investment in WeWork.

Got a tip about SoftBank or WeWork? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

  • Read more about SoftBank and WeWork:
  • WeWork and Uber are giving SoftBank a black eye, but that doesn’t mean Vision Fund II is in trouble, experts say
  • WeWork reportedly hired the parents of a high-ranking exec as real estate brokers for a Miami lease, among other potential conflicts of interest
  • WeWork says it has a $3 trillion market opportunity and has signed up only 0.2% of its potential customers. Here’s why real-estate experts say those numbers don’t add up.
  • Here’s how WeWork answered the 5 biggest questions about its business — and why analysts are still worried about its upcoming IPO
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Sammy Singh

Global VC, Founder, and entrepreneur extraordinaire as featured in Inc. Magazine, Bloomberg, and Forbes. Sammy Singh is a graduate of UCLA and Wharton School of Business as well as a former student of Loyola University of Chicago. Sammy is best known as a renowned financial technology global entrepreneur and has founded over 26 different firms across industry and all over the world. He is a venture capitalist,a TV/ Film actor, tax specialist, and marketing solutions strategist. Connect with Sammy Singh on social media below! www.linkedin.com/in/cfo www.instagram.com/champagnegqpapi www.facebook.com/officialsammysingh www.twitter.com/cxosynergy www.medium.com/@sammysingh www.crunchbase.com/sammysingh

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