WeWork Sells Conductor Unit Back to the Founder
(Bloomberg) -- The embattled co-working company WeWork completed the first of what it hopes will be a series of asset sales by finding a buyer for Conductor, a unit that makes marketing software used by Visa Inc. and Samsung Electronics Co.
Seth Besmertnik, who co-founded Conductor before selling it to his college classmate Adam Neumann, will stay on as chief executive officer of the newly independent entity, the companies plan to announce Thursday. Besmertnik and other investors will contribute $15 million to fund operations and grant Conductor’s 250 or so employees majority ownership of the business through founder-class stock. Conductor and WeWork declined to disclose terms of the sale.
For WeWork, selling off side businesses and turning attention back to co-working is a primary element of the turnaround plan set by the company’s new management. In October, SoftBank Group Corp. agreed to take a majority stake in WeWork, after a failed initial public offering put the company in danger of running out of money and cost Neumann the CEO job. SoftBank helped bring in new leaders, who are eliminating 2,400 jobs. WeWork is in talks to sell another business, Managed by Q, to a group of investors that includes the co-founder of that startup. And WeWork said Thursday that it’s shuttering a unit called Spacious that it acquired less than four months ago.
Recent events have weighed heavily on morale inside WeWork. Conductor executives hope the new employee stock plan will raise spirits. In addition to holding a majority of stockholder votes, staff will be asked to elect a representative to the board. “This will ensure, in the long term, the company is always acting in the best interest of all the shareholders and that the employees have access to information about how we’re running the company,” Besmertnik said.
Besmertnik helped start Conductor in 2010, eventually amassing more than 400 customers using its software to design marketing campaigns and optimize websites for search engines. Conductor had raised more than $60 million in venture funding, a laudable figure for a corporate software company but far from the more than $12 billion Neumann took in for WeWork.
Investors had entrusted Neumann to build a global empire of office space for rent. WeWork’s valuation kept climbing, and Neumann seemed to be unstoppable. WeWork paid $126 million, not including performance bonuses, for Conductor last year. The deal would give Conductor cash to invest in research and development and double the size of that team. In return, Neumann gained a new channel of communication with Citigroup Inc., Salesforce.com Inc. and other Conductor customers right as WeWork was trying to recruit larger companies, which made up 25% of its membership at the time.
The deal also reunited Besmertnik with Neumann, nearly two decades after they met as students at Baruch College in New York City. Both men dropped out to pursue business careers before returning later to earn degrees. Onstage at an industry conference a month after the acquisition, Besmertnik embraced Neumann, who greeted Conductor employees as family. “Welcome home,” Neumann said.
Besmertnik said that while WeWork’s meltdown has been hard on the Conductor team, he’s grateful to have been a part of the company. Artie Minson, one of two men who replaced Neumann as CEO, praised Besmertnik in an emailed statement and said the divestiture is “a positive step forward for both WeWork and Conductor.” The buyout was partly financed by Besmertnik, along with Selina Eizik, the chief operating officer at Conductor, and Jason Finger, a founder of the Grubhub Inc.-owned food delivery app Seamless.
Speaking from his New York office, which is lined with action figures and features a whiteboard covered in inspirational quotes (“The world is a reflection of you.”), Besmertnik said he’s focused on enforcing a strong company culture and a “people-first approach.” He hopes the new stock ownership program for employees sets an example for other businesses to follow, he said: “I’ve always felt the system wasn’t fair. If there happens to be a new CEO or a new board that doesn’t have the same willingness to fight for the people, employees stand to get the short end of the stick.”
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