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WeWork CEO Adam Neumann is such a big surfing fan he led the company to invest $13 million into a startup that creates artificial waves - check out how 'Wavegarden' works
WeWork CEO Adam Neumann is such a big surfing fan he led the company to invest $13 million into a startup that creates artificial waves - check out how 'Wavegarden' works
Aaron HolmesSep 18, 2019, 21:17 IST
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WeWork CEO Adam NeumannMichael Kovac/Getty Images for WeWork
Before WeWork was plagued with investor concerns and a stalled initial public offering, chief executive Adam Neumann directed the company to invest in an artificial wave startup.
Wavegarden offers multi-million-dollar wave installations that have been set up in three countries so far - but its only US location faced roadblocks with regulators and locals.
WeWork's investment in Wavegarden is one of the more far-flung backings made by a company that has struggled to define its core purpose.
If WeWork's office-sharing business doesn't work out for the company, it has some backup options. For example: a startup that makes artificial waves, which chief executive Adam Neumann directed WeWork to funnel more than $13 million into.
WeWork made the decision this week to delay its initial public offering, and Neumann now finds himself in hot water amid investors' concerns about WeWork's profitability and tanking valuation.
But back in 2016, when WeWork was still riding a wave, so to speak, of investor hype, Neumann led the company to invest $13.8 million in Wavegarden, a Spanish wave pool company. Neumann, an avid surfer, apparently wanted WeWork to embody the spirit of community he found in surfing, the Wall Street Journal reported at the time.
WeWork's investors are now rolling out new limits on Neumann's control of the company in an attempt to keep its valuation afloat, which could mean in the future Neumann has less power to throw company money at ventures that align with his favorite hobbies.
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But for now, here's a deep dive into the gnarly startup whose success WeWork has bet millions on.
Wavegarden is an engineering firm that designs and builds artificial wave pools, a market that its website touts as a "rapidly emerging sector."
Its products, known as Wavegardens, are massive, permanent waterworks installations that simulate an actual beach, similar to a wave pool at a water park.
Wavegardens come in two models — a compact, diamond-shaped "cove" and a more sprawling "lagoon" — which can be anywhere from 130 to 360 yards long.
Installing the smallest Wavegarden model will run you approximately $21 million, according to Wavegarden's website. This includes the cost of preparing and erecting the site, and installing the wave generating system and water treatment system, service buildings, and development costs.
Prices for larger Wavegardens aren't specified on the website and are set on a project-by-project basis.
Wavegarden estimates that venues will see an internal rate of return of 20% for a standalone facility. Surfers shell out up to $90 an hour to use Wavegarden's facilities, according to the Wall Street Journal.
Wavegarden's first US park faced backlash
Wavegarden has constructed three fully-operational units in Spain, the UK, and Austin, Texas. The latter, which was built in 2016, hit a number of roadblocks and ruffled the feathers of lawmakers and locals along the way. It is currently closed.
The Austin facility, known as Nland, began construction in 2014, but faced a lawsuit from Travis County alleging that its Wavegarden didn't meet state health requirements for public pools and hadn't applied for necessary permits.
The park ultimately reached an agreement with county authorities and opened in October 2017, but closed just a month later due to damage under the Wavegarden. Meanwhile, locals living near the park — built in a floodplain — complained that it was regularly spilling water into the surrounding area, flooding their front yards and driveways.
Nland is currently closed after being purchased by the World Surf League, according to its website, and will be redeveloped. Surfing blogs speculate that the Wavegarden "lagoon" — derided for its "crumbly, meandering waves" — might be replaced with a Wavegarden "cove," or another brand of wave pool entirely.
What does any of this have to do with WeWork?
When Neumann directed WeWork to invest in Wavegarden, the company had recently received a slew of major investments and was eager to expand into other ventures. One of those was WeLive, a dorm-style residential offering that the company originally projected would have 34 locations by 2017 (it currently has just two locations).
It's not clear exactly where Wavegarden fits in with WeWork's business. At the time, WeWork referred to its Wavegarden investment as one of its "meaningful investments to significantly enhance our product offering."
Even Neumann himself has wavered when it comes to classifying WeWork's scope as a business.
"We ourselves are still discovering what is the best type of company that we want to be," he said when asked about WeWork's business category at a TechCrunch panel in 2017. "We're taking best practices out of the for-profit world and best practices out of the nonprofit world."
