INSUBCONTINENT EXCLUSIVE:
Perhaps they could work on cutting spending, improving their gross margins, and, say, shooting for profitability.Not so, at least in one
Instead of doing those things, China-based Ucommune filed to go public in America this month
The WeWork competitor is mostly a co-working business
own.IntroductionsBefore we chat about the business fundamentals of Ucommune, a primer on the company itself.Founded in 2015, according to
Crunchbase data, Ucommune has raised over hundreds of millions
Prior investors include Gopher Asset Management, Aikang Group, Tianhong Asset Management, All-Stars Investment and Longxi Real
Estate.TechCrunch reported that its final private round valued Ucommune at $3 billion.All that capital was put to work
According to is F-1 filing, Ucommune operates 197 co-working facilities in 42 cities
The company also claims more than 600,000 members and nearly 73,000 workstations.The WeWork similarities continue: While discussing itself
Next, deduct the direct costs that that revenue engendered
From there, subtract your operating costs
Now take your operating profit and remove taxes and other costs
What remains is net income.As you can quickly see, the more gross profit a business generates from its revenue, the more money is has left
over to pay for operating expenses
And that means that you have no gross margin available to fund operating costs
In turn, that means that your company is super unprofitable.Ucommune is unprofitable, unsurprisingly
they have very high gross margins.)Things get a bit worse when we look further.YuckDigging in, Ucommune operates two main businesses
Its second largest business is a marketing effort
Neither piece of the whole is attractive from a margin perspective
business is slightly better
Its $56.5 million in revenue from the first three quarters of 2019 was nearly offset by $51.0 million in revenue costs
Ucommune had cash and equivalents of $23.4 million and short-term investments worth $11.0 million at the end of Q3 2019
window in which Ucommune would need to access it.A window that is closing, mind
If the company kept consuming cash at its prior pace, we can estimate that it will not have enough cash to make it to the end of Q2 2020
than the last, making its business appear likely to keep burning acres of cash while it grows
And you have to ask yourself if it is a good business, why are its private investors pushing it onto the public markets instead of giving it
more of their own money?They must have known, landing this close to WeWork, how this was going to look
