Managed by Q
Managed by Q illustrates the mechanics of a stock-and-cash acquisition: venture sellers received cash and equity valued at an acquirer’s peak mark, while the acquirer carried the subsequent impairment when that valuation fell.
Managed by Q was a New York office-services and workplace-management startup founded in 2013 by chief executive Dan Teran. Before its acquisition it raised roughly $125–128 million across four venture rounds from investors including GV (Google Ventures), RRE Ventures, Kapor Capital, and Homebrew 1. In April 2019 The We Company (WeWork) acquired Managed by Q for $189.7 million in GAAP fair value, of which $107.5 million was cash paid to the cap table and $82.0 million was Series AP-3 preferred stock struck against WeWork’s $47 billion January 2019 valuation 21.
WeWork recorded $166 million of impairment on the acquisition within the same fiscal year — $145 million of goodwill and $21 million of intangibles, equal to roughly 87 percent of the purchase price 2. In March 2020 WeWork sold Managed by Q to the San Francisco competitor Eden for $28 million, after Teran’s $23 million buy-back bid failed for lack of financing 3. Within a week of closing, Eden laid off the Managed by Q team 3.
Cross-reference of the acquisition record indicates that Managed by Q was one of several WeWork purchases funded with a mix of cash and WeWork stock in which selling shareholders realized value before the company’s 2019 valuation collapse; the intent behind the pricing is not established by the record 4.
Acquisition Terms
Managed by Q raised approximately $125–128 million before its sale. Reported rounds included a 2013 seed from Homebrew, a 2015 Series A of about $15 million led by RRE Ventures, Series B and Series C rounds in 2016 backed by GV (Google Ventures) and Kapor Capital, and a January 2019 Series C extension of about $55 million from GV and RRE 1. Other holders on the cap table included SV Angel, Greycroft, Slow Ventures, and Sherpa Capital 1.
In April 2019 The We Company acquired Managed by Q for a GAAP fair value of $189.7 million, composed of $107.5 million in cash (56.7 percent), $82.0 million in Series AP-3 preferred stock, and $0.2 million in Class A options 12. The Series AP-3 preferred carried a $110-per-share original issue price set against WeWork’s $47 billion January 2019 valuation 1. WeWork’s S-1 also described the transaction in terms of a total contract price of $220.0 million payable as $100.0 million cash plus Series AP-3 preferred 1.
Impairment and Resale
WeWork recorded $166 million of impairment against the Managed by Q acquisition in fiscal 2019, the same year as the purchase: $145 million of goodwill and $21 million of intangible assets 2. That impairment equaled roughly 87 percent of the $189.7 million purchase price 2. Because the asset had already been written down, WeWork recorded an approximately $10 million accounting gain on the eventual sale 2.
In March 2020, after SoftBank moved its portfolio company WeWork to divest non-core assets, the company sold Managed by Q to the competitor Eden for $28 million in total cash consideration, with $2.5 million held back 3. Founder and chief executive Dan Teran offered $23 million to repurchase the company but, per The Real Deal, the bid was not viable because he could not assemble the financing; Eden’s $25 million offer prevailed 3. Within a week of the closing, Eden laid off the Managed by Q staff 3.
Distribution of Consideration and Loss
Analysis of the filings and contemporaneous reporting indicates that the $107.5 million cash portion was distributed to the Managed by Q cap table — including GV, RRE Ventures, Kapor Capital, Homebrew, and Teran — at the spring 2019 closing, before WeWork’s August 2019 S-1 and the subsequent October 2019 valuation decline to under $8 billion in the rescue led by SoftBank 4. Analysis of the same record indicates the Series AP-3 preferred, struck at the $47 billion mark, lost most of its face value as WeWork’s valuation fell by roughly 83 percent 4.
Cross-reference of the purchase, impairment, and resale figures shows a gross decline of about $161.7 million between the $189.7 million paid and the $28 million realized on resale, with the $166 million same-year impairment recognized on WeWork’s books 4. Cross-reference of the investigation record indicates this transaction sits alongside WeWork’s purchases of Conductor and other companies in a documented pattern of stock-funded acquisitions made during the tenure of WeWork co-founder Adam Neumann, in which selling shareholders realized value at the peak valuation while the acquirer carried the write-downs 4.
All Findings
3 total
All Findings
3 totalfinancial (3)
Managed by Q VC cap table: GV/RRE/Kapor/Homebrew raised ~$125-128M across 4 rounds before WeWork; sellers paid 56% cash / 44% AP-3 stock priced at WeWork's $47B peak
Managed by Q (founded 2013, CEO/co-founder Dan Teran) raised ~$125-128M pre-acquisition. Rounds (per Wikipedia/TheRealDeal/Crunchbase reporting): Seed (2013) Homebrew (Hunter Walk/Satya Patel); Series A 2015 ~$15M led by RRE Ventures (+Gary Vaynerchuk/Vayner-RSE, Fabrice Grinda/FJ Labs, Jessica Alba); Series B 2016 ~$25M with GV (Google Ventures) + Kapor Capital; Series C 2016 ~$30M GV + RRE (M.G. Siegler/GV joined board); Series C extension Jan 2019 ~$55M GV + RRE. Other holders: SV Angel, Greycroft, Slow Ventures, Sherpa Capital, Haystack/Semil Shah, Flight Ventures. WeWork's Apr 2019 consideration of $189.7M GAAP fair value = $107.5M cash (56.7%) + $82.0M Series AP-3 Preferred + $0.2M Class A options. NOTE the discrepancy: WeWork's S-1 also states the headline 'total contract price of $220.0 million to be paid in $100.0M cash and the remaining in Series AP-3' (line 14125), while press framed it as '$100M cash + $120M preferred stock priced at WeWork's $47B valuation.' The cash portion ($107.5M) was REAL money distributed to the cap table at the absolute peak; the AP-3 stock ($110/share original issue price, struck at the $47B mark) was the speculative portion that cratered. INFERENCE: the ~56% cash weighting meant Q's VCs (GV, RRE, Kapor, Homebrew) and Teran extracted over half the value in hard cash months before WeWork's Sept-Oct 2019 collapse — a near-perfect peak exit for the seed/Series A holders.
Founder Dan Teran offered $23M to buy back Managed by Q from WeWork (Mar 2020) but lost to Eden's $25M because 'he couldn't get the funding together'; Eden gutted the team within a week
When SoftBank-controlled WeWork dumped non-core assets, co-founder/CEO Dan Teran tried to repurchase the company he built. The Real Deal (Mar 3 2020): Teran 'offered $23 million to WeWork to buy back the company' but his bid 'wasnt a viable offer because he couldnt get the funding together.' Rival Eden (a San Francisco competitor, one of Q's biggest rivals) won at $25M. AllWork/other reporting framed Teran+investors as seeking to buy back 'for less than $55 million' (a higher band), but the operative WeWork-facing bid was $23M cash. WeWork 'apparently better liked the proposal of an outside bidder' (TechCrunch). Within a week of closing, Eden laid off the Managed by Q team (TheRealDeal Mar 9 2020). FACT: the buyback failed on financing, not on price-by-much — Teran's $23M was only $2M shy of Eden's $25M. INFERENCE: a founder who 11 months earlier had been paid partly in WeWork paper could not assemble $23M cash to reclaim his own company at ~11% of its purchase price — a stark illustration of stock-for-acquisition value destruction.
Extraction math: WeWork lost ~$155-162M net on Managed by Q in 11 months ($189.7M in, $28M out); $82M AP-3 stock cratered with WeWork's 83% valuation collapse while $107.5M cash exited the cap table at the peak
LOSS MATH (FACT, from filings + press): WeWork paid $189.7M GAAP fair value ($107.5M cash + $82.0M AP-3 + $0.2M options) Apr 2019; sold Mar 2020 to Eden for $28M total cash consideration ($2.5M heldback). Gross destruction $189.7M - $28M = ~$161.7M (~85% of value gone in 11 months). On WeWork's books: $145M goodwill impairment + $21M intangibles impairment booked in FY2019 (=$166M impaired same year as purchase), then a $10M accounting GAIN on the 2020 sale (because the asset had already been written down). The $166M same-year impairment is the smoking gun: WeWork recognized within months that it had recklessly overpaid — impairment equal to 87% of purchase price in the acquisition year itself. PEAK-CASH-OUT (INFERENCE, well-supported): the AP-3 preferred was struck at $110/share against WeWork's $47B Jan-2019 mark; by Oct 22-23 2019 SoftBank's rescue valued WeWork at under $8B — an ~83% haircut — rendering the $82M AP-3 worth a small fraction of face. But the $107.5M CASH was distributed to Q's cap table (GV, RRE, Kapor, Homebrew, Teran) at closing in spring 2019, BEFORE the Aug-2019 S-1 implosion. Net effect: Q's investors converted a private startup into >$107M hard cash at the precise top, transferring the downside (the cratering AP-3 + the entire $166M write-down) onto WeWork/SoftBank balance sheets. This fits the thread-8 'acquisition looting' pattern (cf. findings #11450, #11451): stock-funded M&A spree where sellers cash out in real money + overvalued paper at the peak and SoftBank eats the impairment.
- 1.Finding #11458
- 2.SEC 0001813756-23-000016
- 3.Finding #11465Sources: https://therealdeal.com/new-york/2020/03/03/wework-sells-managed-by-q-to-rival-startup-at-90-discount/Open artifactSource record, https://techcrunch.com/2020/03/03/confirmed-managed-by-q-sells-to-rival-eden-for-just-11-of-what-wework-paid-for-it-last-year/Open artifactSource record, https://therealdeal.com/new-york/2020/03/09/eden-slashes-jobs-at-managed-by-q-less-than-a-week-after-25m-purchase/Open artifactSource record
- 4.Finding #11466