Adam Neumann’s latest big idea? Become America’s Biggest Landlord | We work
Adam Neumann presided over one of the most dramatic corporate collapses in recent history. A barefoot, barefoot business messiah, he’s managed to build and burn his latest startup, office-sharing company WeWork, so spectacularly that even Hollywood has paid attention.
And now he’s back – on a quest to become America’s biggest landowner.
Neumann, we learned this week, is leading a new company that seeks to reinvent apartment living. Details are sketchy, but the company, called Flow, aims to solve the global housing crisis with “community-focused” rentals – so essentially WeWork for tenants.
Flow got off to a good start after receiving one of the most sought-after blessings a new company can get from Silicon Valley: a $350 million investment from venture capital giant Andreessen Horowitz, known as ‘A16Z.
The announcement of the firm’s investment in Flow, which values the company “pre-seed” – that is, it has not yet been launched – at $1 billion shook the world startups. Not only is this A16Z’s biggest investment in a company to date, but it’s also a significant endorsement of Neumann, who has become an entrepreneurial anti-hero. The news immediately lent itself to many jokes on Twitter, and a lot of anger.
After promising to reshape the office world and succeeding in becoming the largest office owner in many cities, including London and New York, WeWork suffered a crash in 2019 when the company turned out to be worth much less than it was. that investors had thought.
The company planned to join the stock market at a valuation of $47 billion, but when investors began scrutinizing the company’s business model and governance structure, its value plummeted and it canceled its plans. WeWork laid off 2,400 employees and Neumann was given $445 million to leave the company.
While the coworking venture was by no means a failure and slowly finding its footing after Neumann, it was a classic example of startup boom and bust and an avatar of trouble to come.
Investors began to realize that, fueled by venture capital, many “unicorn” companies – those valued at over $1 billion – had heavily inflated values and often subsidized the price of services and products. to kill their competitors.
Over the past few years, WeWork’s story has been told time and time again in numerous books, documentaries and a film, many of which have focused on the eccentricities and intensity of Neumann’s leadership.
Lessons have been learned, according to Marc Andreessen, co-founder of A16Z. This week, he described Neumann as “a visionary leader” who had revolutionized commercial real estate and was ready for his next adventure.
“It’s often underestimated that one person fundamentally re-engineered the desktop experience and led a paradigm-shifting global company in the process: Adam Neumann,” Andreessen wrote in a blog post. “We understand how difficult it is to build something like this and we love seeing recurring founders build on past successes by building on lessons learned.
“For Adam, the successes and lessons are many.”
Neumann kept a low public profile in the years after leaving WeWork, but he slowly made more appearances. In November, he appeared at a New York Times DealBook summit where he said WeWork’s growth “went to my head.”
“I had a lot of time to reflect, and there were multiple lessons and multiple regrets,” he said.
In the spring, he spoke to the Financial Times about his new ambitions, including the then-unnamed Flow and his new role as a startup investor. Through his family office, Neumann invests in more than 45 startups and has more than 50 employees, according to the Financial Times.
“The opportunity is great,” Neumann told the newspaper of his new idea. “We started out buying this property, but then I started walking around the buildings, just smelling, and I felt like there was so much more to do to improve the lives of these tenants.
“It felt like, frankly, there was room for more community.”
Even before releasing his Flow idea publicly, a Wall Street Journal report in January revealed that Neumann had quietly purchased 4,000 apartments, valued at more than $1 billion, in major Sunbelt metropolitan areas, including Miami. , Atlanta and Nashville. . Neumann had begun telling friends and associates that he was looking to start a company that would create branded apartments with amenities. One of the Nashville apartments has a saltwater pool and dog park.
It is undeniable that the United States is experiencing a housing crisis. The lack of supply and soaring prices have made home ownership unaffordable for many and rents have soared.
As Neumann pointed out, “If you stop building today, you [would] ran out of houses in less than two months. Crazy, huh? »
Andreessen, too, sees the need for more housing, but not in his backyard. In a 2020 essay on his vision of the future titled “Time to Build,” Andreessen proclaimed, “We should have sparkling skyscrapers and spectacular living environments in all our best cities at levels far beyond what we have now; Where are they?”
“We can’t build enough housing in our cities with booming economic potential – leading to skyrocketing housing prices in places like San Francisco, making it almost impossible for ordinary people to move in. and fill the jobs of the future,” he wrote. .
Despite this statement, Flow’s first apartment is unlikely to be in Atherton, California, the upscale neighborhood of Andreessen. Earlier this month, the Atlantic reported that Andreessen and his wife, Laura Arrillaga-Andreessen, sent a public comment laced with capitalized words against zoning for the multi-family housing development in Atherton.
An effort to increase the housing supply in the area would “MASSIVELY decrease the value of our homes, the quality of life for ourselves and our neighbors, and IMMENSELY increase noise pollution and traffic,” they wrote.
And it’s not just housing advocates who have rolled their eyes at Flow. A16Z is being criticized for giving Neumann heavy support as women and black and Hispanic founders struggle to secure funding. Recent data showed that only 2% of venture capital funds in recent years have gone to underrepresented founders.
“This is disgusting,” tweeted Kate Brodock, CEO of Switch and General Partner of the W Fund. “A16Z’s biggest check goes to a (straight white male) founder of one of the most toxic companies we’ve seen. Companies like this perpetuate over and over again a traditional system that favors a small cohesive whole of founders.
But for all the shock and surprise of Neumann’s resurrection, McKeever Conwell II, founder and managing partner of RareBreed Ventures, said we shouldn’t really be surprised. Neumann is an example of the norm, rather than an exception, in venture capital.
“At the end of the day, as VCs, we are essentially fund managers – we are glorified financial advisers. We take money from wealthy people or groups that have large pockets of capital, and our job is to get them to make more money,” said Conwell, who is black. “Our job is not necessarily to worry about ethics, morality, systemic racism or financial inequality. There are plenty of VCs out there who care, but that’s not the job.
Despite Neumann’s background, Conwell noted that the founder brought generous returns to early WeWork investors who sold out before its crash.
“From a VC’s perspective, if you were a prior investor in WeWork, you made a lot of money,” Conwell said. “It’s very common for VCs to reinvest in people they’ve already invested in, especially people who made them money. Adam Neumann has made a lot of people a lot of money.