HomeBusinessAdam Neumann’s last big idea? Becoming America’s Largest Landlord | We work
Adam Neumann’s last big idea? Becoming America’s Largest Landlord | We work
August 20, 2022
ADam Neumann presided over one of the most spectacular corporate collapses in recent history. A New Age-squirting, barefoot messiah, he managed to build and burn his latest startup, the office-providing company WeWork, in such a spectacular way that even Hollywood paid attention.
And now he’s back – on a quest to become America’s greatest landlord.
Neumann, it was reported this week, is at the helm of a new company looking to reinvent apartment living. Details are vague, but the company, called Flow, aims to tackle the global housing crisis with “community-driven” rental — basically WeWork for renters.
Flow is off to a flying start after receiving one of the most sought-after blessings a new venture could get from Silicon Valley: a $350 million investment from venture capital giant Andreessen Horowitz, known as A16Z.
The announcement of the company’s investment in Flow, which values the “pre-seed” company — meaning it hasn’t launched yet — at $1 billion shocked the startup world. Not only is it A16Z’s largest investment in a venture to date, but it’s also a significant endorsement of Neumann, who has become an entrepreneurial anti-hero. The news immediately lent itself to plenty of jokes on Twitter and a lot of anger.
After promising to reshape the office world and successfully become the largest office rental company in many cities, including London and New York, WeWork suffered a shocking crash in 2019 when it was found to be worth far less than investors had imagined.
The company had planned to enter the stock market at a valuation of $47 billion, but when investors scrutinized the company’s business model and corporate governance structure, its value plummeted and saw its plans called off. WeWork laid off 2,400 employees and Neumann was paid $445 million to leave the company.
While the co-working company is by no means a failure and is slowly gaining a foothold after Neumann, it was a textbook example of startup boom and bust and an avatar of trouble ahead.
Investors began to realize that, pumped up with venture capital, many “unicorn” companies — valued at over $1 billion — had inflated values and often subsidized the price of services and products to knock out competitors.
In recent years, WeWork’s story has been told over and over in countless 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 only one person has fundamentally redesigned the office experience and led a paradigm-changing 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 are thrilled to see returning founders build on past successes by growing from lessons learned.
“For Adam, the successes and lessons are enough.”
Neumann kept a low public profile in the years since he left WeWork, but he’s slowly making more appearances. In November, he appeared on a New York Times DealBook summit, where he said WeWork’s growth “went to my head.”
“I’ve had a lot of time to think, and there have been several lessons and I’ve regretted several of them,” he said.
In the spring, he spoke to the Financial Times about his new ambitions, including the then-unmentioned Flow and his new role as an investor in startups. 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 huge,” Neumann told the newspaper about his new idea. “We started by buying this property, but then I started walking through the buildings, just feeling, and it felt like so much more could be done to improve the lives of these tenants.
“It felt like, frankly, there was room for more community.”
Even before coming out publicly with his idea for Flow, a report by the Wall Street Journal in January revealed that Neumann had quietly purchased 4,000 apartments, worth more than $1 billion, in major metropolitan areas in the Sunbelt, including Miami. , Atlanta and Nashville . Neumann began telling friends and acquaintances that he was looking for a company that would create branded apartments with amenities. One of the Nashville condos has a saltwater pool and dog park.
There is no argument that the US has a housing crisis. Lack of supply and rising prices have made owning a home unaffordable for many and rents have skyrocketed.
As Neumann noted, “If you stop building today, [would] be without houses in less than two months. Crazy, huh?”
Andreessen also sees the need for more homes, just not in his backyard. In a 2020 essay on his vision for the future, titled “It’s Time to Build,” Andreessen stated, “We should have gleaming 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 homes in our cities of growing economic potential — resulting in insanely skyrocketing house prices in places like San Francisco, making it nearly impossible for ordinary people to move in and take the jobs of the future,” he wrote. .
Despite this statement, Flow’s first apartment in Atherton, California, the upscale neighborhood of Andreessen is unlikely to come. Earlier this month, the Atlantic reported that Andreessen and his wife, Laura Arrillaga-Andreessen, had sent a public comment, laced with capital letters, against zoning plans for multi-family housing in Atherton.
An effort to increase the housing supply in the area would “HUGE decrease our home values, our and our neighbors’ quality of life, and IMMEDIATELY increase noise and traffic,” they wrote.
And it’s not just housing lawyers who have rolled their eyes at Flow. A16Z has come under criticism for giving significant support to Neumann as women and black and Hispanic founders struggle to get funding. Recent data has shown that only 2% of venture capital funds have gone to underrepresented founders in recent years.
“This is disgusting,” tweeted Kate Brodock, Switch CEO and a general partner at the W Fund. “A16Z’s biggest check goes to a (straight white male) founder of one of the most toxic companies we’ve seen. These types of companies, time and again, perpetuate a traditional system that favors a small, homogeneous group of founders.”
But for all the shock and surprise of Neumann’s resurrection, McKeever Conwell II, founder and managing partner at RareBreed Ventures, said we shouldn’t be really surprised. Neumann is an example rather than an exception in the field of venture capital.
“Ultimately, as VCs, we are essentially money managers – we are glorified financial advisors. We take money from rich people or groups that have a lot of capital, and our job is to make more money for them,” said Conwell, who is Black. “It is not our job to worry about ethics, morality, systemic racism or financial inequalities. There are a lot of VCs who care about that, but that’s not the job.”
Despite Neumann’s past, Conwell noted that the founder delivered generous returns for early WeWork investors, who sold out before the crash.
“From a VC perspective, if you were a previous investor in WeWork, you would have made a lot of money,” said Conwell. “It’s very common for VCs to reinvest in people they’ve invested in before, especially those they’ve made money from. Adam Neumann has made a lot of people a lot of money.”