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Adam Neumann, founder and former CEO of WeWork, feels that the career arc is similar to the rise and fall of unicorn dreams. The entrepreneur whose fall from grace attracted global interest found a ladder in the form of a check from Series A Venture Capitalist Andreessen Horowitz.
Andreessen Horowitz announced on Monday that it had written the largest single check to Newman’s new startup Flow. The stealth startup is trying to (re)invent real estate, but WeWork is focused on transforming rental properties rather than commercial properties. Horowitz’s check, valued at more than $350 million, valued the still-unlaunched company at more than $1 billion, The New York Times reported. (Andreesen Horowitz declined to comment beyond the blog post, and Flow did not immediately respond to a request for comment.) It’s unclear how the deal was structured between equity financing or debt financing.
While details remain scarce, the development has received mixed reviews from early stage investors. Some say that’s the real point of the venture capital segment — supporting bold founders — while others note that Newman’s Second Chance is a time when women and founders of color struggle more than ever to find startup capital.
Is it really all about the track record?
Newman’s track record at WeWork looks different depending on who you ask. Much has been made of the culture problem within the company. Neumann spent a lot of money on his office, his wife’s vanity project school, and a wave pool investor, but after the business had been in the works for so long, Neumann wasn’t the one left holding the bag.
The company fell from $47 billion to ~$8 billion during Newman’s tenure. WeWork has laid off thousands of workers due to its own budget deficit, and in 2018 He was fired as CEO in 2019 by his own investors. They still paid him handsomely to leave, though — his exit package was worth more than $1 billion.
A post-game analysis of WeWork’s failed IPO attempt focuses on the far-reaching parts of its vision, from reporting “community-adjusted EBITDA” to announcing its mission to “raise global consciousness.”
But the company finally made its public debut through a SPAC in late 2021, albeit to a much lower valuation and significantly less fanfare. Despite the public criticism, WeWork’s early investors still benefit from backing the company, McKever Conwell, founder of RedRed Ventures, which backs seed and pre-seed companies, told TechCrunch.
“At the end of the day, Adam is a white guy who founded a company and became a multi-billion dollar company. Now, were there any tricks in there? for sure. Are some things wrong? for sure. But I think what people forget is that if you’re an early investor, you still got paid, which we weren’t,” Conwell said.
Conwell says that given the weight VCs place on a founder’s network at the seed level, it’s understandable why a firm like a16z would want to at least trust a founder like Neumann to build multibillion-dollar real estate. Business – what you have done in the past.
“If you look at the history of entrepreneurs, successful technology founders, most of these founders don’t have their first big hit. It’s like their third, or fourth, or fifth company. [that succeeds]” said Conwell
Especially in tough economic times, according to Conwell He pointed out on Twitter, asset managers tend to pile into what they see as “safe” investments. That seems to be what a16z is doing with its bet on Neumann, he added.
“Companies like Andreessen are only going to focus on the small pockets [of opportunities] It’s a playbook where you know you can make money. They know it works, it’s the playbook they’re selling to their investors. It’s a playbook they never change. It doesn’t matter, because if you don’t change it, you’re still winning,” Conwell said.
Vision
As far as vision goes, revitalizing the rental real estate market is not a unique idea. With over $100 million in venture capital investment, it’s a co-living company that plays shared property manager for a collection of apartments and houses. The startup, ironically, operates one of the former WeLives, which were WeWork dorm-like rental properties.
“Whatever you think about Numan, WeWork is innovative and defines the category,” co-founder Brad Hargreaves, who returned as the company’s CEO two weeks ago, told TechCrunch in an email.
I believe we will see more of the “value-heavy” corporate deals,” Hargreaves continued. “VCs (if you can call them that nowadays) have a lot of capital to deploy, and it’s clear that big change in some industries doesn’t just come from light-touch software innovation,” Hargrave said.
At the same time, Hargreaves hints that Newman’s New Deal is rich. “It’s a hell of a company to rank above,” he said, referring to how Alliance Residential, whose check size was 110,000 apartments, was bought by Grester for $200 million. FSV, which provides asset management services, is worth just $6 billion and has 1.5 billion units and dozens of brands. While it’s unclear what percentage of the check will be debt-backed and equity financing, he thinks the deal likely isn’t structured like a traditional business deal.
Kate Brodock, CEO of Switch and general partner at W Fund, called the deal. “disgusting”
“This is one of the biggest and most famous companies out there and I just couldn’t understand it,” Brodock said in an interview with TechCrunch. “This is like someone waking up and being like, how many boxes can I check that takes us back?”
Alison Byers, founder of Scroobious, a platform that aims to scale startups and make founders more supportive, says she feels muted anger.
“This sense of acceptance and helplessness is almost learned. Or, like trauma, we’ve all been through so much that it no longer has the same impact,” she told TechCrunch via Twitter DMs. “To people who have opened their eyes to the systemic issues of VC funding in the last couple of years, this all seems new and scary, but we’ve been dealing with it forever.”
Byers added: “It’s a matter of fact and I’m not going to let it consume my day. [because] I do my female founder load as my regular load.”
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