Why the $350 million blank check given to Adam Neumann (ex-WeWork) shocks tech

Neither the public disgrace in 2019 when he was kicked out of his own company, WeWork, nor the crisis in tech stocks since the start of the year seem too powerful to prevent Adam Neumann’s big comeback. The very controversial co-founder of the nugget of coworking, who almost went bankrupt in 2019 when the bubble around his delusional valuation burst revealing in passing a toxic corporate culture, has just quietly raised the incredible sum of 350 million dollars (344 million euros), for its new startup, entitled Flow. And not from just anyone: the investor is none other than one of the biggest funds in Silicon Valley, the venerable Andreessen Horowitz, known for his investments in Airbnb, Facebook, Lyft, Slack, GitHub, Instagram or Skype. This is, by the way, the biggest investment ever made by the firm for a start-up. And Flow becomes in fact a unicorn -startup valued at least 1 billion dollars- even before its commercial launch.

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Huge blank check for a startup that hasn’t proven anything yet

While it is quite common for an experienced entrepreneur, especially if he has already been successful, to easily raise funds for his new project, the Neumann case is striking. Not only is the amount of 350 million dollars rare for a startup whatever its level of maturity, but above all Flow will only launch in 2023. In other words, in a context of global tech crisis where access to funds is becoming more difficult for entrepreneurs launching their project, one of the largest tech funds in the world has signed a huge blank check to a startup that has yet to prove anything of its relevance in its market, just on the basis of the name of its leader.

However, Adam Neumann is quite simply one of the most controversial figures in the history of Silicon Valley. The charismatic businessman today embodies less entrepreneurial success than the excesses and disillusions of tech. Certainly, the visionary co-founder of WeWork has shaken up the world of office real estate and achieved the feat of obtaining a valuation of 47 billion dollars in 2019, which, logically, is enough to reassure any investor on its ability to grow a business. But the entrepreneur also had a way of life that was incompatible with the sustainability of a business. The man who dreamed of being immortal and becoming the first trillionaire in history, gave in to his whims -WeWork had invested in lunar projects such as a school or a surfing company- and was known to organize for its employees decadent parties based on drugs, alcohol and sex.

The success of WeWork during the Neumann period rested on quicksand: it was a financial bubble, maintained with the blows of hundreds of millions of dollars and a discourse around the “labour revolution” totally disconnected from the reality of its activities and of its own corporate culture, renowned for its toxicity, as brilliantly depicted in the TV series WeCrashed. The house of cards set up by Adam Neumann therefore logically collapsed on itself. Its IPO was canceled and the company lost $40 billion in valuation in a matter of weeks in the fall of 2019, leading to the co-founder’s firing and a disaster takeover by the Softbank fund. He cleaned up the crazy investments of Adam Neumann and then managed to turn the company around to the point of going public in 2021, for a valuation of 9 billion dollars. Hit by the crisis in tech stocks, the company is now only worth half.

But Andreessen Horowitz prefers to ignore the excesses of Adam Neumann to focus on the value he was able to create. Adam is a visionary leader who has revolutionized the world’s second largest asset class, commercial real estate “, justifies the fund in a blog post. ” It is often underestimated that Adam changed the office experience while running a groundbreaking global company. adds Marc Andreessen. The investor only briefly touches on the excesses of Adam Neumann’s lifestyle during the WeWork era. ” Adam and the WeWork story has been chronicled, analyzed, and fictionalized in detail and at times correctly. We love seeing serial entrepreneurs build on their past successes by learning from their mistakes. Adam was very successful and took many lessons “, he eludes.

Flow, a vague concept

For the moment, we know almost nothing about Flow. Just that Adam Neumann now wants to tackle the post-Covid residential real estate market, in the context of the Big resignation » of employees that has hit the United States since 2020. According to the New York Times, the startup will launch in 2023 and Marc Andreessen will sit on its board of directors. It has already bought more than 3,000 apartments in Miami, Atlanta and Nashville, in order to offer them for rent and support this provision of identical services in all cities, while creating a local and global community of tenants.

In other words, a version of WeWork but in residential real estate. The main contribution of Flow would be the fluidity, the technology and the associated services. According to the New York Times, tenants could even receive part of the value of the apartment after occupying it for a certain period of time. The leasing model is also mentioned, with the possibility of buying the apartment at a lower price after a few years.

Reactions between pragmatism and disgust

The announcement of this record funding for a startup that has yet to prove anything has sparked mixed reactions from the tech ecosystem. For Marc Andreessen, “ it’s only natural that for his first project since WeWork, Adam returns to the theme of connecting people through transforming their physical space and building communities where people spend the most time: their homes. The residential real estate market – the largest asset class in the world – is ready for this change “, writes the investor-star.

The more pragmatic -cynical?- agree with him. Asked by the American site TechcrunchMcKeever Conwell, the founder of the Rare Breed fund which had invested in WeWork and lost money there, understands why Andreessen Horowitz chose to ignore the Adam Neumann escapades:

In the end, Adam is a white man who started a company that achieved a multi-billion dollar valuation. Was there a scam there? Definitely. Did he miss things? It’s certain. But I think people forget that if you were an early investor in WeWork, which I wasn’t, you made a lot of money. »he explains.

But the announcement above all sparked controversy. For many investors, entrepreneurs, and tech watchers, it underscores the inequalities in access to finance, especially for women and minorities, and the white male privilege already introduced. All the more so in the context of the tech crisis, and while startups founded solely by women only raised 2% of fundraising in the United States last year, the lowest proportion since 2016. .

Investor Kate Brodock, committed to gender equality in the very masculine world of tech, posted her disgust on Twitter:

[C’est écœurant. @a16z’s [le compte Twitter du fonds Andreessen Horowitz, Ndlr] gives his biggest check to a (heterosexual white male) founder of one of the most toxic companies that has ever existed. Such firms perpetuate again and again a traditional system that favors a small homogeneous group of founders]

I wish women had the opportunity to screw up as spectacularly as Adam Neumann », adds investor Leslie Feinzaig. Who continues: Great entrepreneurship is the ability to learn from mistakes and come back. But Andreessen Horowitz actually didn’t give this guy another chance. It’s like they’re celebrating Adam Neumann instead of just giving him another chance, and that’s what hurts ».

In the real estate sector too, where initiatives to reinvent residential housing abound but where entrepreneurs often struggle to raise enough funds, Andreessen Horowitz’s huge check divides. On the BBC, John Drachman, the co-founder of the Waterford Property Company, displays his skepticism. Adam is clearly an amazing salesperson and he can create a pitch and a vision. He managed to raise a lot of money for WeWork. But we think, is this WeWork part 2? Only time will tell ».

Credibility, Adam Neumann’s main obstacle

If Adam Neumann succeeded in this tour de force with Andreessen Horowitz, now remains the most difficult: to convince future customers and partners of Flow, in other words to inspire confidence. After WeWork, the entrepreneur will encounter much more distrust vis-à-vis his storytelling than when he charmed his interlocutors with his charisma and his passion by declining his assignment » which consisted of raise the consciousness of the world » -it was the logo of WeWork- with what was in fact only a property of shared offices.

Will Adam Neumann once again be able to create enthusiasm for a concept that looks a little too much like WeWork but in residential housing? Especially since the entrepreneur is very busy: he also recently launched another startup, Flowcarbon, in the reputedly very speculative field of crypto. The concept : “tokenize” on the blockchain the carbon credits issued and purchased by companies to meet their legal obligation to offset their carbon emissions. The objective: to prevent fraud, because each carbon credit is unique and authenticated via the blockchain, and the credits are exchanged via the platform. For this concept in tune with the times, Neumann had already managed to raise 38 million dollars by selling its tokens and 32 million dollars from investors like Samsung Next or a16z crypto, the crypto fund… of Andreessen Horowitz .