Neumann, ousted from his $47B empire, wins high-profile backing for a residential startup
Adam Neumann is back. The Israeli entrepreneur suffered a spectacular fall from grace after building WeWork into a $47 billion empire.
Now he’s embarking on a new venture, to transform the residential rental real estate market, and he has reportedly secured $350 million in funding.
Neumann, 43, a former captain in the Israeli Navy, founded WeWork in New York in 2010 as a network of co-working spaces.
It became the biggest startup success in the USA, expanding to 23 countries and employing 14,500 people at its peak.
But it came crashing down in 2019. Neumann was ousted as CEO amid allegations of gross mismanagement and a toxic work culture, ahead of an abortive IPO (initial public offering). WeWork was described it as the most over-valued company in the world.
SoftBank, the Japanese multinational conglomerate holding company that had invested $18.5 billion in the company, dropped its valuation – from $47 billion to just $5 billion.
WeWork’s purchase of a $60 million Gulfstream G650 business jet was cited as an example of Neumann’s excessive spending.
And the company’s refusal to reimburse employees for meals that contained pork, poultry, or red meat was cited as an example of his erratic decision making. But the biggest concern was the company’s failure to make money. In the third quarter of 2019 it lost $1.25 billion.
Neumann’s spectacular rise and fall has been well documented in the press, in books and on TV. He was recently portrayed by Jared Leto in the Apple TV+ drama series WeCrashed and was the subject of the Hulu documentary WeWork: Or the Making and Breaking of a $47 Billion Unicorn.
Admirers describe him as a visionary and a charismatic genius. Critics use strong language and are far less complimentary.
But like him or loathe him, he’s now making a comeback. He’s bought more than 3,000 apartment units in Miami, Fort Lauderdale, Atlanta and Nashville, according to a New York Times report yesterday. And after sparking a revolution in office space, he’s aiming to do something similar in residential lettings.
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His new company, called Flow, aims to create a utopia for remote workers, offering a community-style living to accommodate the workforce of the future. It’s already been valued at $1 billion, the newspaper says, ahead of its launch next year.
Neumann, who still owns a 10 per cent stake in WeWork, has won backing from Andreessen Horowitz, a Silicon Valley venture capital firm that is regarded as royalty among early-stage investors, and which is making its biggest single investment.
“We are excited to partner with Adam Neumann and his colleagues on Flow,” writes Marc Andreessen, Co-founder and general partner, in a blog entry on the company’s website.
He describes Neumann as “a visionary leader who revolutionized the second largest asset class in the world — commercial real estate — by bringing community and brand to an industry in which neither existed before.”
And he says Neumann will now bring a sense of community to people’s living space. “We think it is natural that for his first venture since WeWork, Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time: their homes. Residential real estate — the world’s largest asset class — is ready for exactly this change.”
Flow, the new company, will address what Andreessen describes as the “soulless experience” of renting an apartment in an age when hybrid working largely removes the need to live near a workplace.
“Many people are voting with their feet and moving away from traditional economic hub cities to different cities, towns, or rural areas, with no diminishment of economic opportunity,” he writes.
But a scattered workforce means they miss out on in-office social bonding and friendships. He describes the problem but has yet to provide a detailed account of how Flow will address it.