Tech industry reacts to a16z-backed Adam Neumann real estate comeback – TechCrunch


The career of WeWork co-founder and former CEO Adam Neumann has been synonymous with the rise and eventual fall of unicorn dreams. The entrepreneur, whose fall from grace has sparked worldwide interest, has just found a ladder in the form of a check from famed venture capitalist Andreessen Horowitz.

Andreessen Horowitz announced on Monday that he had written his biggest check to date at Neumann’s new startup, Flow. The stealth startup is trying to reinvent real estate (again), but instead of commercial properties, which WeWork has focused on, Neumann is looking to revolutionize rental properties. According to the New York Times, Horowitz’s check, which is said to exceed $350 million, values ​​the yet-to-be-launched company at more than $1 billion. (Andreessen Horowitz declined to comment beyond the blog post, and Flow did not immediately respond to request for comment.) It is unclear how the deal is structured between equity financing or debt financing. .

While details remain scarce, the development has met with a range of opinions from early-stage investors, whose entire job it is to back outlier founders with high odds of success. Some say that’s the exact purpose of the venture capital asset class — backing bold founders — while others note that Neumann’s second chance comes as women and founders of color struggle more than never to get start-up capital.

Is it really a matter of prize list?

Neumann’s background at WeWork can be seen differently depending on who you ask. Much has been made of the cultural malaise within the company. Neumann spent the investors’ money on copious amounts of booze for the office, a school for his wife’s vanity project, and a wave pool, but when the company finally imploded ahead of its planned IPO of long time, Neumann was no longer the one holding the bag.

The company saw its valuation plummet from $47 billion at its peak to around $8 billion under Neumann’s tenure. WeWork laid off thousands of employees in part because of his own fiscal recklessness, and he was eventually forced out as CEO by his own investors in 2019. They still paid him handsomely to leave, though – his exit package was worth over $1 billion.

Post-game analysis of WeWork’s failed IPO attempt focused on some of the more outlandish parts of its vision, from the “community-adjusted EBITDA” statement. at the announcement of his intention to “elevate the conscience of the world”.

But the company eventually made its public debut via a SPAC in late 2021, albeit at a much lower valuation and significantly less fanfare. Despite public criticism, WeWork’s early investors have always had the company’s backing, Rare Breed Ventures founder McKeever Conwell, whose company backs seed and pre-plant companies, told TechCrunch. seeds.

“At the end of the day, Adam is a white guy who built a company and got a multi-billion dollar valuation. Now was there some trickery in there? Sure. Some things he did wrong “Of course. But I think what people forget is that if you were an early investor, which we weren’t, you still got paid,” Conwell said.

Conwell said that given the weight that VCs place on a founder’s network at the seed stage, it’s understandable that a company like a16z would want to trust a founder like Neumann, at least when he’s on his way. It’s about building multi-billion dollar real estate. business – something he has done before.

“If we look at the history of entrepreneurs, founders of successful technologies, many of the most important results of these founders are not their first thing. It is like their third, or fourth or fifth company. [that succeeds]”Conwell said.

Particularly during tough economic times, like Conwell highlighted on Twitter, asset allocators tend to pile money into what they consider to be “safe” investments. That’s exactly what a16z seems to be doing with its bet on Neumann, he added.

“Companies like Andreessen are only going to focus on a small pocket [of opportunities] in which they know they know how to make money… It’s a playbook. They know it works, it’s a playbook they can sell to their investors. It’s a playbook they never change. It doesn’t matter because if they don’t change anything, they always win,” Conwell said.

Vision

In terms of visions, renovating the rental property market is not a one-size-fits-all idea. With over $100 million in venture capital investment, Common is a cohousing company that acts as a property manager in a suite of apartments and houses. Ironically, the startup operates one of the old WeLives, which was WeWork’s dormitory version of rental properties.

Co-founder Brad Hargreaves, who retired as the company’s chief executive less than two weeks ago, told TechCrunch via email that “whatever you think of Neumann, WeWork was innovative and has defines the category”.

“I think we’re going to see more ‘asset-heavy’ venture capital deals happening,” Hargreaves continued. “VCs (if you can even call them that these days) have a lot of capital to deploy, and it’s clear that massive change in some industries won’t come from lightweight software innovation alone,” Hargreaves said.

At the same time, Hargreaves hinted that Neumman’s new contract is rich. He said the size of the check is “a hell of a stack of preferences to layer on top of this type of business,” pointing to how Alliance Residential, which owned 110,000 apartments, was bought for $200 million by Greystar. FSV, which offers property management services, is valued at just $6 billion and has 1.5 billion units and dozens of brands. He thinks it’s likely the deal won’t be structured like a traditional venture capital deal, although it’s unclear what percentage of the check would be debt financing versus equity financing.

Kate Brodock, CEO of Switch and general partner of the W Fund, called the deal “repugnant.”

“It’s one of the biggest, most remarkable companies out there and I just can’t fathom,” Brodock said in an interview with TechCrunch. “It’s like someone woke up and they were like, how many boxes can I tick to set us back?”

Allison Byers, the founder of Scroobious, a platform that aims to diversify startups and make founders more likely to venture out, described feeling a dull rage.

“There is this undertone of acceptance and almost learned helplessness. Or like a trauma that we’ve all been through so much, it just doesn’t have the same impact anymore,” she told TechCrunch on Twitter DM. “This all sounds new and horrifying to those who have opened their eyes to the systemic issues in venture capital funding over the past couple of years, but we’ve been dealing with it forever.”

Byers added: “It’s really just a matter of fact and I can’t let it consume my day. [because] I have my normal load of founder shit to do.

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