Backing for Adam Neumann’s new firm prompts outrage

Adam Neumann left WeWork, the once globally hyped, now heavily downsized office space-sharing company, amid a cloud of questions about his management.

Less than three years later, he seems ready for a comeback.

The long-haired entrepreneur, whose breathtaking rise and fall has inspired countless articles, multiple books and a television drama starring Anne Hathaway and Jared Leto, made headlines this week for raising hundreds of millions of dollars to support a new real estate venture — this time focused on Apartments.

He also unleashed another firestorm.

Details about Mr. Neumann’s new company called Flow are sparse. In January, The Wall Street Journal reported that Mr. Neumann had acquired interests in more than 4,000 homes across the United States with the goal of creating a “widely recognized home brand with many amenities.”

But this week, Andreessen Horowitz, a famous Silicon Valley venture capital firm, announced it is backing the firm, hailing Mr. Neumann as a “visionary leader” who has “fundamentally reinvented the office experience” and betting he will do the same for the rental period will do.

The New York Times, which first reported on the deal, wrote that Andreessen had invested $350m (£290m) – “the largest single check” the investment firm has written for a start-up. It said the deal valued Mr. Neumann’s new company at more than $1 billion.

“We love it when repeat founders build on past successes by growing from the lessons learned,” Marc Andreessen wrote in a blog.

“We think it’s only natural that Adam, in his first venture since WeWork, would return to the theme of connecting people by 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 poised for just that change.”

Flow, which has not responded to a request for comment, is due to launch next year, according to its website.

Andreessen Horowitz, who has previously supported Mr. Neumann, also did not respond to a request for comment. But the firm’s vote of confidence has other investors raising eyebrows at the high-sounding language surrounding the plans, while others point to the episode as a sign of the relative ease with which white men can raise money compared to women and other underrepresented groups in the tech world .

“There’s a reason this is making waves… Because of the size of the check, because of the unprecedented funding from someone who has been popularized as an immoral businessperson, it generates a more emotional response,” said Allison Byers, founder and CEO of Scroobious, which aims to support start-ups led by underrepresented groups with funding.

She was one of many to take to social media to express their frustration with the investment. “For everyone else, we are held to these impossible standards. That is the outrage.”

And the big bet on Mr. Neumann comes at a time when much of the tech industry is facing a slowdown, making it harder for startups to raise money and leading to layoffs and slowdowns or hiring freezes.

Investor Leslie Feinzaig, founder and chief executive of venture fund Graham & Walker, said the reported size of the investment in a yet-to-be-founded company feels like a “stomach punch”.

“My immediate reaction was, ‘Man, I wish women had the same opportunity to fail spectacularly like Adam Neumann did,'” said Ms. Feinzaig, whose firm has focused on investing in women-founded businesses.

Companies founded entirely by women secured just 2% of venture capital in the US last year — the smallest share since 2016, according to Pitchbook. Companies with black founders accounted for even less, according to Crunchbase.

“Great entrepreneurship is the ability to overcome mistakes and pitfalls. But Andreessen didn’t just give this guy a chance,” Ms. Feinzaig added. “It’s like they’re celebrating Adam Neumann instead of giving him a chance and that part feels hard.”

Despite Mr. Neumann’s obvious strengths, there are broader doubts in the real estate world.

An Israeli-born entrepreneur, Mr. Neumann is known for his charm and charisma, which have helped make WeWork an internationally recognized brand. But in 2019, plans to take stocks imploded when questions about financial losses and links to Mr. Neumann’s personal finances surfaced. He received an exit package worth more than $1 billion, including $200 million in cash.

WeWork finally got listed last year in a deal that valued the company at $9 billion, down from $47 billion at its peak. It’s now worth $4.2 billion.

But Mr. Neumann seems undaunted by the experience — or sees a money-making opportunity that looks too good to pass up.

Rents are rising at a historic fast pace, up 14% in the US in the 12 months to July according to a recent Redfin report, and the high cost of buying a home is pushing more people into the rental market.

But there remains widespread industry skepticism about Mr Neumann’s recent ambitions to shake up a market in which many of the country’s biggest companies are already active, said John Drachman, co-founder of established real estate company Waterford Property Co.

“Adam is clearly an incredible salesman and he can create a story and a vision. He’s been very successful in raising a lot of capital for WeWork,” he said.

But in the real estate world, people still reserve judgment. “There was a big, big skepticism when this came out. There’s a thought, is this WeWork part two? And only time will tell.”