Pourquoi le chèque en blanc de 350 millions de dollars donné à Adam Neumann (ex-WeWork) choque la tech

Adam Neumann.

Neither the public disgrace in 2019 when he was kicked out of his own company, WeWork, nor the crash in tech stocks since the beginning of the year seems too powerful to prevent Adam Neumann’s big comeback. The highly controversial co-founder of the coworking nugget, which nearly went bust in 2019 when the bubble around his delusional valuation burst revealing a toxic corporate culture in the process, has just discreetly raised an incredible $350 million ($344 million euros), for his new startup, titled Flow. And not just anyone: the investor is none other than one of the largest 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 largest investment ever made by the company for a start-up. And Flow becomes a de facto unicorn – a startup valued at least $1 billion – even before its commercial launch.

Two years after hitting rock bottom, WeWork finally goes public by partnering with a SPAC

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

Although 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 for a startup rare, whatever its level of maturity, but above all Flow will only be launched in 2023. That is, in a context of global technological crisis where access to funds is every increasingly difficult for entrepreneurs. By launching its project, one of the world’s largest tech funds has written a huge blank check to a startup that has yet to prove anything of its relevance in its market, just on the basis of its leader’s name.

However, Adam Neumann is simply one of the most controversial figures in Silicon Valley history. Today’s charismatic entrepreneur represents less entrepreneurial success than the excesses and disappointments of technology. Certainly, the visionary co-founder of WeWork has revolutionized the world of office real estate and achieved the feat of obtaining a valuation of 47,000 million dollars in 2019, which, not surprisingly, is enough to reassure any investor about his ability to grow a business. . . But the entrepreneur also had a way of life 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 surf company – and was known for organizing decadent parties for his employees based on drugs, alcohol and sex.

The success of WeWork during the Neumann period rested on quicksand: it was a financial bubble, sustained by blows of hundreds of millions of dollars and a discourse around the “work revolution” totally disconnected from the reality of its activities and its own corporate. culture, famous for its toxicity, as brilliantly portrayed in the television series we crashed. The house of cards erected by Adam Neumann logically collapsed on itself. Its initial public offering was called off 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 disastrous takeover by the fund Softbank. He cleaned up Adam Neumann’s crazy investments and then managed to turn the company around to the point of going public in 2021, for a $9 billion valuation. Hit by the tech stock crash, 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 second largest asset class in the world, commercial real estate. “, justifies the fund in a blog entry. ” It is often underestimated that Adam changed the office experience while running an innovative global company. adds Marc Andreessen. The investor only briefly mentions the excesses of Adam Neumann’s lifestyle during the WeWork era. ” The story of Adam and WeWork has been narrated, analyzed and fictionalized in detail and sometimes correctly. We love to see 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

At the moment, we know almost nothing about Flow. Only now Adam Neumann wants to tackle the post-Covid residential real estate market, in the context of the great 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 be part of its board of directors. It has already purchased more than 3,000 apartments in Miami, Atlanta and Nashville, to offer them for rent and support this provision of identical services in all cities, while creating a local and global community of renters.

In other words, a version of WeWork but in residential real estate. Flow’s main contribution would be fluidity, technology and 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 caused mixed reactions in 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 world’s largest asset class, is poised for this change “writes the star-investor.

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

In the end, Adam is a white man who started a company that reached a valuation of billions of dollars. Was there a scam there? Definitely. Did you miss things? Sure. 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 inequalities in access to finance, especially for women and minorities, and white male privilege already in place. Even more so in the context of the technological 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 displeasure on Twitter:

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

I wish women had the opportunity to fuck her 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 didn’t really give this guy another chance. It’s like they’re celebrating Adam Neumann instead of giving him another chance, and that’s what hurts. ».

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

Credibility, Adam Neumann’s main brake

If Adam Neumann achieved this tour de force with Andreessen Horowitz, now the most difficult part remains: to convince future Flow clients and partners, in other words, to inspire confidence. After WeWork, the entrepreneur will find much more mistrust in his storytelling than when he bewitched his interlocutors with his charisma and passion by declining his assignment » which consisted of raise world consciousness » -it was the WeWork logo- with what was really only shared office property.

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