Adam Neumann’s new real estate startup is valued at $1 Bn even before launch

It came as a surprise to many. In fact, some even called it a “practical joke”. WeWork’s hugely controversial founder Adam Neumann, who was infamously ousted by VCs in 2019 for monetary fraud, mismanagement, and overseeing a toxic work culture, could raise a massive cheque again, especially in a venture bear market — and for a startup that hasn’t even launched yet.

Last evening IST, prominent Silicon Valley VC fund Andreessen Horowitz (a16z), known for its early bets on Airbnb and Twitter, announced a $350 million pre-seed investment in Neumann’s new startup Flow, valuing the soon-to-be-launched residential real estate firm at $1 billion (unicorn).

While a16z’s official blog post did not disclose any financial details of the deal, NYT pegged it at $350 million, citing unnamed sources. This is a16z’s biggest ever cheque in a single round to any founder. 

Explaining its bet on Neumann, who botched up WeWork’s IPO and presided over its fall from a sky-high valuation of $47 billion to the current $4 billion, Marc Andreessen, Co-founder and General Partner at the VC firm, said, “Adam is 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.”

Flow, slated to launch in 2023 as per its rudimentary website, looks to run more than 3,000 apartment units Neumann has purchased across Miami, Fort Lauderdale, Atlanta and Nashville, and offer a branded rental housing experience and community living features to people. This service will be extended to third-party developers as well, according to DealBook.

As remote working grows abundantly in a post-pandemic world, a16z reckons the housing market is ripe for disruption, and trusts “repeat founders” like Neumann to build on their past successes. 

“We understand how difficult it is to build something like this and we love seeing repeat-founders build on past successes by growing from lessons learned… This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders,” Horowitz explained, adding, “For Adam, the successes and lessons are plenty and we are excited to go on this journey with him building the future of living.”

Interestingly, this is a16z's second investment in a Neumann-founded startup this year. Earlier in May, the VC firm had pumped in $70 million into Flowcarbon, a blockchain-based carbon credit platform, which reportedly has no connection with the real estate startup Flow. 

Nonetheless, crypto token $FLOW spiked briefly, on Monday, following the news of a16z’s backing of its namesake company. “Flowcarbon and Flow are separate companies. The token FLOW is unrelated to both,” confirmed WSJ.

a16z has ruffled feathers

Neumann’s ability to raise a big round of VC funding despite his disastrous track record and a global “startup winter” has raised eyebrows, with many calling our a16z for promoting a homogenous set of “male white founders”.

“THIS IS DISGUSTING. @a16z’s largest check going to a (straight white male) founder of one of the most toxic companies we’ve seen. Firms like this perpetuate over and over again a traditional system that favors a small, homogenous set of founders,” tweeted Kate Bedrock, General Partner at W Fund.

Sheel Mohnot, VC at Better Tomorrow Ventures, wrote, “On the one hand, you love to invest in founders with a chip on their shoulder… on the other, there was lots of bad behaviour by Neumann & potential reputational damage by investing, and the price is high.”

Amanda Goetz, Founder, House of Wise, wrote, “Me: can’t raise capital for a proven supplement company with over $1m in sales Adam Neumann: sneezes a new idea and gets $350m from a16z. I hate it here”

Another user tweeted, “Elizabeth Holmes, founder of Theranos, lost investors $1 billion. She faces up to 20 years in prison. Adam Neumann, founder of WeWork, lost investors $11 billion. He then raised $350 million for his next startup.”

“Seasoned VCs have always said that storytelling is the most important skill for a founder.  I always argued for execution, domain knowledge, perseverance etc instead. No more arguments after Flow,” wrote a user.

For a16z, however, Flow is Adam Neumann’s “return to the theme of connecting people through transforming their physical spaces”. 

But is residential real estate ready for disruption, especially the kind mercurial entrepreneurs like Neumann can bring about? Time will tell.

Also read: WeWork divests control in China unit; receives $200 million in funding

Also read: WeWork's Adam Neumann resigns as CEO, gives up majority voting control