WeWork founder Adam Neumann’s new startup is backed by Andreessen Horowitz

Adam Neumann is back.

The WeWork founder, whose spectacular rise and fall has been chronicled in books, documentaries and a scripted TV series, has a start-up and a surprising backer.

Mr. Neumann is starting a new company called Flow, focused on the residential real estate market, the DealBook newsletter reports. Most notably, he has financial backing from Andreessen Horowitz, the prominent Silicon Valley venture capital firm that was an early investor in everything from Facebook to Airbnb.

Andreessen Horowitz is considered royalty among early-stage investors, so his endorsement is a powerful signal of support and perhaps a rebuke to Neumann’s critics, who have described his WeWork leadership as a warning against corporate hubris.

The company’s investment in Flow is about $350 million, according to three people briefed on the deal, valuing the company at more than $1 billion before it even opens its doors. The investment is the largest single check Andreessen Horowitz has ever written in a funding round for a company.

Flow is expected to launch in 2023, with the venture capital giant’s co-founder Marc Andreessen joining its board, these people said. Mr. Neumann plans to make a significant personal investment in the company in the form of cash and real estate assets.

“It is often underestimated that only one person has fundamentally redesigned the office experience and led a paradigm-shifting global company in the process: Adam Neumann,” Andreessen wrote in a note posted on his company website Monday. , explaining your rationale for investing in the company.

At its peak, WeWork was valued at some $47 billion. After a failed public offering and stories of mismanagement, it spectacularly imploded. Mr. Neumann was kicked out of WeWork in 2019, but walked away with hundreds of millions of dollars. Today, WeWork has a market value of around $4 billion.

Mr. Andreessen wrote that “we love to see repeat founders build on past successes by growing from lessons learned.” For Neumann, he added, “successes and lessons abound.”

Mr. Neumann, who has purchased more than 3,000 apartment units in Miami, Fort Lauderdale, Atlanta and Nashville, aims to rethink the rental housing market by creating a branded product with consistent amenities and community features. Flow will operate the properties that Mr. Neumann has purchased and will also service him to new developments and other third parties. The exact details of the business plan could not be known. (Flow is not related to crypto firm Flowcarbon, which was also co-founded by Mr. Neumann and raised $70 million in May in a round led by Andreessen Horowitz.)

It appears that Mr. Neumann’s business will follow a very different model from WeWork’s, which involved renting office space on a long-term basis and then leasing it back to clients at higher rates for shorter terms. This created its own risks if WeWork couldn’t find tenants.

In Flow’s case, the business is effectively a service owners can partner with for their properties, similar to how a hotel owner might contract with a branded hotel chain to operate the property.

Flow’s investment thesis appears to reflect economic and social trends that are driving more people to rent houses rather than buy them at a time of housing shortages. One-third of Americans rent their homes, and more than half of Americans living in urban settings are renters.

Mr. Neumann made a brief foray into the residential real estate market during his time at WeWork. The company created a division called WeLive that offered experiences and short-term rentals. The business was derided as a social experiment gone haywire and quickly closed, one of the few divisions, like WeGrow and Rise by We, that took WeWork away from its core focus. Mr. Neumann has said that the company expanded into too many areas too quickly.

The investment in Flow, while large by venture capital standards, is still far less than the $9 billion Masayoshi Son, the founder of SoftBank, poured into WeWork with a mandate that Neumann grow the company as soon as possible. as fast as possible. When WeWork nearly collapsed, Son poured another $9 billion into the company to shore up its finances, leading to Neumann’s ouster.

Mr. Andreessen said in his memo that he was particularly interested in Flow because he believed rental real estate was ripe for disruption, especially now that more people are working from home and “will experience much less, if any, of the office”. social ties and friendships that local workers enjoy.”

He also hinted that the company could try to address one of the biggest challenges renters face: “You can pay rent for decades and still have zero equity, nothing.” He added: “In a world where limited access to home ownership continues to be a driving force behind inequality and anxiety, providing renters with a sense of security, community and genuine ownership has transformative power for our society.” .

It’s unclear whether Flow will offer a rent-to-own program or some other mechanism for tenants to build capital. Andreessen and other tech moguls recently opposed a plan for multifamily housing near their properties in the city of Atherton, California.

Mr. Neumann declined to comment. In an interview at DealBook Summit last year, he said of his rise and fall at WeWork that “I’ve had a lot of time to think, and there have been multiple lessons and multiple regrets.”

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