Adam Neumann’s latest big idea? To become America’s biggest landlord | WeWork

Adam Neumann presided over one of the vital spectacular enterprise collapses in current historical past. A New Age-spouting, barefoot enterprise messiah, he managed to construct and burn his final startup, the office-sharing firm WeWork, in such spectacular trend that even Hollywood paid consideration.

And now he’s again – on a quest to grow to be America’s greatest landlord.

Neumann, it was reported this week, is on the helm of a brand new firm trying to reinvent condo residing. Particulars are sketchy however the firm, referred to as Movement, goals to deal with the world’s housing disaster with “community-driven” leases – so principally WeWork for renters.

Movement is off to a flying begin after receiving one of the vital sought-after blessings a brand new enterprise may get from Silicon Valley: an $350m funding from enterprise capital large Andreessen Horowitz, referred to as A16Z.

The announcement of the agency’s funding in Movement, which values the “pre-seed” firm – that means it has not but launched – at $1bn rocked the startup world. Not solely is it A16Z’s greatest single funding in a enterprise but, however it’s also a large endorsement of Neumann, who has grow to be an entrepreneurial antihero. The information instantly lent itself to quite a few jokes on Twitter, and a whole lot of anger.

After promising to reshape the workplace world, and efficiently turning into the most important workplace landlord in lots of cities, together with London and New York, WeWork got here to a jarring crash in 2019 when the corporate was revealed to be price a lot lower than traders had thought.

The corporate was planning to hitch the inventory market at a $47bn valuation, however when traders began scrutinizing the corporate’s enterprise mannequin and company governance construction, its worth collapsed and it referred to as off its plans. WeWork laid off 2,400 staff and Neumann was given $445m to depart the corporate.

Whereas the co-working firm is on no account a failure, and is slowly discovering its footing post-Neumann, it was a textbook instance of startup growth and bust and an avatar of hassle forward.

Traders began to grasp that, pumped with enterprise capital money, many “unicorn” firms – these valued over $1bn – had closely inflated values and have been usually subsidizing the worth of providers and merchandise to kill off rivals.

In the previous couple of years, WeWork’s story has been advised again and again in quite a few books, documentaries and a film, lots of which centered on the eccentricities and depth of Neumann’s management.

Classes have been discovered, in line with Marc Andreessen, cofounder of A16Z. This week he described Neumann as “a visionary chief” who had revolutionised industrial actual property and was prepared for his subsequent journey.

“It’s usually under-appreciated that just one particular person has essentially redesigned the workplace expertise and led a paradigm-changing international firm within the course of: Adam Neumann,” Andreessen wrote in a blogpost. “We perceive how tough it’s to construct one thing like this and we love seeing repeat-founders construct on previous successes by rising from classes discovered.

“For Adam, the successes and classes are loads.”

Neumann saved a low public profile within the years since leaving WeWork, however he has slowly been making extra appearances. In November, he appeared at a New York Instances’ DealBook summit the place he mentioned WeWork’s progress “went to my head”.

“I’ve had a whole lot of time to suppose, and there have been a number of classes and a number of regrets,” he mentioned.

Within the spring, he spoke to the Monetary Instances about his new ambitions, together with the then-not-yet-named Movement and his new position as an investor in startups. Via his household workplace, Neumann invests in additional than 45 startups and has over 50 staff, in line with the Monetary Instances.

“The chance is super,” Neumann advised the newspaper about his new concept. “We began by shopping for this actual property, however then I began strolling the buildings, simply feeling, and it felt like there’s a lot extra that may very well be executed to make these tenants’ lives higher.

“It felt like, frankly, there’s room for extra group.”

Even earlier than he got here out publicly along with his concept for Movement, a report from the Wall Avenue Journal in January revealed Neumann had quietly purchased 4,000 residences, valued at greater than $1bn, in massive metropolitan areas within the Sunbelt, together with Miami, Atlanta and Nashville. Neumann had began telling associates and associates that he was trying to construct an organization that will create branded residences that include facilities. One of many residences in Nashville has a saltwater pool and a canine park.

There is no such thing as a arguing that the US has a housing disaster. Lack of provide and hovering costs have made residence possession unaffordable for a lot of and rents have risen sky-high.

As Neumann has identified: “When you stopped building in the present day, you [would] run out of properties in lower than two months. Loopy, huh?”

Andreessen, too, sees the necessity for extra housing, simply not in his again yard. In a 2020 essay on his imaginative and prescient of the long run titled “It’s Time to Construct”, Andreessen proclaimed: “We should always have gleaming skyscrapers and spectacular residing environments in all our greatest cities at ranges method past what we’ve got now; the place are they?”

“We are able to’t construct sufficient housing in our cities with surging financial potential – which ends up in crazily skyrocketing housing costs in locations like San Francisco, making it almost unimaginable for normal individuals to maneuver in and take the roles of the long run,” he wrote.

Regardless of this declaration, it’s unlikely that Movement’s first condo shall be in Atherton, California, Andreessen’s upmarket neighbourhood. Earlier this month, the Atlantic reported that Andreessen and his spouse, Laura Arrillaga-Andreessen, despatched a public remark laced with all-caps phrases towards zoning for multifamily housing improvement in Atherton.

An effort to extend the housing provide within the space would “MASSIVELY lower our residence values, the standard of lifetime of ourselves and our neighbors and IMMENSELY enhance the noise air pollution and site visitors,” they wrote.

And it’s not simply housing advocates who’ve rolled their eyes at Movement. A16Z is coming below criticism for giving a large backing to Neumann as girls and Black and Hispanic founders battle to get funding. Current information has proven that as little as 2% of enterprise capital funds lately have gone to underrepresented founders.

“That is disgusting,” tweeted Kate Brodock, CEO of Change and a basic companion on the W Fund. “A16Z’s largest verify going to a (straight white male) founding father of one of the vital poisonous firms we’ve seen. Corporations like this perpetuate again and again a conventional system that favors a small, homogenous set of founders.”

However for all of the shock and shock of Neumann’s resurrection, McKeever Conwell II, founder and managing companion at RareBreed Ventures, mentioned we shouldn’t actually be stunned. Neumann is an instance of the norm, slightly than an exception, in enterprise capital.

“On the finish of the day, we as VCs are primarily cash managers – we’re glorified monetary advisers. We take cash from wealthy individuals or teams which have massive pockets of capital, and our job is to make them more cash,” Conwell, who’s Black, mentioned. “Our job shouldn’t be essentially to care about ethics, morality, systemic racism or monetary inequalities. There are various VCs who care about that, however that’s not the job.”

Regardless of Neumann’s previous, Conwell famous that the founder introduced beneficiant returns to early traders of WeWork who bought out earlier than its crash.

“From a VC’s perspective, in case you have been an earlier investor in WeWork, you made some huge cash,” Conwell mentioned. “It’s quite common for VCs to reinvest in of us they’ve invested in earlier than, particularly those that have made them cash. Adam Neumann made lots of people some huge cash.”