WeWork’s Adam Neumann has another billion dollar idea…

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. We work. You might be familiar with that name or seen the signs for the co-working spaces in your city. Because over the past decade, they've sprung up all around the world. The company soared to a $47 billion valuation before crashing back down to earth after a failed stock market listing and a number of red flags. The founder, Adam Neumann, was forced out. The books were written. Apple made the TV show, and many people thought this was the end of the story. But this week, Adam Neumann made headlines again after raising $350 million from one of Silicon Valley's biggest names. That's right. He's leading another billion dollar Start-Up. And this time, he's not disrupting the places we work. He's disrupting the places we live. 

Audio clip: [00:00:57] There's an energy that you feel that energy, something that's hard to explain. It's something that either you feel it or you don't. We like to call it the we generation. 

Sascha: [00:01:06] It's Wednesday, the 17th of August. And today I want to know what is Adam Neumann's new idea and is it worth $350 million? To do this, I'm joined by my colleague here at Equity Mates is Darcy Cordell. 

Darcy: [00:01:21] Thank you, Sascha. I found this story a fascinating one. So looking forward to getting into it. 

Sascha: [00:01:25] Absolutely. I certainly am fascinated by the Adam Neumann story. I voraciously consumed the podcast and the Apple TV show. But what else do we need to know about Adam Neumann before we get into this story that I might have missed in the introduction? 

Darcy: [00:01:41] Adam Neumann is the co-founder and former CEO of WeWork, which is the co-working office space company founded in 2010. WeWork was one of the hottest start-ups of the past decade and expanded to 756 locations in 38 countries. And as the company grew, it attracted more and more investors. And today we work has raised $22 billion in funding, but they didn't just spend that money raised on more co-working spaces. Neumann and his wife Rebecca had some seriously wild ideas. We Grow. 

Audio clip: [00:02:14] Is teaching the children how to adapt to the rapidly changing world around us that we all. 

Darcy: [00:02:20] See. There was we grow a private kindergarten started by we work with tuition ranging from $22000 to $42000 a year. There was raised by way a gym and wellness centre that we were sold as, quote, the future of well-being. And we live we work to attempt to take the co-working concept and create co-living. 

Audio clip: [00:02:40] So far, there are only two wee lives in the world, one in D.C. and one on Wall Street, where Nick lives with 400 others. We work exploded in popularity along with the Start-Up Boom under the premise that millennials like Nick will sacrifice personal space for communal luxury. 

Darcy: [00:02:55] And there are also plenty of wild parties thrown in their time. 

Sascha: [00:02:58] Sascha Yeah, the wild party certainly had a reputation and we're going to be returning to that Co-Living concept a little bit later. But before then, let's close out the Adam Neumann and we work story. It all came crashing down in 2019 after we work filed for an initial public offering an IPO and some pretty poor governance started to be revealed about this massive company.

Darcy: [00:03:24] Yeah, it's fair to say there are a number of red flags for investors. 

Sascha: [00:03:28] It's all my stuff of legend right now. How recklessly we work spent its money on things from a company that makes wave pools to a company that makes superfoods led by a guy that Adam met while he was surf. 

Speaker 6: [00:03:40] And there was a small line in just a couple of lines about how Adam Neumann, the CEO, he had personally purchased the trademark to the word we and had sold that back to his own company for $5.9 million. 

Darcy: [00:03:52] We work with leasing buildings that Neumann owned. The company even started reporting metrics that just meant nothing. For example, community adjusted EBITDA rather than profit. And because of all this, we worked $47 billion stock market listing collapsed and Neumann was forced out of the company. [00:04:08][16.9]

Sascha: [00:04:09] Well, he was paid over $1 billion by we work. So if that's being forced out, you can feel free to force me out of this podcast at any time. Darcy. So we work restructured and regrouped and then a year or so later it did list on the stock market at a much more modest $9 billion valuation. [00:04:31][22.0]

Darcy: [00:04:32] And even that number has been cut in the recent stock market sell off. It's now worth about $4 billion. WeWork, SoftBank took a controlling stake in WeWork to actually bail them out, and that was worth around eight and a half billion dollars. But that investment has not fared very well so far. [00:04:49][16.6]

Audio clip: [00:04:49] I think we work as sort of both a little bit of an outlier in this era of technology, start-ups, but also kind of the perfect encapsulation of what this era of sort of easy money and no rules has delivered in in Start-Up Land. [00:05:05][15.3]

Sascha: [00:05:05] And that kind of felt like the end of the story. As I said, that was a great podcast. We crashed and then that was turned into an Apple TV series. So seemed like Hollywood agreed. And they wrapped up this story in a neat three act arc. So I don't think we were the only people to be surprised to see Adam Neumann back in a big way this week. Darcy, what were the headlines? [00:05:27][22.4]

Darcy: [00:05:28] Venture capital firm Andreessen Horowitz is investing $350 million in just an idea. It's one of the largest ever investments for an early stage. Start-Up Sascha, this is pretty incredible in an environment that's becoming a lot harder for Start-Up to raise money. The New York Times reports that this is Andreessen Horowitz, biggest check for any company in any round ever. It's just a massive investment. And it's actually the second time that Andreessen Horowitz has invested with Adam Newman earlier this year. They invested in Flow Carbon, which is another Start-Up co-founded by Neumann that issues cryptocurrencies backed by carbon credits. Haven't quite right to my head around that one yet either. [00:06:09][41.0]

Sascha: [00:06:11] Wow. Andreessen Horowitz clearly feels strongly about Neumann's ideas. CEO Marc Andreessen justified his investment on their website by saying, quote, It's often underappreciated that only one person has fundamentally redesigned the office experience and led a paradigm changing global company in the process. Adam Neumann So on that note, following that strong statement by CEO Marc Andreessen, let's take a quick break and then unpack what we know about this most recent idea. [00:06:42][31.7]

Audio clip: [00:06:48] The co-working Start-Up We Work rents full service offices to start-ups and freelancers who used to have to worry about things like printer toner and OfficeMax. [00:06:55][7.6]

Audio clip: [00:06:56] There's an energy that you feel that energy, something that's hard to explain. It's something that either you feel it or you don't. We like to call it the we generation. [00:07:04][7.6]

Sascha: [00:07:05] Welcome back to The Dive. Today we're talking about the co-founder of WeWork, Adam Neumann, who was forced out of the co-working space back in 2019. But now he's back with a new company. And armed with a $350 million check from one of Silicon Valley's biggest names. DORSEY What do we know about this new company? [00:07:25][20.9]

Darcy: [00:07:26] The company is called Flow. Not to be confused with flow carbon. And it was founded earlier this year. [00:07:31][5.0]

Sascha: [00:07:32] Lots of flow companies around. There's also a flow without a W that's a women's health app. So it's obviously a popular name. [00:07:38][6.7]

Darcy: [00:07:39] The guy I'd want to get the trademark for that name. So we work disrupted commercial real estate and office buildings, as you've mentioned. But Flo is looking to disrupt residential real estate. We've got to piece together the close a little bit here. In a trademark application filing last month. Flo described its services as including cryptocurrency trading, providing an online social networking platform, real estate development and temporary accommodations. But we're not quite sure how they might combine these things just yet. [00:08:10][30.9]

Sascha: [00:08:10] What a weird combination of activities. I mean, I am not running $1,000,000,000 company, so perhaps that's part of the genius, but still not words that I would have put together. At least the real estate development and temporary accommodations. Part of that filing sounds a lot like something that they've tried before at We Work, which is we live. [00:08:31][20.3]

Darcy: [00:08:31] Yeah, that's right. Sounds very similar. We live started back in 2016 and it was basically two co-living spaces where people could rent rooms in shared furnished apartments. One was in New York City and a second was in Virginia. After Neumann was booted from WeWork, though the company shut down. We live in 2021. [00:08:50][19.2]

Sascha: [00:08:51] So it looks like Neumann is now trying to revive. We live with his new company, Flo. [00:08:56][5.2]

Darcy: [00:08:57] Yeah. So again, they have similarities, although we are dealing with pretty incomplete information here. Flo doesn't even have a website yet. [00:09:04][7.0]

Sascha: [00:09:04] Maybe one of those other companies got the domain before he. [00:09:07][2.6]

Darcy: [00:09:09] Very possible, Sascha. But having said that, reports are that Neumann has been very active. He's already acquired over 4000 apartments in Miami, Atlanta, Fort Lauderdale and Nashville. And if I was to guess what the full idea of this Flo idea is based on from what we know. Here's what I'm thinking. Fully furnished and shared office and living spaces that could be carbon neutral and tenants might be able to pay their rent in crypto or somehow earn crypto by living there. [00:09:38][29.6]

Sascha: [00:09:39] Maybe they need to hire you D'Arcy as one of their ideas consultants. After all, Adam Neumann was known for big mission statements when he was at work. I think from memory it was too quiet. Elevate the world's consciousness and quiet. So big statements. Surely we have another one here. [00:09:57][17.8]

Darcy: [00:09:57] Well, the reporting we've seen from Flo suggests that they're focussed on becoming a, quote, housing utopia for remote workers. [00:10:04][7.1]

Sascha: [00:10:06] Housing utopia, nothing small. Which is exactly what I expected. The use of the word utopia in the mission is interesting. Famously, it's pretty rare that utopias work out with a good news story. [00:10:20][14.3]

Darcy: [00:10:21] Yeah, along with the rest of the way generation. Sascha. [00:10:23][2.4]

Sascha: [00:10:25] Look, I've got one more question, Darcy. I have read that there have been comparisons made between Elizabeth Holmes and Adam Neumann. Holmes was the founder of Theranos, and she lost over $1 billion for her investors and is now facing up to 20 years in prison. Neumann lost. We were investors, $11 billion. Why have their fates been so different? [00:10:48][23.2]

Darcy: [00:10:48] Yeah, this is a fair question, but it has a pretty simple answer. Basically, losing your investors money is not illegal. Both these people, Holmes and Neumann, lost plenty of money for their investors, but Holmes was found guilty on four criminal charges, mostly relating to fraud. There's no suggestion that Adam Neumann has done anything illegal here. Granted, a few very dodgy things like paying for his own trademark and leasing his own properties. But these aren't actually illegal. So, yes, both Holmes and Neumann lost money. Neumann a lot more, in fact. But Holmes wasn't charged because she lost her investors money. It was the fraud of misleading the investors, and that's the difference. [00:11:27][38.7]

Sascha: [00:11:28] As you said, Darcy, a fair question with a pretty simple answer. So let's leave it there for today. But this is certainly a story that, well, I, for one, will be watching closely. So I suspect we'll be doing another episode in the future. If you enjoyed this episode, will tell us and then tell a friend about it. It. Really is the best way for a podcast to grow. And if you're listening because you've been referred. Welcome. We've got a growing back catalogue that's well worth checking out. Our last three episodes have covered Why Domino's Pizza Failed in Italy. Celebrity crypto endorsements and a new weight loss pill that everyone, including even Elon Musk, has been talking about. There really is something for everyone, so go check it out. Remember, you can follow us on Instagram at the dived up business news. You can contact us by email. The dive at Equity Mates rt.com. And you can subscribe wherever you are listening right now. See, you never miss an episode. Thanks so much for joining me today, Darcy. [00:12:21][53.3]

Darcy: [00:12:21] Thanks, Sascha. 

Sascha: [00:12:22] Until next time.