WeWork co-founder Adam Neumann is once again making waves with the announcement of a new startup called Flow that’s being funded by early Airbnb investors Andreessen Horowitz and is promoting itself as a real estate startup that aims to revolutionize the residential housing industry.
The $350 million deal is said to be the largest in the Silicon Valley fund’s 13-year history and brings Flow’s initial evaluation to exactly $1 billion, a pittance when compared to the $47 billion figure WeWork received in 2019 thanks to SoftBank. The company’s operation will officially begin next year, according to the New York Times’ DealBook page, which first reported the news late Monday.
“We love seeing repeat-founders build on past successes by growing from lessons learned," Marc Andreessen stated, referring to Neumann's well-documented past. “The successes and lessons are plenty.”
Neumann has reportedly purchased some 3,000 residential units in the red hot Miami, Atlanta, and Nashville markets that will be among the properties first run by the company. According to the Times, his aim is to “rethink the housing rental market by creating a branded product with consistent service and community features.”
One will have to wait and see if Neumann’s latest “unicorn” goes the way of Eli Broad’s early KB Homes venture or will be influenced by his former Chief Architect’s new “people-first” Nabr initiative.
The Times report says Flow plans to “offer its services to new developments and other third parties” but is short on any additional details. In a blog post, Andreessen outlined some of the logic behind his support, including a recent shift to the remote working economy and economic inequalities laden in rental development. (Of note: the latter was purported to be a driving factor cited by Ingels at the initial announcement of Nabr on Instagram last summer.)
“You can pay rent for decades and still own zero equity — nothing,” Andreessen wrote. “In a world where limited access to homeownership continues to be a driving force behind inequality and anxiety, giving renters a sense of security, community and genuine ownership has transformative power for our society.”
16 Comments
I'm amazed the man is getting a second chance. But he is one of the greatest salesmen around - one who can make prosaic ideas sound revolutionary - and he did tap into a zeitgeist of the '10s.
Uumm.... doesn't this describe rent-to-own .. ?
With "Community" and "Vibes". Remember when WeWork was subletting offices but somehow got valued as a tech company?
Rent-to-own with a splash of timeshare, it seems to me.
So he is already in the "red hot" Miami, Atlanta, and Nashville markets? Why anyone would want to live in Atlanta or Nashville is beyond me. and I am from the South. Miami has a history of real-estate boom and busts for as long as there has been a Miami. Miami is a very interesting place to live - got to give credit where it is due. It's the capital of Central and South America really.
He did manage to avoid WeWork's big balance sheet problem this time around, it seems: Rather than sub-leasing rented properties, he now owns the properties himself, thanks to the billions he got from Softbank/Saudi Arabia. WeWork had been moving away from the lease model before the IPO blew up in their faces as the balance sheet mismatch was too risky at the rate they were signing leases.
The idea itself ... we shall see. WeWork was a reactive business in that it saw an opportunity and met the demand for flexible offices with communal vibes at the time. It certainly wasn't trying to change the way people use spaces, despite their proclamations to change the world. High rents is indeed an issue - you could squeeze more people into the same hip cities or you could make less popular cities more popular. The former is reactive, the latter is much more difficult to pull off.
The lazy and insular nature of today's US elites is always galling. Hard to believe that this is the best place a giant Silicon Valley VC outfit could find to invest a giant sum of their money. Or that Neumann is really the right guy to improve the business of rental housing. I'm sure the designers for this thing will be chosen on one criteria: who has the lowest price?
Funnily enough, WeWork in its heyday had a reputation for paying whatever contractors and suppliers were charging them. Too much money from Softbank and MBS to splurge on. Interiors suppliers loved doing business with them.
That's interesting! I never knew that about WeWork. My experience with the multifamily space is that the clients are often super cheap.
From another article:
"Neumann’s aim is to provide a consistent housing experience across a chain of branded apartment complexes."
Gee, nobody has ever thought of that before.....Brilliant! Sell the sizzle not the steak. Brilliant! What could go wrong?
He somehow managed to convince the folks with tens of billions to spend that an office subletting company was a revolutionary tech unicorn the last time round ...
Fool me once, shame on you...
A smart idea to try to turn rentals into genuine property ownership -- which is a key problem with most urban markets and advantage single family homes will have over dense cities.
However, this is something the government should have already done years ago -- a private company's drive for profit will make it difficult to give equity to renters, but will instead offer smaller and smaller slices of the pie. But could be interesting to see. A challenge considering how little wealth and buy in that young people have now.
A twitter user described it as "the Theranos of landlordism" which made me laugh.
I once worked for someone like him - "house of cards" Housing - it was all hand to mouth investor financing
This reminds me of Fran Zappa's famous quote:
"Most rock journalism is people who can't write, interviewing people who can't talk, for people who can't read."
I have helped so many failed startups (Modular, etc.) who knew how to shake up the industry with a new model, blah, blah, blah. Ask Katerra, ad infintum about this. Notice the people funding this sales guru no nothing about the housing industry. Well...good luck to them. The housing industry has too many players. Yes, change is needed, but....land, realtors, infrastructure, entitlements, suppliers, vendors, appraisers, property managers, builders...what could possibly go wrong...?
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