Tech industry reacts to Adam Newman’s a16z-backed return to real estate – TechCrunch

The career arc of WeWork co-founder and former chief executive Adam Newman has felt synonymous with the rise and eventual fall of unicorn dreams. The entrepreneur, whose fall from grace has attracted global interest, got a ladder in the form of a check from storied venture capital firm Andreessen Horowitz.

Andreessen Horowitz announced Monday that it has written its largest single check ever to Newman’s new startup, Flow. The stealth startup is trying to reinvent real estate (again), but instead of the commercial properties on which WeWork focused, Newman is looking to revolutionize rental properties. Horowitz’s check, according to The New York Times, is reportedly worth upwards of $350 million, valuing the yet-to-be-launched company at more than $1 billion. (Andreessen Horowitz declined to comment beyond the blog post, and Flow did not immediately respond to a request for comment.) It is unclear how the deal between equity financing or debt financing is structured.

Although details are sparse, the development has received many opinions from early-stage investors, whose entire job is to support outside founders with high chances of success. Some say this is the exact point of the venture asset class — backing bold founders — while others note that Newman’s second chance comes in the form of women and founders of color seeking starter capital more than ever before. do struggle.

Is it really about track record?

Newman’s track record at WeWork varies depending on who you ask. Much has been made of the cultural malaise in the company. Newman spent copious amounts of wine for the office, a school for his wife’s vanity project, and investor cash on a wave pool, but when the business eventually went ahead with its long-planned IPO, Newman wasn’t going to keep the bag. was.

The company’s valuation fell from $47 billion to ~$8 billion during Newman’s tenure. WeWork laid off thousands of employees, partly because of its own financial woes, and was eventually ousted as CEO by its own investors in 2019. He still paid them well to leave, though – his exit package was worth more than $1 billion.

A post-game analysis of WeWork’s failed IPO effort focused on some of the more distant parts of their vision, from reporting “community-adjusted EBITDA” to announcing their intention to “raise the consciousness of the world.” did.

But the company eventually made its public debut through a SPAC in late 2021, albeit at a much lower valuation and markedly less fanfare. Despite public criticism, early WeWork investors still benefited from backing the company, MacKeever Conwell, founder of Rare Breed Ventures, whose firm supports seed and pre-seed companies, told TechCrunch.

“At the end of the day, Adam is a white guy who started a company and got a multi-billion dollar valuation. Now, was there some gimmicks? Sure. Some things he did wrong? Sure. But I guess What people tend to forget is that even if you were an early investor, which we weren’t, you were still paid,” Conwell said.

Conwell said that given the load of VCs on a founder’s network at the seed stage, it’s understandable why a firm like a16z would want to put its trust in a founder like Newman, at least when it’s a multi-billion dollar real estate company. When it comes to building wealth. Occupation – something he has done before.

“If we look at the entrepreneurs’ histories of successful tech founders, the biggest results for many of these founders aren’t their first thing. It’s more like their third, or fourth, or fifth company. [that succeeds]Conwell said.

As Conwell, especially during tough economic times told on twitterAsset allocators tend to hoard money in what they see as “safe” investments. He said that’s exactly what the a16z is doing with his bet on Newman.

“Companies like Andreessen are only going to focus on a small pocket” [of opportunities] In which they know how to make money… it’s a play book. They know it works, it’s a playbook they can sell to their investors. It’s a playbook that they never change. It doesn’t matter, because even if they don’t change it, they are still winning,” Conwell said.

Approach

As far as vision goes, renovating the rental real estate market is not a unique idea. With over $100 million in venture capital investments, Common is a co-living company that plays the role of property manager across a suite of apartments and homes. Ironically, the startup operates one of the former WeLives, which was a WeWork hostel-like dorm on rental properties.

Co-founder Brad Hargreaves, who stepped down as the company’s chief executive less than two weeks ago, told TechCrunch over an e-mail that “Whatever you think of Newman, WeWork was innovative and in the category. defines it.”

“I believe we are going to see more ‘asset-heavy’ venture deals,” Hargreaves continued. “VCs (if you can even call them that these days) have a lot of capital to deploy, and it’s clear that massive change in some industries just won’t come through light-touch software innovation,” said Hargreaves. he said.

Also, Hargreaves indicated that Newman’s new deal is prosperous. The size of the check, he said, is “one hell of a preference stack to layer on a company like this,” explaining how Alliance Residential, which had 110,000 apartment units, was bought by Greystar for $200 million. was. FSV, which provides asset management services, is valued at just $6 billion and has 1.5 billion units and dozens of brands. He thinks it’s likely that the deal isn’t structured like a traditional venture deal, though it’s not clear what percentage of the check will be debt funding versus equity financing.

Kate Brodock, Switch CEO and general partner at W Fund, called the deal “Disgusting.”

“It’s one of the biggest, most remarkable firms out there and I can’t understand,” Brodock said in an interview with TechCrunch. “It’s like someone woke up and they were like, How many boxes can I check that lead us backwards?”

Allison Byers, founder of Scrubius, a platform aimed at diversifying startups and making founders more enterprise-worthy, described feeling a muted rage.

“It is an undertaking of acceptance and almost learned helplessness. Or the kind of trauma we all experienced so much that it no longer has the same effect,” she told TechCrunch on Twitter DM. We have opened our eyes to the issues, but we are dealing with it forever.”

Byers said: “It’s really just a matter of fact and I can’t let it consume my day”. [because] I have the usual load of female founders.

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