WeWork, WeCrashed, and Now (We) Flow … a New Disaster on the Horizon for Adam Neumann?
Investors always prefer to believe the smooth talkers rather than focus on profitability.
I don't know if you're interested in startups like I am, but if you are, you've probably seen the documentary “WeCrashed” on Apple TV+. If you haven't seen it yet, you know what you have to do: do everything you can to see it!
This documentary focuses on the story of Adam Neumann. A young Israeli businessman who is well known to the world for having founded WeWork in 2010, the specialist in coworking spaces, the former star of “the workplace of tomorrow”.
WeWork is a company that had everything to become a great tech success story as the Americans like them so much. First of all, a trendy concept that sells very easily to bankers and investment funds that finance everything related to the “sharing economy”.
Then a young charismatic CEO, billions of dollars in fundraising in less than 10 years, 17 million square meters of real estate in 150 cities around the world, and losses of course. Some even end up believing that this constitutes a criterion ...
In 2018, when WeWork filed to go public, the company's estimated valuation was $47 billion.
WeWork's requested 2018 IPO is the beginning of the end for Adam Neumann
Everything was going great until that IPO filing in 2018. That's when potential investors discover Adam Neumann's group's staggering losses. Investors also discover more than questionable practices of the CEO.
Adam Neumann did not hesitate to invest personally in buildings rented by WeWork. His lifestyle was excessive and his controversial management methods were exposed: maximum pressure, harassment, threats of dismissal, manipulation, and culture of elitism.
Some even went so far as to describe WeWork as a cult!
WeWork's IPO fails. The (fictitious) valuation of the group collapses. On the other hand, the losses are not fictitious but real. The shareholders must therefore pay up. They accept but ask in exchange for the head of the founder and CEO Adam Neumann.
Left with a big check, Adam Neumann now returns with Flow
Although criticized from all sides, Adam Neumann does not leave empty-handed. He received a check for 1.7 billion dollars. This nice check allows Neumann to buy apartments in various American cities and to launch his new venture: Flow.
Flow is a startup that wants to revolutionize residential real estate, offering community-centered services in apartments. A kind of utopia for telecommuters.
After the office of tomorrow, Neumann wants to sell the house of the future.
The most incredible thing is that despite Neumann's liabilities, investors still believe in this new fable. Venture capital firm Andreessen Horowitz (a16z) has announced that it is investing $350 million in Flow, its biggest check for an equity investment to date, based on a $1 billion valuation.
So the story can start again, the fundraising and investments too (not the revenues, still).
Investors always prefer to believe the smooth talkers rather than focus on profitability
This new story is interesting, and one wonders whether it will not result in another disaster for Adam Neumann and those who will trust him.
But before that, we can already remember something essential: despite inflation and monetary tightening, investors still have plenty too much money to invest.
And the deflation of bubbles, NFTs, and the fall of unicorns and hedge funds that had bet everything on it will not change anything: investors still prefer to believe in beautiful fables and paradigm shifts, rather than in the good old business model based on profitability.
Failures like WeWork's will undoubtedly happen again in the future. For Adam Neumann, this could allow a streaming platform to prepare a documentary called “WeWork, WeCrashed, We Flow!” in the future.
Some reading
Blockchains Bridges Are the New Favorite Target of Crypto Hackers. More than $2B has been stolen via bridges by hackers since the beginning of the year.
The Best Business Book of All Time Dates From 1969 and Almost Nobody Knows About It. Warren Buffett and Bill Gates recommend everyone to read at least once.
Wall Street Has a Doubt — Is Warren Buffett Still a Role Model for Investors? Berkshire Hathaway’s lack of ESG transparency is coming under increasing criticism.
Where There Is Unity There Is Always Victory — On Why Uniting Behind Bitcoin Is Your Best Chance. Alone against the current system, you have no chance.