Will Adam Neumann Fail Again? ($1 B Value, No Product!)

this episode is brought to you by curiositystream hi welcome to another episode of Cold Fusion Adam Newman the infamous founder and former CEO of wework is not a new name to the startup industry so Sensational was the story of his rapid rise to stardom and equally abrupt Fall From Grace in 2019 that it attracted a myriad of headlines inspired books and even a television drama aptly named we crashed starring Jared Leto and Anne Hathaway it's as if people couldn't get enough of him but now he has attracted another storm of headlines with the announcement of his new company backed by a 350 million dollar investment and valued at one billion dollars before it's even launched in today's episode we'll take a look at what Adam has been up to after the wework disaster and also his latest business venture you're [Music] before talking about Newman's new startup called flow let's take a brief look at what happened while he was at the helm of wework at its peak wework was valued at a staggering 47 billion dollars it was touted to revolutionize the commercial real estate market in the co-working office space by quote elevating the world's Consciousness end quote everyone rode on that hype and all was well this was until a series of disastrous events led to the eventual downfall just before the launch of its much anticipated IPO we've already covered the full story in a previous episode but to put it briefly Adam Newman's work hard and play harder attitude got the better of him he burned investor money on parties and the cost of the alcohol Supply quote could have covered most of an entry-level wework salary writes Reeves Weidman in his book billion dollar loser in addition to this he often rocked up to meetings smelling of weed now what you do on your own personal time is fine but maybe not while you're trying to run a company he was also known for his outrageous behavior from spraying new investors with fire extinguishers to throwing picnic Furniture into a bonfire at a wework employee's house and this wasn't to mention he treated his own employees poorly a lawsuit was filed by a former employee stating that she was sexually assaulted at company events and she blamed the company's quote entitled frat boy culture that permeates from the top down Newman's business dealings were also shrouded in controversies as well he made millions of dollars by leasing multiple properties in which he had an ownership stake back at wework and how could we forget he infamously trademarked the word we and sold it back to his own company for six million so after seeing all of this chaos investor SoftBank pulled back their 16 billion stake in the company weworks valuation plummeted to 8 billion board members grew weary and the company's IPO was eventually postponed after this Adam Newman was kicked out of wework he wasn't to leave empty-handed though he was given a golden parachute deal with a lovely payout estimated to be 1.7 billion according to the Wall Street Journal Adam still owns two billion worth of wework stock today after his exit from wework Adam Newman and his wife Rebecca Paltrow Newman retreated back to Israel where they're originally from he did not however stay in hiding for too long according to Forbes he was back in the Hamptons in the early half of 2020 and soon started offloading some of his real estate Assets in multiple locations worth approximately 69.65 million after cashing in from selling his real estate properties he and his family offers 166 second Financial Services began quietly acquiring a vast multi-family real estate portfolio according to the Wall Street Journal entities that are tied to Newman purchased majority stakes in more than 4 000 apartments across the country these Holdings are valued at more than one billion so it looks like Newman is quietly taking stock and building up towards something but why well this buying spree of real estate assets can be seen as a clever way to offset the taxes of as wework exit package worth 1.7 billion but something bigger may have been at play Adam Newman may be gearing up for another quote revolutionary business now fast forward to August of 2022 and Adam Newman just announced his latest startup called flow while we work his previous foray was into the commercial real estate market flow is attempting to transform the residential real estate market they aim to do this by quote giving renters a sense of security community and genuine ownership end quote but if like me you're wondering exactly how that information remains sparse it's a business model that's curiously secretive and somewhat controversial but we do have some Clues we'll come back to this controversial part later their website is just a bare bone splash page with a tinge of 70s design interestingly the lack of information didn't stop them from securing 350 million dollars in funding the funding came from the investment firm a16z also known as Anderson Horowitz this gave flow a valuation of one billion dollars even before it officially launched it's an astounding amount of Faith to put that amount of money behind something that doesn't even exist let alone a company being run by Adam Newman a16z led the way and invested in companies like Facebook Pinterest Groupon slack Lyft and many others it's safe to say that they've cemented their place in the ruthless VC world of Silicon Valley and yet shockingly enough this 350 million dollar investment was their largest check ever flowing into Adam Newman's new company flow the former wework CEO and co-founder receiving a 350 million dollar check from Venture Capital firm Andreessen Horowitz it's the largest check the firm has ever written in a funding Rod according to the New York Times that brings flow to a billion dollar valuation pre-launch the business aiming to disrupt the residential real estate market by creating a product consistent with service and Community features so there's a major question here why take such a big risk well Mark Anderson the co-founder billionaire of a16z wrote in his recent blog post titled investing in flow quote we love seeing repeat Founders build on past successes by growing from the Lessons Learned for Adam the successes and lessons are plenty and we are excited to go on this journey with him and his colleagues building the future of living Adam returns to the theme of connecting people through transforming physical spaces and building communities where people spend most of their time their homes residential real estate the world's largest asset class is ready for exactly this change end quote And to clarify by change he meant quote to rethink the housing rental market by creating a branded product with consistent service and Community features end quote now Keen viewers would remember that Adam Newman has tried to do something like this he called it we live he came up with the idea at the same time as we work and by the way we live only open two locations and failed to get off the ground so right now the United States is going through a housing crisis renters and would-be homeowners across the country are facing spiking rental prices and increasingly steeper barriers to entry respectively a rising interest rate environment is also complicating things Mark Anderson the co-founder of a16z is very much aware of the problem himself in 2020 he wrote an essay called it's time to build but when it came to the issue of combating the housing crisis in his own neighborhood he stood in opposition as the Atlantic reported he and his wife had submitted a public comment arguing against a proposed multi-family housing plan in their town of arthurton California which is also the most expensive zip code in the U.S so on the one hand Mark Anderson gives a passionate 2020 essay about solving the housing crisis and then backs Adam Newman's real estate venture but he himself doesn't want to solve the problem in his own backyard that sure is interesting it could just be that maybe this implies that he doesn't have people's best interests at heart okay so remember when we said there might be a controversial part to Flo's secretive business model well let's take a deeper look into that now so Adam Newman did not only amass a huge portfolio of real estate assets but also invested 20 million dollars into a new york-based company called Alfred this made Newman the lead investor according to Forbes Alfred's business model is extremely similar to what flow is proposing so what is Alfred and its business model Alfred was co-founded by two Harvard Business School classmates Marcellus apone and Jessica Beck it started as an app based concierge type service provider which targeted busy Millennials in the urban area it provided services like Pet Care grocery pickup dry cleaning laundry and so on later on Alfred decided to move to upscale areas and partnered with landlords to provide the same services but with higher profits but this wasn't the end of the evolution soon Alfred's management realized that using software to manage properties makes more sense additionally if they could add Property Management expertise to the equation it would be vastly more profitable and provide an all-encompassing package this realization came after they participated an experiment in Connecticut where Adam Newman owned several of the buildings according to their website Alfred now provides a residential management software that quote gives owners and operators a unified platform to support all aspects of residential living the company began to grow and they acquired a property management firm rkw residential which is already managing 30 000 homes Alfred was no longer just a small startup providing concierge type services with its app it was now a property manager as well Alfred now manages 20 000 units and has over 300 000 U.S residents using its technology and services and guess who was the lead investor and had two board positions Adam Newman at this time he began to distance himself from his own portfolio company if only there was an easier way to make money in the real estate market perhaps by providing services and property management software just like Alfred it would be too messy to buy up the company outright so in 2021 Newman secretly acquired another startup called Carson living one of Alfred's direct competitors they were both doing the same thing the acquisition has mostly been kept under the radar but one of Carson's former investors suggested that the founder of the company is now working for Adam Newman on one of Flo's products it seemed like as a major investor Newman quickly realized the potential of what Alfred was doing and he wanted some of that money for himself besides he's no stranger to the real estate market nor did he lack any experience in building a multi-billion dollar company then it probably comes to you as no surprise that the New York Times have speculated that flow is presumably going to offer concierge type services and facilities and Management Services to Adam Newman's vast property portfolio and third-party landlords the same business model as Alfred it also raises a few questions on the moral standing that being said it is still early days though flow is yet to be launched many are speculating that it's just going to be an Alfred copycat the media in general were an uproar when the news of Adam's return broke from journalists to Tech experts almost everyone unanimously condemned a16z for backing Adam Newman in his quest to redeem himself and rightly so as reported by the BBC Alison Byers founder and chief executive of scroobius said quote there is a reason why this is making such waves because of the size of the check because of the unprecedented funding of somebody who has been popularized as an immoral business person it creates a more emotional reaction the size of the deal is undeniably colossal 350 million dollars at the pre-seed rounding and the valuation of the company worth north of 1 billion dollars does turn a few heads it also brings back the decades-old controversy of biases surrounding Venture Capital firms NPR showcased their concern on a recently published article titled quote 350 million dollars for wework co-founder shows how broken and biased venture capital is it's not all doom and gloom for Newman though there are some tech experts and VCS who have taken kindly to the news according to Rare Breed Finch's founder McKeever Conwell it's not shocking that Newman is back and his new big idea got the funding as well it's more of a norm than an exception in the startup world he notes that successful Founders tend to find their feet in their second third or fourth trying and as a side wework eventually did manage to go public after Newman's exit it somehow still operating Under New Management albeit poorly early investors still got paid a good amount of money and that's probably what a16z is banking on happening too they think this guy can generate cash well went on to say quote at the end of the day we as VCS are essentially money managers or glorified financial advisors we take money from rich people or groups that have large pockets of capital our job is to make them more money he continued our job is not necessarily to care about ethics morality systemic racism or financial inequalities there are many VCS who care about that but that's not the job so For Better or For Worse Adam Newman sure doesn't know how to attract people's attention in terms of business he has very little ethics but does manage to attract investment we'll see how this goes but he's off to a rocky start to say the least flow is going to launch in 2023 though before it opens its doors to business it's literally just all smoke and mirrors only time will tell if Adam Newman is able to change the narrative in the future by disrupting quote the future of living so there you have it whether you like it or not Adam Newman is back so what do you guys think do you think his new company flow will be successful do you think the investment firm a16z was right in throwing 350 million dollars at a project that doesn't exist let me know your thoughts in the comments section below so I've got some very interesting topics planned next for cold fusion one of which is a lesser known story about an electric car made by General Motors back in the 1990s the car was futuristic quick and quiet consumers loved it and it was decades ahead of its time but in a bizarre twist General Motors killed the project they shipped all the cars out into the desert and crushed them so why on Earth did this happen to such a seminal piece of technology well you can watch the episode and find out if you want to see it right now it's on the streaming platform nebula nebula is a streaming platform made by creators for creators I want to do a lot of things with cold fusion in the future so this platform allows me to experiment with different kinds of content there's no need to 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name is Togo and you've been watching cold fusion and I'll catch you again soon for the next episode cheers guys have a good life [Music] all right all right [Music] cold fusion it's me thinking

Channel: ColdFusion

Views: 852,638

Keywords: Coldfusion, TV, Dagogo, Altraide, Technology, Apple, Google, Samsung, Facebook, Tesla

Id: bmQFc4kMOU8

Length: 17min 4sec (1024 seconds)

Published: Thu Sep 29 2022