Startup CEO Who Lost Billions Of Market Value, Walked Away With Huge Sum Gets Massive Check For Another Venture

Adam Neumann, the founder of coworking space provider WeWork, received a $350 million check for another real estate venture.

WeWork operated 44.8 million rentable square feet in flexible workspaces as of 2021, including 1% of the total commercial office stock in New York City, according to filings with the Securities and Exchange Commission. Yet the company fell from a $47 billion valuation to a $4 billion valuation after a failed public offering in 2019, which occurred amid reports of mismanagement that later resulted in Neumann’s ouster — although he still managed to exit the firm with hundreds of millions of dollars.

Venture capital firm Andreessen Horowitz, co-founded by software entrepreneur Marc Andreessen, nevertheless cut Neumann a $350 million check for residential real estate company Flow, according to a report from The New York Times. The funds constitute the largest individual investment Andreessen Horowitz has granted in a single round of funding and places Flow above a $1 billion valuation.

Flow will operate the 3,000 apartment units Neumann owns in Miami, Fort Lauderdale, Atlanta, and Nashville starting in 2023, although specifics about the company’s business plan remain unknown. In a blog post explaining the investment, Andreessen implied that Flow will seek to address pain points in the real estate market often faced by younger Americans.

“The demographic trends driving America’s housing market are impossible to ignore: our country is creating households faster than we’re building houses,” Andreessen wrote. “Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centers. These factors put enormous pressure on rents in the nation’s most dynamic cities, starkly revealing the troubling realities of both sides of the housing market’s two historical models.”

Despite past controversy, Andreessen expressed confidence in Neumann’s leadership. “We think it is natural that for his first venture since WeWork, Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time: their homes,” he continued. “Residential real estate — the world’s largest asset class — is ready for exactly this change.”

Indeed, rent in many large cities continues to rise amid low inventories and broader constraints in the housing market. Average rent in the New York City borough of Manhattan, for example, surpassed $5,000 in the month of June, according to a recent report from real estate appraisal firm Miller Samuel.

The market for single-family homes is likewise experiencing disruptions due to rising mortgage rates and persistent shortfalls in supply. The National Association of Home Builders’ Housing Market Index fell by six points in August to 49, marking the first time since the spring of 2020 that the metric has fallen below the breakeven value of 50 — thereby indicating a “housing recession.”

“Ongoing growth in construction costs and high mortgage rates continue to weaken market sentiment for single-family home builders,” NAHB Chairman Jerry Konter said in a press release. Mortgage rates began climbing at the beginning of 2022, according to data from government-backed mortgage enterprise Freddie Mac, with 30-year fixed rates beginning at slightly over 3% in January and surging to over 5% as of Thursday.

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