3 Reasons Why Flow – Adam Neumann’s New Venture – Will Fail Miserably
Marc Andreessen of venture capital royalty wants everyone to know that he found the solution to America’s housing crisis. Adam Neumann. That’s right, the same Adam Neumann who overpromised and underdelivered with WeWork, plummeting its valuation from a high of $47 billion to around $7 billion (after it was rescued by SoftBank). The same Adam Neumann who was investigated for self dealing and enjoyed frat boy excesses, completely indifferent to his investors’ and shareholders’ best interests.
But Marc Andreessen says it’s different this time. In announcing his firm’s partnership with Neumann and his startup, Flow, Andreessen said:
We understand how difficult it is to build something like this and we love seeing repeat-founders build on past successes by growing from 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.
What exactly are they building?
Flow is a residential real estate startup that plans to address a number of issues, including housing availability, lack of social interactions in a post-pandemic and increasingly remote world, and the challenges renters have building equity.
Andreessen’s firm is investing $350 million to aid Neumann’s efforts, valuing Flow at a cool $1 billion. All for a startup that doesn’t even have a website bigger than one page. That’s almost as comical as Trump’s Truth Social merger with Digital World Acquisition Corporation. Almost.
Elizabeth Holmes’ fall from grace was arguably different – and worse – than Neumann’s, but it begs the question whether anyone else would get this type of second chance. Especially at the scale of trying to revolutionize one of the world’s largest asset classes in residential real estate.
Below are three reasons why you should be skeptical that Flow will turn out any differently from WeWork. In fact, all three reasons suggest that Neumann – and Flow – will fail miserably.
1. Like WeWork, Flow proposes nothing new, let alone revolutionary
Cohabitation or communal living is not a new phenomenon. Adam Neumann did not invent it, just as he did not invent shared office space. What he invented was a brand in WeWork, which is exactly what he will try to do with Flow.
Over the past almost three years since he left WeWork, Neumann has turned into a real estate mogul. He has bought one apartment building after the next. Unsurprisingly, his focus has been in Sun Belt states that experienced an influx of Northeasterners (in particular) during the pandemic. Some of the cities where he purchased buildings included Nashville, Austin, and Miami.
Neumann says he wants to revolutionize housing, making it more affordable. But instead of developing new properties to help address the housing shortage, Neumann has entered already hot markets and thrown around millions like any other private equity or hedge fund investor. This only adds fuel to a burning housing market fire. By doing this, he’s actually part of the problem, not the solution.
How he then plans to remodel and refurbish these existing buildings so they’re designed for communal, cohabitable living is anyone’s guess. As is the question of whether he can do this magical act at cost (not to mention, profit). Marc Andreessen and any other investor is going to want a return on their investment. They are not putting money into Flow for charity.
Don’t let their altruistic sounding goal distract you from their capitalist incentives. This is not about affordable housing. It is about creating a fun space for (primarily) single young professionals to cohabitate and pretend they’re back in college. With the amenities they’re planning – saltwater pools, valet trash pick-up, dog parks, etc. – there is no way someone making minimum wage will be able to afford a Flow rental.
Even if Flow used a rent-to-own model, that too is not revolutionary. It already exists. They potentially could clean up that market, however, which is rife with fraud and scammers. That would be a value add, but it’s unclear whether someone would want to build equity in a communal living space, especially if they no longer want to live there past their 20s.
2. Does anyone – including single young professionals – really want to live in a communal environment?
Most people who want to save money find roommates. They pick the person. If someone seems like a creep or weirdo, they move to the next candidate.
What Adam Neumann is proposing with Flow is very different. By agreeing to live in a Flow building, people also have to agree to live with other random people. Sure, Flow would probably vet them, but there are no processes or background checks infallible enough to weed out every crazy person.
Not everyone is a charismatic extrovert like Neumann. Some people want peace and quiet when they go home, others want nonstop parties and loud music. I’m sure there are some “normal” people who would live in a communal setting for the sociable nature of it all, but it is hard to imagine most people enjoying it long term, especially as more randos come and go.
Apart from the actual living, who will want to invest? Rent to ownership does not happen overnight. Peoples’ circumstances change too. It’s questionable whether everyone would be happy raising kids in a communal environment. And equally, as a relatively new dad, I can assure you that the childless would all welcome kids in their communal space. Those that say they would might change their minds after my third early morning trip to the communal kitchen to warm up a bottle.
And that is just the beginning of potential domestic disputes.
There is one thing you can be certain of, however. Adam Neumann will find a way to sell it as a utopian environment powered by innovative “technology.”
3. Another instance of Adam Neumann overpromising and underdelivering
Nobody can deny Neumann’s ability to build a brand and woo investors. After the WeWork debacle though, nobody can also deny how spectacularly awful Neumann is at actually running a business.
Marc Andreessen clearly thinks he can control him. His $350 million investment and board seat at Flow put him all in on Team Neumann.
Do you think Andreessen ever spoke to the guys at SoftBank? Do you think he asked Masayoshi Son whether he regretted investing billions in Neumann and WeWork?
The answer is either no, or that Andreessen thinks Neumann has reformed. That things will be different this time under his watch.
But nothing is different so far. As mentioned, Flow – like WeWork – is nothing new. They are both physical – brick & mortar – businesses that try to market themselves as technology companies. Neumann is already overpromising and threatening to underdeliver.
Just wait, Flow will have some sexy “new” technology integrated into its communal living experience. Whether that’s an app, something that utilizes the blockchain, or my personal favorite – its own crypto token or coin.
Simply putting something on the blockchain or tokenizing the rental experience does not make something revolutionary. Although it will definitely sucker in a few susceptible investors.
He has already tried to tokenize Flowcarbon. This is a separate venture, but it’s also backed by Marc Andreessen’s firm.
As with WeWork, Neumann is a guy who cannot focus and get out of his own way. It is never enough for him to perfect one venture. He has to do ten, twenty, or more all at once. Back in the WeWork days, they all eventually shuttered, from WeLive (which was basically a precursor to Flow), to WeGrow and Rise by We.
Neumann is trying to solve what are essentially supply problems with misdirected “technology” solutions. Whether that’s trying to address a housing shortage by purchasing existing properties and making them communal, or trying to fight climate change with the blockchain when there need to be more real world projects to actually combat it.
Flow and Flowcarbon have fancy wrapping and slogans. They have inspiring altruistic visions and objectives. But like Neumann, they will ultimately underdeliver and in the end, fail.
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