It may appear as if high-profile WeWork founder Adam Neumann has retreated from the real estate scene after he was unceremoniously ousted from his company, but with a noncompete agreement set to expire this month, the charismatic leader is preparing for his next act.
After helping to build the flexible office space provider into one of the world's most valuable startups — helped by his ambitious, change-the-world aspirations and ability to persuade investors to give him billions of dollars — Neumann is preparing to launch Flow, a residential real estate startup with similar ambitions.
Neumann’s return to prominence roughly four years after departing WeWork comes as that money-losing coworking giant scrambles to renegotiate nearly all its leases and attempts to remedy financial obligations.
His ouster included an agreement that barred him from having any association with WeWork's competitors or approaching WeWork with business proposals. That deal ends this month, effectively removing his final link to a company that experienced one of the largest valuation declines in U.S. history.
WeWork has had losses of $15 billion since the end of 2017, a performance that stems from the business model Neumann pursued with what critics called a growth-at-any-cost approach that relied on cash-intensive, fixed-lease agreements with landlords in the United States, the United Kingdom and other countries.
CoStar News reached out to Neumann through both his family office, known as 166 2nd Financial Services, and Flow but did not receive a response to emails to representatives and queries through LinkedIn. But in his first public interview since the WeWork ousting, he told the New York Times in late 2021 that his leadership style got caught in the frenzy of the company's meteoric rise.
“It went to my head,” Neumann told the Times. "If I had to focus on a problem, I think I had a style of running the company that early on was excellent. We were working very hard and building this global brand and it was working phenomenally. Then we started growing faster and faster, and that same style that made us grow so fast and was so good for a startup, and where I missed, big time, that style that had worked so well until then was not right for Wall Street. We found ourselves in a perfect storm."
That storm ultimately resulted in Neumann's forced resignation in 2019, a deal that netted the embattled founder an estimated $1 billion in WeWork shares and a $185 million consulting fee, even after WeWork's peak valuation of about $47 billion had plummeted to $7 billion when Softbank, the operator's largest outside investor, took over the company.
"As we were doing this and the world was telling us we were correct and the valuation was another way people told us we were heading in the right direction, the valuation made us feel like we were right and made me feel like whatever style I was leading with was the correct style at the time," Neumann said. "It was never my intention not for the company to succeed."
'Lessons Learned'
With the future of the coworking giant he founded in 2010 up in the air, Neumann is now stepping back into the public eye to help ensure the success of Flow. Aimed at addressing the global shift toward remote- and hybrid-work patterns, precise operating details about the startup are scarce.
But Neumann told attendees at a Fortune conference in Deer Valley, Utah, this summer that Flow's business model will be broadly based on a “vertically integrated system” of owning and operating apartment buildings and offer its services to new developments and other third parties.
The startup is expected to make its official launch before the end of this year, and Neumann has purchased more than 3,000 multifamily units in markets such as Atlanta, Miami and Nashville, Tennessee, to create a branded portfolio with consistent service and property features.
Neumann is also drawing from his experience in the early days of building WeWork, especially when it comes to convincing investors that his mission is worth a whole lot of zeros. Andreessen Horowitz, one of Silicon Valley's most powerful venture capital firms, is investing about $350 million in Flow, pushing the startup's valuation beyond $1 billion before it even hits the market.
Andreessen Horowitz General Partner Marc Andreessen wrote in a recent blog post that as a result of a problematic housing system, pandemic-driven shifts that have pushed the boundaries of where people choose to live and work, and a newfound emphasis on quality-of-life standards, "The residential real estate world needs to address these changing dynamics," and Flow, with Adam Neumann's leadership, is a solution in which the firm is willing to bet.
"Adam is a visionary leader who revolutionized the second-largest asset class in the world — commercial real estate — by bringing community and brand to an industry in which neither existed before," Horowitz wrote. "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. 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."
Andreessen Horowitz's vote of confidence — and capital injection — may give Flow a leg up in terms of establishing itself on the commercial real estate stage. Even so, it remains to be seen how Neumann will decide to lead the venture and if anyone else will follow.
“In life, sometimes you are up and sometimes you are down,” Neumann said, adding that people learn a valuable lesson at their lowest points, and “You can apply that lesson and it will be a great part of your journey and will become a good thing, not a tragedy.”