Former WeWork CEO Adam Neumann secures $350 million in funding, sparking outrage

Silicon Valley has been shaken by news of Adam Neumann's new residential real estate business, Flow.

According to reports, Neumann, 43, is now in control of Flow, a billion dollar real estate firm, nearly three years after resigning from his position as CEO of WeWork over claims of mismanagement, a toxic workplace, and the company's failed IPO.

According to CNN, renowned venture capital firm Andreessen Horowitz declared on Monday that it would invest in Flow. A hefty amount of $350 million has been invested in the startup by Andreessen Horowitz. Even before it launched, the investment has valued the firm at more than $1 billion.The investment gives Flow a unicorn status (a term given only to 'startups' who have a valuation of over a billion). At present,Flow has a bare bones website, with the slogan 'Live life in flow' and two words stating it will launch in 2023.

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There are little details available concerning Mr. Neumann's new business, Flow. In order to establish a "widely recognised residential brand, loaded with amenities," Mr. Neumann reportedly bought shares in more than 4,000 US units in January, according to the Wall Street Journal.

When the purchase was first announced, The New York Times stated that Andreessen had contributed $350 million (£290 million), calling it "the largest individual cheque" the investment company had ever written for a start-up.

What really happened to WeWork?

The New York Times called the crash and burn of WeWork“an implosion unlike any other in the history of start-ups."

WeWork filed for an initial public offering (IPO) in 2019, riding the success wave. This alsomarked the start of its decline.

In order to support its unrestricted expansion going forward, WeWork hoped to generate more than $3.5 billion from the IPO. Neumann liquidated $700 million in stock prior to the IPO's scheduled launch, continuing his recent pattern of dubious decisions.

But when the We Company submitted its S-1 filing to go public, its huge losses were made public. Then, a lot of analysts expressed their significant concerns about WeWork's potential for future profitability and said they didn't think the brand would be valued at more than $20 billion.

A WeWork co-working space in Washington DC.Photo credits: AFP

In September 2019, the IPO was postponed. The company was "besieged with criticism over its governance, business model, and ability to earn a profit.

Shortly after, SoftBank announced a $9.2 million write-down on its interests in WeWork.

On the terrible demise of the brand, The Guardian ran an article. The company's costly, inefficient business model as well as CEO Neumann's immoral and dubious activities were cited by reporter Matthew Zeitlin as the primary causes of the brand's failure.

Following these problems, WeWork underwent a significant management shift. Neumann was asked to resign as CEO as a result of reaction from the botched IPO and an apparent loss of trust by SoftBank. In a nutshell, the co-working giantwent from a $47 billion valuation tobankruptcy in just six weeks.

Outrage over the $350 million investment

As reported by the BBC, the firm's endorsement has some investors scratching their heads at the lofty language around the plans, while others are using the incident as evidence of how much easier it is for white men to acquire money in the tech industry than it is for women and other underrepresented groups.

"There is a reason why this is making such waves.... Because of the size of the cheque, because of the unprecedented funding of somebody who has been popularised as an immoral business person, it creates a more emotional reaction," said Allison Byers who is thefounder and chief executive of Scroobious, which aims to help start-ups led by under-represented groups find funding to the BBC.

She was only one of several who vented their anger about the investment on social media."For anyone else, we're held to these impossible standards. That's the outrage," she posted.

Leslie Feinzaig, an investor and the founder and managing director of the venture capital firm Graham & Walker, said the reported scale of the investment in a company that has not yet gone public seemed like a "gut punch" in that setting.

Adam Neumann at the opening bell ceremony at Nasdaq in New York, January 2018. Photo credits: AP

"My immediate reaction was, 'Man, I wish women had the same opportunity to fail up as spectacularly as Adam Neumann has,'" said Ms Feinzaig, whose firm has focused on investing in firms founded by women.

Most importantly, there are doubts within the world of real estate.

According to John Drachman, co-founder of reputable real estate company Waterford Property Co., there is still a great deal of scepticism in the sector regarding Mr. Neumann's most recent plans to shake up the market, where many of the top corporations in the nation are already participating.

"Adam can clearly convey a story and a vision, making him a fantastic salesperson. He was really effective in raising a significant amount of money for WeWork "says he.

However, in the realm of real estate, individuals continue to reserve judgement. "When this was released, there was a tonne of scepticism. Is this another instalment of WeWork, one could wonder. Time alone will tell, though."