in 2019 Adam Newman, the acrobatic and flamboyant co-founder of WeWork, had gone out of the picture in a bad way. The spectacular failure of his ambitious, and in some ways visionary, startup, which was starting to redefine the way of working, had overwhelmed the confidence of investors and cast a gloomy light on the excesses and extravagances of the character.
Very soon the case of WeWork it has become the epitome of the wrong start-up, that is, one that should not be done under the pressure of an irrepressible and uncontrollable founder with grandiose aims.
The idea that had moved WeWork, i.e. that of being together in a common working space until it was transformed into a community and a melting pot of innovation and spontaneous meeting/comparison of talents, was very more than mere co-working. Precisely this determination to go beyond the known had seduced stars of the world of capital such as Masayoshi Son and Jamie Dimon, who, later, would have had the opportunity to ferociously change their minds.
Even son the reputation almost destroyed, Newmann had left WeWork with a tidy sum that served him to start two new projects that already reflect his personality in the name: Flow e Flow Carbon.
There is a future after WeWork? Yes there is
Everything could have gone unnoticed if it hadn't happened that one of the largest venture capital funds in Silicon Valley, Andreessen-Horowitz, had not provided him with 350 million dollars to switch from project when running Flow. Which is equivalent to making it a unicorn right away, since the valuation of the project, which up to now consists of a web page with 9 words, is already one billion dollars.
This investment has raised eyebrows among many observers for two reasons. The first concerns the controversial character of Adam Newmann in the light of the WeWork affair. After Cyclone Newmann, WeWork is now worth a tenth of the valuation defined, precisely by Dimon and Son, for the takeover bid in 2019.
The second reason lies in the fact that Andreessen-Horowitz has gone far beyond his comfort zone which is that of new technology. Flow is not a technology project. FlowCarbon, which Newmann shares with his wife Rebekah Paltrow, is more so, and Andreessen-Horowitz has put 16 million into this project through a70z crypto (its own vehicle for investments in the crypto world).
Flowcarbon is a sort of stock exchange of the carbon credits. It is operated via tokens, digital assets stored and traded using blockchain technology, to give you access to cheap finance to scale your businesses. The first token, backed by a carbon offset package, is called Goddess Nature Token. If not what could it be called? We are talking about Adam and Rebekah Newmann.
Il carbon credit market, reports the “Financial Times”, has the potential to grow to 50 billion dollars by 2030. And the Newmanns are there.
A bet on Adam Newmann
In fact, Andreessen-Horowitz is betting on entrepreneur Adam Newmann. Mark Andreessen used these words to explain the decision of his company — which has already invested in Skype, Twitter, Airbnb and more recently in Coinbase, Club House and OpenSea.
«Neumann is a visionary leader who revolutionized the second largest asset class in the world – commercial real estate – and who is now preparing to transform the residential real estate market, the single largest class. It's often not appreciated enough that one person fundamentally redefined the office experience and led a global company to change the paradigm. If there is such a person it is Adam Neumann. We like founders who try to repeat the successes achieved by capitalizing on the lessons learned in those experiences. For Adam, the successes and lessons are many."
What is Flow?
What we currently know about Flow is almost nothing, except that it will open operationally in 2023.
Newmann, in a long interview given to the "Financial Times" last March, said he intends work on the supply and accessibility crisis of housing which is leading an increasing number of young people to rent rather than buy.
Contrary to the past, Newmann – and perhaps this is one of the famous lessons learned – speaks of the project in very vague and general terms, making clear its potential to change the current structure of the residential rental market.
From what one can imagine it is, in general, not so much a co-housing as a real service, with characteristics of evolved co-housing, oriented towards the acquisition of the property. Of course, the new project tends to remodel some concepts already tested in WeWork and has how reference to the world of youth in all its expressions.
The primary, so far discernible, difference between WeWork and Flow is that Flow will get the ownership of real estate with which to develop its business, while WeWork worked and still works in sub-lease mode.
Flow might be a "brand service", to use the definition given by Andreessen, intended as a viaticum to lead tenants to some form of ownership, seen as stakeholders or even as shareholders. The mechanism through which these subjects can be brought to ownership is not yet known. The basic idea is to rethinking the entire value chain of the residential rental market, also with new technologies (certainly through the blockchain).
Mark Andreessen has explicitly denied that it is a reinvention of the Real Estate Investment Trust (REIT), that is, that sort of real estate investment trust that owns, administers and redistributes the income generated by the leasing activities.
For now the only certain thing that Neumann, as revealed by Andrew Ross Sorkin in the "New York Times", has purchased more than 3.000 housing units in Miami, Fort Lauderdale, Atlanta and Nashville.
The new dimension of the residential property rental sector
According to Newmann, as has already happened with WeWork, Flow also aims to exploit “a huge opportunity” of redefine the concept of residence and ownership by introducing that sense of community, sharing and shared services, a mantra of Newmann's philosophy which he himself defines as "concept living".
This is something that is completely missing even in those cities that have a strong youth population and a lively job market in an urban context rich in cultural and recreational attractions, cheered by a pleasant climate.
What is certain, however, is that Flow is going to intervene in one of the hottest areas on the planet, that of affordable housing crisis. It is therefore a sector of enormous importance that needs a robust review that the public hand seems unable to implement.
In the words of Mark Andreessen, the residential real estate leasing sector "is ripe for disruption", especially now that many people have decided to work from home, giving up the social ties and friendships that are established in the workplace. Andreessen continues:
“You can pay rent for decades and have zero capital – that is, nothing. In a world where restricted access to home ownership continues to be a driver of inequality and social anxiety, providing renters with a sense of security, community, and true ownership has great transformative power for our society. ”.
The soaring rents in the USA
A recent US government analysis found that the number of homes affordable for first-time home buyers is decreased by 80% since the XNUMXs. For the majority of the new generations the only option is renting and in this regard a precise term has been coined which defines this state of affairs, the R-Generation (Generation Rent).
It happens though the rental market is becoming prohibitive. This weighs heavily on the morale of the generations who are entering work and are available for mobility to pursue their professional expectations.
The increase in rents has also prompted a reflection by Paul Krugman in his general analysis on the subject of inflation. For the Nobel Prize rising house prices and above all the soaring rents is a very important factor at the macroeconomic level:. The cost of housing, in fact, represents almost a third of the consumer price index and about 40% of basic consumer prices. “Why has housing gone mad?” Krugman wonders, and replies like this:
“The most probable explanation is that thea Covid pandemic has increased the demand for personal space. Part of it was the sudden upsurge in home working that seems to continue even in the return to normality. And working from home is much easier if you have enough space to have some privacy and quiet. Virginia Woolf, in a famous essay entitled A room all to yourself, argued that to devote herself to fiction "a woman must have money and a room of her own to write". Remote work is not fiction (at least it shouldn't be), but a room of one's own, or at least some personal space, is still essential."
… and also in Europe
The "Financial Times" writes about the situation of the cost of rents in the United Kingdom and in particular in London:
"The rents are rising at a dizzying pace, due to a combination of rising demand, slowing rental turnover and an opportunistic tendency by some landlords to pass on higher costs to tenants.
It is estimated at a 10% cost increase compared to 2021, a growth that many tenants are unable to keep up with also due to inflation expected to reach 18% next year in the UK.
An abrupt a surge in rents is also recorded in Italy. It is estimated between 3% and 7% on average, with significant peaks in large cities such as Milan and in tourist destinations.
With Flow, like Maverick in the homonymous film with Tom Cruise, Adam returns to the eye of the storm for a new mission even more impossible than the previous ones.
Good luck Newman!
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Sources:
Andrew Edgecliffe-Johnson WeWork's Adam Neumann on investing, startups, surfing and Masayoshi Son, “The Financial Times”, March 11, 2022
Andrew Edgecliffe-Johnson, Lydia Tomkiw, Richard Waters, Andreessen Horowitz backs WeWork co-founder's property venture, “The Financial Times”, August 15, 2022
Andrew Ross Sorkin, Adam Neumann's New Company Gets a Big Check From Andreessen Horowitz, "The New York Times", August 15, 2002
Robin Wigglesworth, Alexandra Scaggs, The Second Coming of Adam Neumann, “The Financial Times”, August 15, 2022
Andrew Edgecliffe-Johnson, Richard Waters, The VC-fueled comeback of WeWork founder Adam Neumann, “The Financial Times”, August 19, 2022
Paul Krugman, Wonking Out: Virginia Woolf and Core Inflation, "The New York Times", August 15, 2002
Persis Love, George Hammond, Soaring UK rents leave tenants facing eviction and homelessness, “The Financial Times”, August 26, 2022
The rental bubble arrives in the real estate market, Italy starts again, August 22, 2022
