It was the fundraise heard around Twitter.
Adam Neumann, the infamous entrepreneur behind WeWork, raised a stunning $350 million from Andreessen Horowitz for a yet-to-launch real estate company called Flow. The investment gave Neumann’s latest venture a more than $1 billion valuation, as reported by The New York Times, and came amid what is supposed to be an investor pullback in a bear market.
It is the largest individual check a16z has ever written and the second time the firm backed a Neumann-founded company this year.
There is no need to rehash every single thing that Neumann did wrong; AppleTV+ did that already in the miniseries “WeCrashed.” His calamitous tenure at WeWork garnered him a reputation for worker mismanagement and he led his company to a disastrous IPO. He nevertheless walked away with a roughly $1 billion exit package. He failed up, and the announcement of his a16z round was a reminder that he is still failing up.
“The news [of Neumann’s raise] was not shocking to me,” Nicole Tinson, the founder of the inclusion platform HBCU 20×20, told TechCrunch. “I actually anticipated this because discrimination in funding is no different than discrimination in any avenue.”
The news put reality in a harsh light, a breaking point for many. Women are tired of shattering glass ceilings; their hands are slashed from the dropping shards. Some founders are also exhausted from taking swings at the concrete ceiling, where gender, racial and often socioeconomic conditions combine to create a discriminatory barrier so strong it cannot shatter like glass; it’s sturdy like concrete and must arduously be drilled through.
That is what the venture ecosystem deals with when it comes to enacting systemic change — a concrete ceiling. A sidewalk cannot be penetrated with a fist without hurting the person who hit it. In the same way, the Neumann announcement reminded many founders that one cannot out-educate, out-network and out-assimilate the systemic barriers designed to discriminate against them. There must be a power shift, a sectorwide earthquake to change the status quo.
Much of the outrage centered around Neumann’s raise pertains to what it symbolizes — that this earthquake is not happening. Instead, it signifies a bifurcation in this bear market, where some people see drastic drawbacks while others are propelled forward. People of color are expected to be hit the hardest by the venture slowdown, and data shows they already have. A powerhouse like a16z backing Neumann on a concept signals to others that the status quo stands, even amid the increasing pleas for new founders to finally receive boys-club opportunities.
It would be different if firms like a16z did rounds like this for all founders. It just goes to show that investors, unchecked by their limited partners, repeatedly retreat to the networks they deem safe, and such grapevines rarely include women or people of color. This conscious and unconscious bias is yet another layer of concrete creating a near-impenetrable ceiling.
Tinson said what many others have said — that many businesses are worth supporting, and investors need to analyze better and provide guidelines to help founders of color. In a16z’s case, the firm has some explaining to do: Crunchbase data shows it has made more than 1,200 investments since its inception, with just 193 classified as “diversity investments.”
A further breakdown of the data shows the firm has invested in fewer than 80 companies founded by women and allocated capital to fewer than 15 businesses founded by African Americans, no more than 10 established by Latinx entrepreneurs and under six started by those of South Asian descent.
When TechCrunch contacted the external firm that handles a16z press for further explanation of its diversity metrics, a representative said only that a16z “defers to each individual startup on what they choose to share.”
RareBreed Ventures founder Mckeever Conwell told TechCrunch that the harrowing funding stats around people of color will only change if LPs — of which a16z has 38, including the University of Michigan Endowment and Guardian Life Insurance, according to PitchBook — give directives to GPs on the types of individuals in which they can invest.
That, or the industry needs more ethically and morally minded VCs, which will take time in a sector where the money comes first.
“Everything else is secondary, including, at times, the ethical parts,” Conwell said. “You see somebody who has a potentially unique opportunity, who you’ve seen make a lot of money before, you might want to back them again — even if that person is Adam Neumann.”
Money makes up several thick layers of the concrete ceiling. It stands center stage in this cycle that repeatedly sees investors giving capital and opportunities to white founders while hesitating to provide chances for new entrepreneurs because many come without a track record — a track record they can’t obtain because these same investors are not offering them capital. It’s race, money, power, gender, privilege and class.
You can’t outmaneuver this system. There is no degree or accelerator program that will make this any better — and if it does, it would just be for one. It wouldn’t create equality for all.
Fixing this requires effort on an institutional and systematic level. Perhaps some investors and LPs just don’t care. Maybe time is the acid needed to dissolve the concrete ceiling as we wait and see what oaks the seeds planted today grow into. Until then, don’t run out of bandages.
