WeWork co-founder and former chief executive Adam Neumann’s career arc has felt synonymous with the rise and eventual fall of unicorn dreams. The entrepreneur, whose fall from grace has attracted global interest, just found a ladder in the form of a check from storied venture capital firm Andreessen Horowitz.

Andreessen Horowitz announced on Monday that it has written its largest single check to-date into Neumann’s new startup, Flow. The stealthy startup is trying to reinvent real estate (again), but instead of commercial properties, which WeWork focused on, Neumann is looking into revolutionizing rental properties. Horowitz’s check, reportedly upwards of $350 million, values the not-yet-launched company at over $1 billion, according to The New York Times. (Andreessen Horowitz declined to comment beyond the blog post, and Flow did not respond immediately to request for comment.) It is unclear how the deal is structured between equity financing or debt financing.

a16z says ‘WeBack’ to WeWork’s Neumann with its biggest check ever

While details remain sparse, the development has met with a range of opinions from early-stage investors, whose entire job it is to back outlier founders with high chances of success. Some say that this is the exact point of the venture asset class — backing bold founders — while others note that Neumann’s second chance comes as women and founders of color struggle more than ever to get starter capital.

Is it really all about track record?

Neumann’s track record at WeWork can be viewed differently depending on who you ask. Much has been made of the cultural malaise at the company. Neumann spent investor cash on copious amounts of booze for the office, a school for his wife’s vanity project and a wave pool, but when the business finally imploded ahead of its long-planned IPO, Neumann wasn’t the one left holding the bag.

The company saw its valuation plummet from $47 billion at its peak to ~$8 billion under Neumann’s tenure. WeWork laid off thousands of employees partly because of his own fiscal imprudence, and he was eventually forced out as CEO by his own investors in 2019. They still paid him handsomely to leave, though — his exit package was worth more than $1 billion.

Post-game analysis of WeWork’s failed IPO attempt focused on some of the more far-fetched parts of his vision, from reporting “community-adjusted EBITDA” to announcing his intent to “elevate the world’s consciousness.”

But the company did eventually make its public debut through a SPAC in late 2021, albeit at a much lower valuation and to markedly less fanfare. Despite the public criticism, early WeWork investors still benefited from backing the company, Rare Breed Ventures founder McKeever Conwell, whose firm backs seed and pre-seed companies, told TechCrunch.

“At the end of the day, Adam is a white guy who started a company and got a multibillion-dollar valuation. Now, was there some trickery in there? Sure. Some things he did wrong? Sure. But I think what people forget is, if you were an early investor, which we weren’t, you still got paid,” Conwell said.

Conwell said that given the weight that VCs place on a founder’s network at the seed stage, it’s understandable why a firm like a16z would want to place their trust in a founder like Neumann, at least when it comes to building a multibillion-dollar real estate business — something he’s done before.

“If we look at the history of entrepreneurs, of successful tech founders, many of these founders’ largest outcomes aren’t their first thing. It’s like their third, or fourth or fifth company [that succeeds],” Conwell said.

Particularly during tough economic times, as Conwell pointed out on Twitter, asset allocators tend to pile money into what they view as “safe” investments. That’s exactly what a16z seems to be doing with its bet on Neumann, he added.

A reminder that in times of economic downturn allocators turn back to what they deem is safer. That's right you'd get fired faster for investing in underrepresented founders than investing in Adam Neumann from WeWork fame. (And with a giant check too)https://t.co/MyQEsmMIDK

— MacTheVC.eth (@MacConwell) August 15, 2022

“Firms like Andreessen are only going to be focused on a small pocket [of opportunities] in which they know they know how to make money … It’s a playbook. They know that works, it’s a playbook they can sell to their investors. It’s a playbook that they never change. It doesn’t matter, because if they don’t change it, they’re still winning,” Conwell said.

The vision

As far as visions go, renovating the rental real estate market isn’t a unique idea. With over $100 million in venture capital investment, Common is a co-living company that plays property manager to a suite of apartments and homes. The startup, ironically, operates one of the former WeLives, which was WeWork’s dorm-like take on rental properties.

Co-founder Brad Hargreaves, who stepped back as chief executive of the company less than two weeks ago, told TechCrunch over e-mail that “whatever you think of Neumann, WeWork was innovative and defined the category.”

“I believe we’re going to see more ‘asset-heavy’ venture deals happen,” Hargreaves continued. “VCs (if you can even call them that these days) have plenty of capital to deploy, and it’s clear that massive change in some industries won’t come through light-touch software innovation alone,” Hargreaves said.

At the same time, Hargreaves hinted that Neumman’s new deal is rich. He said that the check size is a “hell of a preference stack to layer over this kind of company,” pointing out how Alliance Residential, which owned 110,000 apartment units, was bought for $200 million by Greystar. FSV, which offers property management services, is valued at only $6 billion and owns 1.5 billion units and dozens of brands. He thinks that it’s likely the deal is not structured like a traditional venture deal, although it’s unclear what percent of the check would be debt funding versus equity financing.

If a startup is worth $1b before it launches a product it’s probably a scam.

— jason@calacanis.com (@Jason) August 15, 2022

Kate Brodock, CEO of Switch and general partner at the W Fund, called the deal “disgusting.”

“This is one of the biggest, most notable firms out there and I just cannot understand,” Brodock said in an interview with TechCrunch. “This is just like somebody woke up and they were like, how many boxes can I check that just moves us backwards?”

Allison Byers, the founder of Scroobious, a platform that aims to diversify startups and make founders more venture backable, described feeling a muted rage.

“There’s this undertone of acceptance and almost learned helplessness. Or like trauma we’ve all experienced so much it doesn’t make the same impact anymore,” she said to TechCrunch over Twitter DMs. “This all seems new and horrendous to those who have opened their eyes to the systemic issues of VC funding over the past couple years, but we’ve been dealing with it forever.”

Byers added: “It’s really just a matter of fact and I can’t let it consume my day [because] I’ve got my normal load of female founder shit to do.”

Startup yachts, Adam Neumann and wait what year is it again?

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