“It’s no trick to make a lot of money if all you want to do is make a lot of money.” —Citizen Kane Money is the name of the game in Venture Capital. And Marc Andreessen’s a16z makes and invests a lot of money.
a16z ’s new investment raised eyebrows across the financial world and in Hollywood as the company invested a record $350 million in Flow, the brainchild of Adam Neumann of WeWork infamy.
Neumann – no stranger to making a lot of money himself – rose to fame in his WeWork quest for greatness followed by a crash and burn when the financials didn’t add up after an attempt to go public. WeWork’s crash under Neumann is well documented as is the huge golden parachute deal he walked away with when asked to leave the company. Vanity Fair says Neumann was given $480 million to leave WeWork.
Now Neumann is back with Flow, a company he says will change the face of rental property in cities around the US. The need is there, he says, because today’s market isn’t friendly to entry-level home ownership, so making community property areas -apartments – appealing and friendly is the way of the future.
Flow has not actually launched, but a16z ’s Andreessen believes in the company as envisioned by Neumann. And Andreessen has often been right. He invested in Airbnb, Facebook, Slack, and Instagram in their early stages. His company has ready cash to invest, and investing in Neumann is a gamble he’s willing to take.
“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,” Andreessen said in an explanatory blog post.
“Adam, and the story of WeWork, have been exhaustively chronicled, analyzed, and fictionalized – sometimes accurately. For all the energy put into covering the story, it’s often under appreciated that only one person has fundamentally redesigned the office experience and led a paradigm-changing global company in the process: Adam Neumann.”
Neumann says he’s learned lessons from his failure at the helm of WeWork. Now with Flow, Neumann says he wants to make renting a way to also build community, or what he calls “Concept living.” Financial Times called Neumann’s idea apartment rentals that sound like a student dorm for urban professionals.
Neumann has spent millions of dollars buying rental apartment buildings in places such as Austin, Miami, and Nashville. He said walking through the apartments he saw great room to improve conditions making them more uplifting for tenants. His answer is a familiar one for him: community. Andreessen saw the opportunity in that idea.
“Shelter is one of our most basic needs,” Andreessen states in the blog post.
“In a world where limited access to homeownership continues to be a driving force behind inequality and anxiety, giving renters a sense of security, community, and genuine ownership has transformative power for our society. When you care for people at their home and provide them with a sense of physical and financial security, you empower them to do more and build things. Solving this problem is key to increasing opportunity for everyone.”
The Financial Times article says two of the buildings Neumann has bought showcase the community he hopes to build. One in Nashville advertises a music room, a bark park, and a valet trash pick-up. The one in Florida lets tenants “live the lifestyle they deserve” with “rent-by-bedroom” co-living, an outdoor cinema, and a “bumpy lawn art area”.
Perhaps there’s more to Flow – Andreessen seems to think so.
“Only through a seismic shift in the way industry relationships are structured and the mechanisms through which value is delivered can we hope to address the underlying problems of the current system and build the solution,” Andreessen stated in the blog post.
“Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders. And given the fragmented nature of the ecosystem today, we can only hope to accomplish any of this by bringing every aspect of the living experience together.”
Where this goes is yet to be seen, especially since to date, Flow is a sort of website with a charismatic leader who knows how to sell a vision and has a net value of $1.4 billion as of June 2022.
Does this translate to home security for future renters in a nation where entry-level homeownership is more expensive and less attainable than ever? Not exactly.
But that’s not the point of Venture Capital investments. What is known for sure is the purpose of venture capital, and that’s to make money. a16z sees the opportunity.
As McKeever Conwell II, founder and managing partner at RareBreed Ventures, said in an article in The Guardian, early investors in WeWork made a lot of money. And at the end of the day, Conwell said, that’s the point.
