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Weekend Analysis

What was Adam Neumann’s big pitch?

Doormen that moonlight as a budtenders. Roommates reimagined as FlowMates. No shoes, no meat.

I can’t stop thinking about Adam Neumann. What did he say to land a billion-dollar valuation from Andreessen Horowitz for his new real estate venture, Flow? And what was Marc Andreessen’s justification for backing one of the most controversial founders in the world?

For now, all we can do is imagine; Flow has a bare-bones website and a16z’s announcement was fuzzy on details.

Go with the Flow™

Critics and hot-takers weighed in this week after a16z announced its investment in Flow, reportedly $350 million. Neumann was dragged as yet another man who fails upward. Comparisons were drawn to Sean Parker, who leapt from Napster‘s music piracy debacle into a fledgling Facebook. Those who dared defend WeWork—"It had a $4 billion exit!"—were reminded that the office leasing startup raised more than $10 billion and was once valued at $47 billion.

Marc Andreessen was caught in the critical crossfire, following headlines earlier this month about his stance against multifamily housing development in his own community. (He wrote in a public comment, since removed from the web, that he was “IMMENSELY AGAINST” rezoning efforts in the ultrawealthy town of Atherton, California.)

It’s worth noting that nothing is known about the nature of a16z’s investment in Flow. It could be structured to provide downside protection or carry a significant debt component.

Neumann’s defenders, Marc Andreessen among them, pointed out that few people have disrupted an industry as forcefully as Neumann did commercial office space. Maybe they have a point. He reimagined the office as your living room, and now everyone is working from their living rooms. Does that count as visionary?

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Neumann is also a serial entrepreneur—which, statistically speaking, would give him better odds of succeeding than a first-timer.

If WeWork was indeed a kind of hard-won MBA, it was an expensive one (see above). And from what little we know, Flow sounds a lot like WeWork: a real estate startup built around community and vibes.

Some things are clearly different. WeWork was famously light on assets and struggled to build attractive margins through renting long and leasing short. Neumann acquired 3,000 apartments before launching Flow—effectively amassing a real estate investment trust in the process.

One noble aim of Flow is to help renters earn equity. But rent-to-own models have been around for decades, and they are often seen as a better deal for the landlord than the tenant. Blackstone entered this market last year with its $6 billion purchase of Home Partners of America.

Other characteristics of Flow could have been lifted from WeWork’s infamous S-1 filing. Andreessen described the company as an effort to build “community-driven, experience-centric service with the latest technology.”

What would a branded apartment from Adam Neumann look like? The doorman could moonlight as a budtender. Perhaps Flow will be subject to the same tortured trademarking as We—an onsite daycare dubbed FlowGrow™ and tenants reimagined as FlowMates™. Will eating meat be allowed, or wearing shoes?

There could be collaborations. Travis Kalanick’s ghost kitchens could cater family dinners. That Fyre Festival guy could run a summer concert series. Companies whose employees won’t return to the office could bring the office to them. Picture it: Apartments by Amazon.

Maybe Flow will oversee a revival of “yogababble” in the tech world. WeWork promised to “elevate the world’s consciousness.” What will Flow’s mission be? To unlock the human potential of … neighbors?

One actual detail that emerged this week was that Flow plans to launch a crypto wallet, according to a report from Forbes. Perhaps ownership in Flow-operated apartments will be tokenized—a FlowDAO in lieu of a homeowners association. Like other crypto startup investors, early backers could receive handsome handouts of tokens that offer a pathway to early liquidity.

It remains unclear what tangible benefit Web3 will bring to the rental market. But Flow’s crypto trimmings make it defensible as a tech investment, and therefore a more plausible place for VCs to park their cash. For years, WeWork promoted overblown claims that its tech would give it some advantage over the old business models that it aped. Will Flow be any different?

One thing’s for sure. The way to solve intractable problems of housing unaffordability is not with a killer brand. Flow will need to be far more innovative, and Neumann will face far more scrutiny than before.

Featured image by Michael Kovac/Getty Images and Joey Schaffer/PitchBook News

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