👀 Getting to $1B selling a "vision" (in one move)

Welcome to The Level Ups. Business news for the future business leader (explained to you like your friend, not your professor).

Today, we cover one of the wildest stories of the last month.

• The man who built a $48B company.

• How it came crashing down and his investors lost fortunes.

• His comeback closing a $350M cheque for his new venture (now at $1B).

• Without building anything (yet), he “sold a vision”

Estimated reading time: 4 minutes & 8 seconds.

This is the story of Adam Neumann (the creator of WeWork). This guy 👇

Let’s get into it.

An Office Revolution

WeWork was the pioneer behind the shared office movement.

The business model was simple. Get one large office, slice it up, and rent out desks and private rooms to smaller, growing companies (often startups).

It’s a common business model today, but it wasn’t always that way.

The company created “brand” around sharing an office space and become both a status symbol and a money printing machine.

I consider brand one of their major keys to success along with the timing. Tech startups saw explosive growth and shared office space was big in that industry.

Several alternatives to WeWork have since appeared (all using the same business model).

There have since been dozens of copycats. None of them are nearly as successful.

When you realize that WeWork once peaked at at $48 billion dollar valuation, it makes sense why people would copy the business model.

Was it that great tho?

It wasn’t all sunshine and rainbows.

The Wall Street Journal once called the company “A $20 Billion Startup Fueled by Silicon Valley Pixie Dust.”

The company wasn’t profitable. Valuation doesn’t mean they’re taking home cash. It has other benefits that come with a big exit like going public (more on this later).

But there were more issues than just profits (as if that’s not enough).

• Neumann’s international trips included taking marjinuna across international borders.

• His wife, Rebekah would fire people for “bad vibes.”

• There were accusations of forcibly kissing at company parties.

• 7% of employees were laid off just before tequila shots were brought into the room and Run-DMC started performing. Neumann allegedly had many of those shots just after canning everyone.

The guy’s doing all this while running a company worth billions. Love it or hate it, it’s not just antics. It’s serious.

There was an award-winning book published on WeWork and Nuemann, along with drama on Apple TV+ if you’d like to read up.

The story gets better.

The Fall.

Neumann was eventually forced out by Softbank and Benchmark, his primary investors.

The company was predicted to be worth $96B when it went public. After all this, the company’s valuation landed at $8B, meaning shareholders overpaid by 1,100%.

Even if you and I see an $8B company as a success, the investors certainly didn’t see it that way.

But that’s not where the story ends with Neumann.

Living in Flow.

After all this, Neumann is already back with a new company worth $1B.

Flow, the new company, recently raised $350M from investors, that’s how it’s worth $1B.

It wasn’t just “investors” by the way. The fundraising round was led Andreessen Horowitz, one of the biggest and most reputable Venture Capital (VC) firms in the world.

There was A TON of controversy about this.

• How could they give Nuemann another shot after a “disgrace” like that?

• Marc Andreessen would push for affordable housing policy publicly, but then invests in this, which seems like one big hypocrisy.

• What kind of an example does this set?

• Why did he get another shot when so many other founders do well but don't get the opportunity?

While some people are hating on Neumann, others love it. It’s a slippery slope. We’ll let you make your own judgements.

How can all this be? How in the hell did he pull this off?

There’s more to the deal.

The Two Things That Matter.

Vision and track record.

Neumann had a very successful startup at one point with WeWork. Even though it ended in “disaster” it was successful once. It wasn't his only one.

While some business owners and founders may also be deserve, a very small percentage of people have achieved what WeWork did.

Track records matter and (for better or worse).

Of course, there’s more.

• Serial entrepreneurs like Neumann often raise more money in funding rounds like this.

• Flow says it will use technology from another proptech firm that works already (proptech is a fancy way of saying real-estate technology company).

• Neumann invested $30M into this company (called Alfred) and is part-owner.

• Neumann already owns thousands of units in Miami, Atlanta, and other major markets that he can use for this venture.

• The vision is more than just a brand for residential housing.

Neumann’s claiming flow will solve a rental housing crisis in the United States and much of North America.

That vision is especially important. Residential housing in the USA is a $33.6 Trillion-dollar industry as of 2020 and it’s growing. You read that right. It’s worth TRILLIONS.

People want a piece of a company that’s claiming to transforms this MASSIVE industry.

A move like this requires vision. Neumann has it and sold it like a champion.

Yes, there is controversy, but it’s also capitalism. There’s money to be made and Andreessen Horowitz is in. The deal is done.

What’s Next?

There’s not much more yet. You can see Flow’s website for yourself.

They’re hiring and we’re waiting to see what they’ll actually do in 2023 (if they stick to that timeline).

The Level Ups is not here to past judgement. Neumann’s story is something every future business leader needs to know.

Vision and ones ability to sell it can make a company worth a billion or help us achieve more humble goals.

What do you think?

Thanks for reading. See you tomorrow.