America is the land of second chances. Nothing makes this point clearer than today’s news that A16Z (aka Andreessen Horowitz) is pouring $350 million into the stealthy real estate startup Flow.
And who is behind Flow? None other than Jared Leto Adam Neumann. He was the co-founder of WeWork. And he presided over one of the biggest investor blowouts in history. If you don’t know the story, it’s time to return from that desert island you’re on and binge-watch WeCrashed.
From what we can gather, Flow is a business that will try to reinvent the process of finding a home. As we wrote about in January, Neumann has been busy re-inventing the property market. He took some of the more than $1 billion burning a hole in his pocket and, as we reported in January, began “quietly …amassing a residential rental property empire with about $1 billion. And he is reportedly doing so with the intention to ‘shake up’ the residential rental-housing market.”
The properties Neumann has amassed are in Miami, Fort Lauderdale, Atlanta, and Nashville. The rebranded Flow apartments will debut next year. We’re a bit unclear about what will set flow housing apart. But WeCrashed punchlines aside, Neumann did shake up how we think about the physical workplace. We can assume he has something similar in mind for residential living.
That shake-up is forming up as Flow. The company website just features a cool logo and an invitation to join its mailing list. It also promises that it is “coming 2023”. Kind of like the sequel to Top Gun Maverick.
Biggest A16Z Check Ever
In a blog post today, A16Z co-founder Marc Andreessen explained why the firm has made its largest-ever investment in Flow. The internet pioneer and VC legend framed Flow as arriving just in time to fix a broken local residential housing market.
“The demographic trends driving America’s housing market are impossible to ignore: our country is creating households faster than we’re building houses,” Andreessen writes.
“Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centers. These factors put enormous pressure on rents in the nation’s most dynamic cities, starkly revealing the troubling realities of both sides of the housing market’s two historical models.”
Only Two Ways to Live
The two models of course are buying and renting. And both are under incredible strain. Add to this the disruption wrought by Covid and the “Great Resignation”. These forces upended working models and led many to reassess the role of work in their lives. Add all this up and we have ourselves a market ready for disruption.
“The residential real estate world needs to address these changing dynamics. And yet virtually no aspect of the modern housing market is ready for these changes,” Andreessen writes.
“And so, we are excited to partner with Adam Neumann and his colleagues on Flow, which is a direct strike on precisely this problem.”
Seismic Shift Coming
Andreessen isn’t terribly specific about Flow’s exact business model. However, he makes it clear that Flow’s goal is the total disruption of the local residential housing market.
“Make no mistake, this kind of mission is a heavy lift. 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 writes.
“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.”
The Story of Adam
Notably, Andreessen acknowledges Adam Neumann’s checkered reputation directly in his post. But he also tries to spin it as a positive.
“Adam, and the story of WeWork, have been exhaustively chronicled, analyzed, and fictionalized – sometimes accurately,” he writes. “For all the energy put into covering the story, it’s often underappreciated that only one person has fundamentally redesigned the office experience and led a paradigm-changing global company in the process: Adam Neumann.”
No doubt A16Z is going to come under fire, at least on investing and tech Twitter, for making such a huge bet on a loose cannon like Neumann. Perhaps they believe they are dealing with an older and wiser Adam. All of the drive with less of the grandiosity, perhaps?
Another key factor may be that Neumann is invested in Flow. He did pour much of his wealth into buying up properties for the venture. Of course, as hard assets, those properties would survive even if Flow fails.
