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If at first you don’t succeed, elevate $350 million and take a look at once more


Housing within the United States has an issue. And Adam Neumann, the charismatic founder recognized for efficiently rebranding shared workplace house as WeWork, and unsuccessfully working it, thinks he has an answer: Flow. This residential actual property startup needs to deal with all kinds of points, together with housing availability, a scarcity of social interactions in a distant world, and the shortcoming of renters to realize fairness.

The housing scarcity is definitely a giant deal. The US was short nearly 4 million housing units as of late 2020, and the issue is spreading across the country. The lack of ability to purchase a house has large repercussions on the whole lot from Americans’ high quality of life to their skill to create wealth. The downside is large enough that enterprise capital agency Andreessen Horowitz (a16z) is writing its biggest check to date — $350 million, valuing the corporate at $1 billion — to put money into Flow with the hope that the corporate can disrupt residential actual property by means of know-how.

In a blog post, a16z co-founder Marc Andreessen wrote that Neumann is returning to “the theme of connecting individuals by means of remodeling their bodily areas and constructing communities the place individuals spend probably the most time: their houses.” Andreessen added that fixing housing issues “requires combining community-driven, experience-centric service with the newest know-how in a means that has by no means been executed earlier than to create a system the place renters obtain the advantages of householders.”

What any of which means just isn’t precisely clear. What we do know is that Flow plans to function greater than 3,000 residences that Neumann lately acquired, and that the corporate will seemingly add group options and supply the chance for renters to realize fairness.

The huge open query right here is whether or not this failed founder and the veneer of know-how will really do something to assist the housing disaster within the US. It’s notable that one of many fundamental issues with US housing is there’s not enough of it. While the difficulty there stems from exclusionary zoning, personal fairness’s mad sprint to purchase rental houses — just like the thousands of apartments Neumann and friends gobbled up — is not making things better.

While providing individuals the power to realize some kind of fairness stake of their residences might assist individuals construct wealth, Flow’s leases are in all probability for many who are already comparatively wealthy. The Nashville property Neumann purchased, for example, incorporates a saltwater pool, valet trash pickup, and a canine park. Add on prime of that every one the premium companies and community-building facets Neumann’s properties will supposedly supply, and issues get even pricier.

It additionally appears just like the undertaking will contain the blockchain. There are a number of clues that counsel this, together with a number of trademark applications uncovered by the Wall Street Journal. The filings for an entity associated to Flow point out actual property growth, co-living house administration, and cryptocurrency buying and selling companies. We additionally know that each Neumann and Andreessen lately teamed up on a equally named undertaking, Flowcarbon, which goals to use blockchain know-how to the marketplace for carbon credit. Additionally, it’s seemingly Flow must use some kind of nascent tech to justify its billion-dollar valuation earlier than the startup has executed a factor.

When WeWork filed to go public, many identified that the actual property firm was going out of its means to convince people it was a tech company — and, by extension, to justify its sky-high valuation. This time round, you may virtually see the wheels delivering Neumann’s head. What’s extra leading edge than Web3? The rebranding of crypto and blockchain might purportedly change the web as we all know it, wresting management of the net away from huge tech corporations, like Facebook and Google, and giving it again to creators.

Sure, that sounds nice. But what does that should do with actual property, group, and giving renters fairness?

Arpit Gupta, an actual property knowledgeable and professor of finance at NYU’s enterprise faculty, surmises that Flow would possibly attempt to mix quite a lot of present issues and market them into one. Those embody timeshares (flexibility!), co-ops (fairness!), layaway financing (entry and fairness!), and luxurious buildings in fashionable areas (well-heeled millennials). Perhaps, Flow needs to supply short-term residences with company-provided financing the place you possibly can develop your possession stake the longer you reside there.

“It’s like WeDwell 2.0 mixed with some kind of rent-to-equity system,” Gupta imagined. Oh, and they’re going to in all probability launch a token — for finance and enjoyable — that may permit extra individuals an possession stake within the enterprise and create quite a lot of buzz.

Flow would under no circumstances be the one firm making an attempt to convey know-how to bear on actual property. Venture capital-funded tech startups are tackling everything from actual property investing to serving to finance renters into changing into homeowners. Web3 actual property corporations, particularly, are inclined to contain placing property rights on the blockchain and tokenizing fairness shares in buildings, based on Gupta.

We additionally don’t but know the complete scope of Neumann’s newest plans. In addition to Flow and Flowcarbon, a search of associated trademark purposes turns up Flow Life (funding and crypto buying and selling companies), Workflow (workspace design), Flow Village (on-line skilled networking) and Kibbutz (academic companies and social networking platform). Of course, simply since you file for a trademark doesn’t imply you’re really going to do one thing.

But as we all know from the destiny of WeWork’s one-time umbrella group, the We Company, Neumann’s ambitions don’t precisely hew to what’s potential. In addition to working an ever-growing portfolio of coworking areas, the We Company additionally branched out into seemingly unrelated companies, together with a faculty and an engineering agency that makes wave pools. Neumann can be well-known for being a profligate spender and a poor manager of cash — behaviors that ended up contributing to the downfall of his company.

Nevertheless, Neumann’s fame and wild ambitions nonetheless haven’t curbed his skill to boost cash.

“In Silicon Valley, there’s all the time cash for the repeat founder,” Eliot Brown, Wall Street Journal reporter and creator of WeWork tell-all The Cult of We, advised Recode. “Failure doesn’t appear to cease individuals.”

That’s notably the case right here. Andreessen is partially chargeable for the cult of the founder, a time period that refers back to the legendary standing given to founders who’re thought to do no fallacious. Now, his VC agency is funding Neumann’s return to glory.

“One of the ironies is that the massive gas behind the rise and fall of WeWork was this fetishization of the founder,” Brown stated. “Adam grew to become kind of the paragon of the founder gone wild and that was a creation, largely, of the mystique that Andreessen put out about founders.”

For Andreessen, nevertheless, Neumann’s experiences and failures are a advantage.

“We perceive how troublesome it’s to construct one thing like this and we love seeing repeat-founders construct on previous successes by rising from classes discovered,” Andreessen wrote in his latest weblog put up. “For Adam, the successes and classes are lots.”

Presumably which means Flow could have no wave pool.

This story was first printed within the Recode e-newsletter. Sign up here so that you don’t miss the following one!

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