Tech's cult of the founder bounces back
WeWork founder Adam Neumann's score of a gargantuan new venture-capital investment shows that Silicon Valley's love affair with free-wheeling, big-spending startup founders remains hot — even in a down market.
Driving the news: Andreessen Horowitz announced Monday it would fund Neumann's Flow —a real-estate venture aimed at "disrupting" the residential real-estate rental market the way WeWork set out to reinvent commercial office space — to the tune of $350M.
Neumann fell from grace in 2019 and took WeWork's IPO down with him after press reports of a pot party on a private jet, accusations of a culture of sexual harassment and concerns about potential self-dealing alienated investors and the company's board.
- In a matter of weeks, the firm's valuation fell from a high of $48B to roughly $8B. Within a couple of years, you could watch the whole emblematic saga — in lightly fictionalized, binge-worthy form on Apple TV+, or in a Hulu documentary.
Yes, but: Whatever it was that made Neumann unfit to lead the trendy coworking-space giant didn't cause anyone to flinch at Andreessen Horowitz, which described its investment in Flow as the largest single check it has ever paid into an investment round, per the New York Times.
Why it matters: Neumann's comeback shows that the people who direct tech capital still believe the industry's most precious resources are entrepreneurial experience and epic-scale chutzpah.
- "We are thrilled by the scope and aspiration of this project...only projects with such lofty goals have a chance at changing the world," Marc Andreessen wrote in a post.
The big picture: In the face of the recent market downturn, a number of founders of once high-flying firms — among them Pinterest, Airbnb and Medium — announced they were stepping back from their businesses. At the same time, some investors began cutting back on new startup money.
- That led some observers to declare that the cult of the founder was losing its hold. "Patience for visionaries wore thin. Founder-led companies started to seem like liabilities, not assets," wrote the Times' Erin Griffith.
Be smart: Andreessen Horowitz — also known for its embrace of cryptocurrency- and blockchain-driven enterprises — could be an outlier.
- More likely: The tech industry's hunger to hand cash to people with experience turning grand ideas into big companies is so great that it will continue to overlook their failings and failures.
Catch up quick: Founders have always been a driving force in the tech economy.
- The personal computer revolution of the '70s and '80s and the internet revolution of the '90s and 2000s both spotlit the role of obsessive founders who clung to their visions and persevered through setbacks to win wealth and "change the world."
- By the 2000s, startup founders were gobbling up the book "Founders at Work" and transforming a word that had long been a boilerplate term on legal documents into a mythic title suffused with reverence.
Between the lines: The key new wrinkle Google introduced 20 years ago was a double-tier governance structure that gave founders extra voting power to protect them from being ousted by investors or boards — the fate of the industry's most celebrated founder of all, Steve Jobs.
- In the end, though, all those votes didn't protect Neumann: The financial walls simply fell too fast for him to survive.
The bottom line: Ultimately, the role of founder is all about sticking to a vision while holding onto the trust of a company's stakeholders. Adam Neumann lost that trust fast three years ago. Andreessen's giving him another chance.
- In Andreessen's words: "We understand how difficult it is to build something like this and we love seeing repeat-founders build on past successes by growing from lessons learned. For Adam, the successes and lessons are plenty."
What to watch: Keep a close eye on his new company's voting structure to see exactly which lessons Neumann learned.