Adam Neumann will probably make a16z money

if we're being honest

Waking up to headlines about disgraced WeWork founder, Adam Neumann, getting the largest check a16z has ever written to a single company in a single round is an easy thing to be cynical about. The jokes write themselves (here, here, here, here, here)

So I’m going to fight instinct and try not to be cynical. I’m going to try and be fair. 

TV shows are not real life. If your opinion on Adam Neumann comes from the hit Hulu show, WeCrashed, take a pause. Jared Leto is an actor and the real Adam Neumann is better looking than he is, anyway.

Let’s talk about what is real life and what’s gotten the public so worked up about Adam in the first place: 

• The man took $700 million off the table in combined debt and stock sales before WeWork IPO’d. 

• His company reported “community-adjusted EBITDA” to allow his real estate company to remove “real estate expenses” from the calculation (... what?) 

• The charismatic salesman failed to recognize that entering into high-priced, long-term rental agreements against month-to-month subscription revenue that a user could cancel on a dime is not the kind of math you want to see as a business. Nor, and more fundamentally, is a real estate company a tech company simply because it has some computers.

Now let’s do the “fair” part:

• Imprecise media narratives abound: he didn’t exactly get $1 billion to walk away, he didn’t exactly trademark “We” and sell it back to the company, he didn’t exactly make money leasing buildings to WeWork. The media likes a good take-down. There has been a lot of blood in the WeWork waters over the years and the sharks did what sharks do. But when every media outlet starts rehashing the same embarrassing flaws, and playing a game of telephone to report the maximally damaging half-truths, it skews the narrative away from the whole-truth which is:

• Adam built a legitimate, globally-recognized business. Sure, he raised $22 billion dollars for a company that fell from a $45 billion valuation to a $9 (and now $4) billion one. But… he did start it? And for what it’s worth, it seems like he’s good to his wife.

• While we’re on the subject of legitimate businesses: Elizabeth Holmes, to whom Adam often gets compared, did not build a real business. Theranos had no product and no end user for said non-existent product (sick patients duped into using a fraudulent blood testing machine don’t count.) Elizabeth Holmes built a $0 business - a house of cards brought down by her own fraud. Adam built a $4 billion business that still exists today. His problem was confusing it with a $47 billion one. 

• The VCs and the board that backed him were the lighter fluid to Neumann’s out-of-control fire. A huge part of the Adam Neumann story is the macro environment in which he operated - the cult of revenue-worshippers that said “grow grow grow, capture the market, and worry about profitability later.” Adam did that well only to wake up one morning and discover the market suddenly cared about profitability again. Oops. It was also a time of feverish obsession with founders. In a paradigm where backing founders-turned-public-company-CEOs was seen as the ticket to billions (thanks Zuckerberg), Adam was allowed to amass tremendous power with few checks and balances. 

So the calculus here, if you’re a16z, seems pretty damn obvious:

• We have a visionary founder who dominated a category and built a $4billion business that made his early investors money

• We know his flaws! That’s more than can be said of most early teams a VC backs. Adam’s problems and pitfalls have garnered more ink (and TV time) than Ye and Kim’s breakup. Stick him in the lane where he can be brilliant, and build fences around his shortcomings.

• He knows his flaws! He’s learned from his past mistakes and is now ready to build an even stronger company.

I hate to say it, but they’ll probably make money on this deal. 

Adam didn’t talk to the press for 2 years after he stepped down from WeWork. Then, in 2021, he came back for an interview with Andrew Ross Sorkin.

The interview is, largely, cringey. 

Adam clears up some misperceptions and corrects some facts that were no doubt blown out of proportion. And also gives a number of half-truths himself.

I get it. Making decisions is hard. Growing massive businesses is hard. It’s easy to get swept up in the hallucinations of a market that’s telling you revenue is all that matters. And the media loves a dramatic downfall so they’ll only cover the outlandish parts which can skew perceptions disproportionately negative.

But fuck, man, by the way Neumann talks you would think a $47 billion valuation was foisted on him - the innocent visionary simply trying to “elevate the world’s consciousness.”

The reality is, Neumann was the captain of a ship losing $2 billion a year. He was the one fighting for a higher and higher valuation because without it, his company would go bankrupt on the $219,000 it was losing per hour. And he was the one telling investors it was a tech company in order to get that capital, when all there really were were skyscrapers in Miami.

In talking with Sorkin, Adam does everything he can to appear contrite. Instead he seems cloying. Instead of: “things were bad, I messed up” it’s “I understand why everything looked bad.”

Okay dude, whatever, it’s all just a big misunderstanding by the rest of us.

I would not be shocked if a16z makes money on this deal. And if Adam actually owned up to his past mistakes I wouldn’t even be that bitter about it.