Adam Neumann and Andreessen Horowitz have shared the very first public details about the WeWork cofounder’s new residential real-estate startup, Flow. In footage released this week, he spoke for 53 whole minutes with Marc Andreessen and David Ulevitch, another partner at A16Z—Flow’s main financial backer, which has sunk $350 million into Neumann’s project, reportedly its largest-ever check to a single company. Apparently their chat occurred behind closed doors last November, but A16Z decided this Tuesday to both post the video on YouTube, and also dedicate the VC firm’s weekly podcast to their discussion.
Neumann had stayed silent on Flow. Leaked reports said it sought to “disrupt the world’s largest asset class” by introducing a model that purportedly combined the best parts of apartment renting and homeownership. Details that had filtered out included the fact that Neumann had effectively already assembled a real-estate investment trust that controlled some 3,000 units in Atlanta, Miami, Nashville, and other cities. The buildings were to be branded with the Flow name. Then Flow would pull a WeWork-of-apartment-buildings move, crafting a unique “community-driven” living experience—maybe like a capitalist version of Neumann’s own experience on an Israeli kibbutz.
Despite Neumann holding forth on Flow nonstop for almost an hour, he leaves unanswered many questions that have emerged since last August—like what Flow’s magic formula is to “elevate the experience” of renting an apartment, imbue it with Neumann’s “community” buzzword, and offer tenants a “perceived value that appreciates over time” while itself still owning the properties.
Renters can expect one unique experience from Flow, Neumann said when he turned to the topic of how he would instill that sense of community and ownership. “A very funny example,” he said, “is if you’re in your apartment building and you’re a renter and your toilet gets clogged, you call the super. If you’re in your own apartment, and you bought it and you own it, and your toilet gets clogged? You take the plunger,” he added, making plunging gestures in the air. “It’s the difference from feeling like you own something to just feeling like you’re renting.”
The point is because they have no skin in the game, renters also have no incentive to plunge their own toilets. Flow will give them some skin, through some sort of as-yet-undefined fractional ownership. Perhaps Neumann’s big problem here is that he alluded to a toilet, which might give detractors the urge to make poop jokes at his expense. (“Flow will help residents unclog their own toilets” or “Flow: What you get when your last business gets flushed down the toilet.”)
In fairness, Neumann also did outline the four “pillars” of the Flow business model: 1) a “technology-first” property management company handling day-to-day operations; 2) a real-estate asset-management company that owns the buildings; 3) a financial-services company; and 4) “this mechanism that’s going to take some of the value and share it with the value creators.”
No additional context was given for that nebulous fourth pillar, though Neumann spoke vaguely about this “value-creating mechanism” several times. It may in his mind involve blockchain and crypto: Neither word was uttered during A16Z’s event. But in recent months, Neumann has dived into the space, and last year Bloomberg reported Flow’s financial-services arm would in fact include a digital crypto wallet.
However, based on how Neumann described the business model, listeners may ask if Flow is actually real estate’s version of a multilevel-marketing scheme:
What we get so excited about the vision of flow and the business of flow is that it’s actually a flywheel. If we can actually create a better experience in the building, then the building performs better and makes a higher NOI.
If the building makes a higher NOI, then we’ll be able to raise more money and buy more buildings. If we buy more buildings, then we’ll be able to run more buildings and have more users in those buildings, and those users are going to start using our financial services.
Now the reason they’re going to use the financial services—the first thing you do in buildings is you charge rent every month, and that’s 35% of their total wallet. So the payments company that’s charging your rent already has a real relationship with the user. If that financial services company is going to do what we it want to do and create services that are actually meaningful . . . then that, again, is going to drive more users. And then if we are able to take this value-creating mechanism and share with the residents a portion of the value, it’s going to make them feel ownership.
It’s unclear what feeling ownership means versus having it. Six months after the company was announced, its website remains a single page containing the words “Coming 2023.” But Neumann admitted he’s sympathetic to the confusion Flow may be creating. “The word ownership is a very complicated word,” he acknowledged, “especially in this place.”