VCs are looking for return, and quickly, which is why they have glommed on to crypto projects. In the old model, you invest money, wait 5-10 years, and get a payoff when the company goes public or gets sold. With crypto, there is a much more immediate payoff with unregistered securities, AKA “tokens”. And then maybe a second payoff in 5-10 years.
There are no details from a16z or Flow on what this actually is, but I am guessing tokenized rent payments on a blockchain in some fashion, promising some sort of equity to renters, and quick returns to a16z. They came out with a splashy investment and a high valuation, and are hoping to make their money back on the unregistered securities, AKA tokens, and who knows, maybe more in 5-10 years.
Never underestimate the cynicism of a16z.
But they will invest eye-watering sums into financing student newspapers for the middle-aged (Substack) or 'turn your car into a public taxi' businesses, knowing that 90% of them won't amount to anything.
As oposed to which industries exactly?
For the issues being raised here (home ownership is inaccessible to many, renters don't have stability, security), aside from greater protections for renters, another class of existing solution is Community Land Trusts. These organizations retain ownership of the land, have a charter that's targeted at keeping housing affordable (or some related mission), lease out land on very long terms (like 99 years) with contracts that place limitations on resale of any improvements on the land. These restrictions can make housing permanently affordable, and removes housing on that land from being an asset for speculation. Residents get security from the very long terms of their loans, the governance of their CLT, and ownership of improvements on the land. The CLT can use revenue to create and maintain community amenities.
Sometimes good arrangements already exist, but they're not going to be rapidly scaled up across the country because no investor stands to get a windfall from rapid expansion.
Let's see if innovation, driven by greed, can change it.
This is similar to a co-op where the land is owned by the building as a whole.
You can't get away from the problem that if you price something under the market price, you'll get a lot of people who want to live there. How do you choose who lives there? Lottery? There's a huge incentive by the people deciding to self-deal.
Even then, it's still not efficient. For instance suppose the market price is $200k and you give it away to someone who really needs it for $100k, you just essentially gave them $100k. But they have to accept that benefit in form of housing. Perhaps they would prefer to live in a home worth $150k and get $50k in cash for groceries or school or whatever else?
And once they're there they won't want to give up the benefit. They're essentially getting something for nothing. Anyone who grew up in a city with rent control can tell you stories about people they know exploiting the system.
All these efforts to control price are like trying to control global warming with new thermometer designs. The price is a signal of larger economic issues. The only reasonable solution I've found is allowing people to build more.
A network of apartment complexes across the country that you can own equity in the entire enterprise instead of one single home. You can "freely" move between the apartments without having to go through financing etc.
This can be interesting with a massive capital and enough time to build out the network but seeing this cocaine addict's name in the mix make me feel this is going to fail fast. Real estate is a slow industry, VC money doesn't have patient for it
No one seems to understand that Neumann built a massively successful company, because they watch the documentaries and think he’s a scumbag for failing to deliver an IPO.
I bet most of the people here agree 100% with the problems and structural shifts this memo identified, and that technological innovation in the housing space to facilitate both social cohesion and affordability would be a *very good thing*.
Sure, Adam had some highly publicized issues at WeWork. Also, a16z is on a lot of people's shit list right now. Still, why do so few people seem to be rooting for their success? If you're prone to cynicism I get it - the only way this can end is grift - but personally I would like to see more companies trying to address these issues and Adam seems like he genuinely cares about it. Maybe a little too much, even.
Another point is that there is no concrete business or idea. The memo at least doesn't explain the actual business. It's vaporware. There are thousands of people with track records that want to open real cashflow businesses and can't get funding. And then there's someone like this that can manifest billion dollar companies with an idea. It just strikes them as unfair.
Sure, just not one led by Adam Neumann or a16z, certainly not one led by both.
Maybe they will do something legitimately good, but from what we know of both of them, it's highly likely that they will optimize for what will increase their respective net worth as fast as possible, no matter the consequences and not for what will have the best impact on society.
And sure they don't have any obligation to optimize for social good, but you can't ask us to be excited about it.
Neumann already had bought close to 4000 apartment in January, presumably linked to this venture. So if you are somehow expecting them to come up with a solution to the affordability crisis, I think you are deluding yourself. It's far more likely that we end up with an airbnb-like for long-term stays that will continue to push the cost of the housing market ever higher, greatly enriching Neumann and a16z in the process. But hey, at least you will be able to book your place for the next 6 months right through an app with a nice UI, you won't need to line up to visit an apartment and it will even come pre-decorated WeWork-style to make you feel right at home!
If this investment has some term that makes it so Neumann does not personally see one penny of this money unless the company is wildly successful and everyone else involved gets paid first, maybe it'd be worth considering. Instead, there is a very likely outcome here where he takes home tens to hundreds of millions while once again doing nothing of actual substance to change the market.
Basically, he's a huckster who enriched himself at the expense of others. People tend to root against people like that, and they don't like it when they're handed huge sums of money.
If you accept that the markets are inherently good and the most profitable outcome is the best outcome, then it’s easy enough to look at this as a positive move… but if you see capital + technology as a force for bad when unchecked, this is just more of the same — success for Flow could come at the expense of others.
Adam’s history is one of not caring about rules or expectations, he caused significant financial harm to a lot of people with WeWork and while I am not particularly cynical about Flow, I think the cynicism from others deserves more credit — it’s not just contrarianism, the housing market is very vulnerable (see all the private equity that pushed up American house prices recently).
[1] Marc Andreesen himself is NIMBY. Which is what is contributing to the housing problem across the USA (and parts of Europe). The inability to build new housing leads to the insane property pricing and the very housing crisis that they are trying to solve https://www.theatlantic.com/ideas/archive/2022/08/marc-andre...
[2] Adam Neumann is a self dealing grifter.
You have two dishonest actors proposing a solution for problems they may be causing directly...
My gut reaction to the news is totally negative. I agree with your above point, but I see that innovation coming from outside Silicon Valley-VC bubble. We need communities to organize and modernize zoning. We need modular housing to drive down the cost of construction. We need to focus on the basic economics (supply & demand) of housing.
If I had to guess, a16z & Adam are going to throw money into being shitty landlords. They are going to get their cut. I'm very skeptical they will make the world a better place.
To paraphrase, "we will continue hurling investment money into residential real estate to create a permanent serfdom of renters."
It would be nice to see this data explored in a more localized way. I know there are excesses of new housing in some places and shortages in other places. I also don't know how much of the current excess housing supply is due to houses being built in less desirable locations.
Something like localized analysis of housing probably doesn't "scale" enough for a VC firm like a16z.
Color me skeptical, but the deliberately vague strawman arguments in the post read between the lines to be something like: "If you're a homeowner we want to your equity and if your a renter we want your rent". I don't harbor any illusions that flow wants to help anyone but themselves.
I have no idea what flow actually is, but if it's something like "airbnb but permanent on the blockchain" like we work was "Airbnb but for your work desk", then no. Heck no.
Excuse me, what? I've absolutely met my neighbors. In past buildings in Brooklyn I've gone out to dinner with some, spent hours on the stoop having conversations with others, taken care of their kids while they ran an errand, and had all sorts of positive (and negative) experiences with them. That's what living in apartments in a dense city community is like. People come hang out in my place all the time.
It's hard to even comment on what they're proposing, since there are no details, but the last thing we need is more single family homes and corporate landlords.
The US has made a series of poor choices to try to treat housing as a means wealth generation.
Housing can be affordable or a good investment it cannot be both. Ownership incentivize's NIMBYism, which has huge detrimental effects. Renting does not.
I do love Brooklyn's planning for the most part, with mixed use commercial avenues and largely residential streets, but I'd also like more outdoor space to socialize in. Half my family is Algerian and I love the style of the Casbah, with interior courtyards surrounded by apartments or multi-use spaces. There's some good footage of this typical Casbah style building in a music video by the Blaze, for those that haven't seen it [1]. I've seen a similar style in Oaxaca as well.
Also, it's kind of rich to hear a billionaire wax poetic about the woes of the real estate market. According to a quick search, he of no surprise owns several properties, including a $177 million property.
source: https://www.theatlantic.com/ideas/archive/2022/08/marc-andre...
This sounds very disingenuous. Starbucks was arguably the first 'community brand' where people would associate one with an informal meeting place rather than to drink a coffee. Even in Silicon Valley, there are cafe chains renowned for this meeting vibe.
And then there are country clubs, which are newer and more bourgeois.
Even the neighborhood newspaper kiosk in historical European cities did a better job of bringing community and brand to real estate than WeWork.
An actual failed scammer is Elizabeth Holmes of Theranos.
Although I think he dumped the rest into Luck right before he hi-rolled Softbank.
Of course that comes at a cost, one that very few people can afford. At least, it will be unaffordable to most. It is always true that more people than one realises is actually awash with money (thanks to the prior generation benefiting from incredible growth of their assets) and for them this freedom of movement by renting on a rolling short-term basis and upping on a whim will allow them to further access high paying work.
I'm really not sure that what housing needs is for large-scale VC money to be poured in (and the corresponding expectations of return on that).
Will it be profitable? Yes. Is it ethical? No.
https://www.vox.com/recode/23142106/adam-neumann-crypto-carb...
https://www.fool.com/investing/2022/07/17/adam-neumanns-new-...
The disclaimer at the end is nearly half the length of the post.
Hasn't this thought process proven wrong in europe. Renters were similarly engaged in local communities where there were sufficient protections for long term renters.( I can't find the study now ).
I really don't understand why govt need to be in the business of providing home ownership subsidies. Seems like it has contributed to exacerbating current situation in US.
While the top VC players may have earned the respect by themselves being visionary entrepreneurs (once, decades ago in many cases), the rest of the VC market is filled with also-ran investors who have never been practicing entrepreneurs, following markets like lemmings and looking for a relatively quick buck while not even understanding the markets they invest in. When I hear someone is an investor, especially if they're not one of the handful few of well-known investors, I just think to myself "banker". I don't know if it's always been like this, but it certainly feels like it's gotten worse.
Funny you say that because a16z was a top-5 (maybe even better) performing VC in the 2010s and the guy who wrote this article is the Marc Andreessen who created Mosaic/Netscape.
I think this just goes back to the classic "live long enough to see yourself become the villain". I mean seriously, a $350 million round to a company that doesn't yet exist and is led by a bona fide fraudster. Boggles my mind.
The question is, is it trivial to take $22 billion dollars and create a $4 billion business? In some cases I would say yeah, its still valuable. I'm not entirely sure I could create a $4 billion business regardless how much money you gave me. On the other hand its real estate, so I could just buy $22 billion of real estate and hopefully come out somewhere just shy of that amount. I'm not sure but the spread between $22 and $4 leaves plenty of room for error.
But there is something to say about failing. Traders that have lost a lot of money are more valuable than those that have never had any downs. But from hearing Adam Neumann speak, it strikes me as though he hasn't learned any lessons. He's a master at deflection and has an excuse or explanation for everything. He has no self awareness or humility. You can listen to his interview from 2021 and it's really incredible.
Anyway, that's all to say I'm surprised anyone would give him another chance.
"Come on, don't you want to be a general manager and own a real P&L? I'll let you run Intel's software division. John, venture capital, that's not a real job. It's like being a real estate agent."
The other thing is that you have more really rich people who control lots of money without a lot of governance.
I was of the opinion that Adam made a serious and flawed business decision of taking long term leases with borrowed money, but selling short term fluid leases for revenue leading to books that are incredibly risky. At the time of collapse, the sky high valuation was basically a branding exercise, rather than actual business value (adjusted for risk)
> it’s often under appreciated that only one person has fundamentally redesigned the office experience and led a paradigm-changing global company in the process
How is that A16z is oblivious to the fact that astronomical valuations were tempered after scrutiny of the business of WeWork?
>We understand how difficult it is to build something like this
Again. They took cheaply available VC money, turned it into long term leases. That is a terrible business to be in, risk wise.
Not to mention bullshit about "community" and what not that they tried to build around WeWork.
>Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time: their homes.
What is novel about this? Aren't Cul de Sacs supposed to be this? Or even apartments?
What is infuriating is that there is so much great work done by great people on building strong resilient and affordable towns which are a pleasure to live and work in, but the easy VC money flows to the wierdo charlatans instead.
Listening to Marc Andreessen talk about Web3 use cases was eye-opening. Despite being the guy that made web browsing mainstream (Netscape), he sounds like your typical crypto Youtube shill, all buzzwords all the time.
Do they care? If they cashed out on Masayoshi Son's money then it was still a great deal for them.
All things being equal, that makes them a pretty good bet.
Flow probably will have a far easier time getting PR than almost any other startup this year. Same goes for inbound CVs, follow on investment, and basically anything else that makes startups tick.
So it's not that surprising that he can raise from an S Tier investor with a smile and a landing page that's literally just a logo.
I guess this is where wework was headed before he got forced out
I put together a simple site to try to develop the solution to at least one of the problems of apartment living -- loneliness
and thanks for the typo note -- fixed.
nothing built, other than the carrd.co website there. i kind of wanted to put something down 'on paper' to try to develop the idea a bit more myself, maybe show it around online here and there - at least see if i'm just a monster or if other folks have the same problem, etc. and it's def helped to put the site together - it's just allowed me to take the next step - think about:
- how to contact people,
- what types of friendships/relationships/apt-family people might be interested in making/creating,
- how would we actually set up an initial meeting between future-apt-family members
- is 'family' too strong a word/idea? part of my goal is to increase solidarity generally.
- could / should these communities be able to evolve into something much more thna 'just' a family -- tenant union, buy the building/property, land/building-type trust stuff?
- apt communities doing 'pizza days' or whatever once a month
- some communities have fakebook groups, etc.
- some folks will actually meet around the building - parking garage, street, laundry room, dog park, walking around the hood, etc.
- some folks will meet on Nextdoor
my natural inclination for a lot of things these days seems to be 'avoid doing this venture online because it will suck -- almost by definition'. that's a bit harsh, but just my take. some of my ideas, like a kb idea, it's online-only and that's fine/good. but when i think of 'online apt community', the closest thing i can think of right now is 'nextdoor' -- which... has always felt like a racist/classist cesspool to me, whenever i checked into it. just my take. so doing yet another online community like Nextdoor, or fakebook, just has an 'ick' factor for me.
one buddy said his communities' 'pizza days' are all he has ever needed to make NEWFOREVERFRIENDS in whatever city he has ever been in, and that this MyAptFam idea is completely stupid or worse.
and then i met a kid who said, during some discussion i wasn't even involved in, "i'm NEVER moving to another city where I don't know someone again."
This is also a good hedge against the crypto pyramid starting to slow down. Leveraging peoples' willingness to try to get rich quick to create a pyramid was profitable, but once people lost their money and crypto lost its luster, they wandered off and were no longer easy victims^Wcustomers... but imagine if VCs could also control your housing. Wandering off is so much harder! Built-in market protection.
Brilliant.
I don't think another VC-funded app with cool branding is going to save us.
AirBnBs are also far more likely to have a fully equipped kitchen setup, separate rooms, and larger setups for families and groups, none of which are impossible with hotels but are definitely not very common.
I do think AirBnB generates way too much negative externalities for the value it brings, but there is value in it for the consumer.
Andreesen, who this article is written by, was himself trying and succeeding to get his own city council to axe housing development in his own neighborhood, causing the very problems he's writing about.