Hi guys, I'm Sahil. I'm Crockett. And today we're filming another episode of Uninvested.
We have a new little setup. We got camera one and camera two. Crockett, why don't you tell
them what we're filming today? Today's an exciting episode. Today we are talking about
man, myth, legend, god, Adam Newman. If you haven't heard about him, you're probably living
under a rock. Fraud maybe. Exactly. We're talking about kind of the rise and fall of WeWork briefly,
but most importantly, Adam Newman, famed and somewhat failed CEO, has just had a massive
recent $350 million investment backed by his same former lead investor, Anderson Horowitz,
for his new company, which people are widely speculating about. Yeah. So this new company
flow we'd love to get into, but before I want to give a little background on Adam Newman
and really the rise of WeWork. Yeah. So Adam Newman, born and raised in Israel. I think he
was actually, I was in Israel last summer and I think he was actually born and raised right
where I was staying, right near around. Anyways, besides the point, goes to college in Israel and
I think it's like four credits before he's going to graduate, drops out of college, starts getting
into real, which by the way is like a- That's ballsy. Ballsy move. What about four credits
away? I don't think I'm ready to drop out for any amount of- I mean, if the podcast takes off,
you never know. But he drops out, starts becoming entrepreneurial, has a couple early ventures,
gets into real estate, actually starts to date and later marries his now wife, Rebecca Newman,
who also happens to be cousin of Gwyneth Paltrow. Interesting fact. And what does she do as a wedding
gift? So as a wedding gift, they got a million dollars from her father. And what does she do?
A good wife. She gave that million dollars right into WeWork. Oh my God. So we all know Adam Newman
is known for his charisma. That's really how he got all these deals done, how he was able to grow
WeWork so fast. But really that first big step of million dollars, here Donald Trump got a small
loan of million dollars. Any amount of money can take you really far, but he was really able to
grow it a lot further than that. Why don't you talk about any of the other deals he made?
So, okay, well, let's use the background of WeWork, right? So he's found WeWork. WeWork is
backed by a variety of investors, notably SoftBank, which is one of the largest funds,
I think, if not the largest fund. Yeah, the Japanese billion. They have like 18 billion involved
in this deal. They've backed some insane companies, monday.com, but like 20 other unicorns at this
point, which is ridiculous. Oh, and unicorn, for those that don't know what a unicorn is,
it's any company that's valued at a billion dollars. Good point. Good point. Sorry about that.
But he started to WeWork and essentially what WeWork is, and again, if you don't know about
WeWork at this point, like where have you been? It is a co-locating workspace. They had, I think,
120 locations across like 45 or 47 countries. You could run out based on either like an enterprise
level subscription model or, you know, like other lower level subscription models, working spaces
for you and your team. You could just go casually work there. That's how they started off and that
was their core business. But as recent Netflix documentary We Crashed kind of explains, the
business failed massively and it was a combination of a lot of different things, really shitty
management, poor financial decisions. Essentially, the company ends up going from an initial 47
billion dollar valuation to a five billion dollar valuation. But on that note, maybe you should
explain what a valuation is. Well, first I really want to back up and some of you might be thinking,
why would I want to co-locate to an office in this post-COVID environment? Makes no sense, right?
I know my bosses, everyone, if they could stay home, work from home days, everyone's doing it.
That's the rage. So many companies making it more accessible and easier. But back then, if you think
about it, there wasn't really a concept. Zoom wasn't as popular. You couldn't really conduct
these meetings at home. But if they really started in New York City, think about having like a thousand,
like a very small apartment, having no workspace. You really just want to get out, but you have no
chance for this. And WeWork really gave people the chance to go meet people like my individuals that
want to work hard away from home. It's like a student going to a library. We're all more productive
away from home. So back then, it made a lot of sense to really transform the way people thought
about working in general, whether it be a small startup, different small corporations, not even
no large corporations still use WeWork when they're in the in-between time they haven't got their
official office yet. And it still exists, by the way. So WeWork still has... You can go find
WeWork's right where you're living, I'm sure of it. Yeah. I mean, literally to back up another second,
WeWork failed in late 2019. But as far back as last summer, when I mentioned before I was in Israel,
I worked out of a WeWork for half the summer in Israel. So it still exists. Well, I want to ask,
how was it? I've heard like some horrible things about WeWork. I know people say like,
they see he's not working, he's not working. I had no complaints. So it was free coffee on tap.
It was like, it was super nice, but you can't help but sit in one of those and be like,
damn, there's a dark history behind this place. A lot of people lost a lot.
A lot. But on that note, right, so the world's a very different place now. Not as many people
like to go into work in person, people for working from home. But at that time,
it was hyped up. And like I said, they had a $47 billion valuation. What does that mean?
So there's a lot of terms for valuation in the startup world. If you watched our first episode,
we talked about a revenue multiple. So what a revenue multiple is, a company has a certain
amount of revenue, we'll say 100 million. And we'll see, look at the market past deals,
it might be a 4X multiple on this market in general. So we would take that revenue multiplied by 4X,
and then we got the valuation for it. However, there are many other ways to get valuation,
but this is one of the more popular ones, I think, with like early stage startups, especially when
they don't have a lot of numbers, which we recruit very fast and have some sketchy numbers, we'll say.
Yeah. I think like, look, if any of you guys have seen like Shark Tank, for example, they use
the most like basic form of evaluation, which is you essentially take your asking price and you
divide that by the fraction that these new investors are going to own to the company, right? So like,
let's say, Sahil, I'm asking for $100 from you for a 10% stake in my company. You take 100 and
you divide it by one 10th. And my company's valued at $1,000 at that point. But that's like super
basic. And like Sahil was saying, so many people sell so much potential in WeWork, it ended up
having people assume $47 billion of net worth. And at the time of its crash, that sunk to $5 billion.
Which is insane. That's essentially this company losing all of its value. And so the reaction was
this super dramaticized Netflix documentary. Yeah. We crashed. We crashed. Which by the way,
we should note, it's, I don't think they're technically allowed to call themselves a
documentary, but it's based on like a lot of true shit that they did. Like at one point,
Adam Newman sold, but he trademarked the word we for $8 million and then tried to sell it back
in an attempt to save the company. He sold WeWork's private jet for like, I think it was like $65
million back. A bunch of crazy shit that he tried to do to save it. The biggest thing is people like
to compare him to Elizabeth Holmes, but he has not gotten charged anything. He really came out of
this not delusional. Like all the investors really lost money, but Adam Newman himself didn't lose
an astronomical amount of wealth, nor is he in jail, which a lot of people thought he should be,
because they claim he scammed investors, made promises that he never fulfilled. Like you're
going to be a millionaire, you're going to be a millionaire. And they're all now broke because
they invested into WeWork, which ultimately is considered a failure. Right. And you're right,
dude, he came out still pretty good. There are reports that say he still has $1.1 billion worth
of his own private real estate investments. So the dude's not hurting right now. He's not hurting at
all. And this is kind of how he's able to fund these next ventures, which I really want to talk
about. The first is called Flow Carbon. We're going to get into Flow, which is the big one.
I'm going to talk about it. It got $350 million from A16Z. What's A16Z? So A16Z is a very
prominent venture capital firm, Anderson Horowitz. So they're very popular in the business. And
they've actually backed, Adam Newman before this $350 million, which people found so skeptical,
in Flow Carbon, they gave about $32 million. I think you could check me on that number.
And no one's really talking about that. I know we looked at the website before this,
and he was not even on the about page. He's really trying to hide himself.
Hi, this dude's not... He co-founded his next salvation startup, and he's not on their about
page. That's absurd. Exactly.
Well, I mean, why do you think that is? I mean, it's his first company. Like any normal person,
you're going to hide your reputation. His reputation is so negative. I don't know if you
guys have been on Twitter when you saw that A16Z agreed to the $350 million. Everyone was like,
wow, wow. Imagine if they found out this even earlier, even sooner to the collapse of WeWork,
that he was getting millions of dollars. This comes into the white privilege, white mail,
it's just getting funding in the industry. And there's so many other startups, which is,
it might be a factor, it definitely is a factor. But it's very interesting that he's hiding
himself his reputation. He's very smart in that stuff. I won't lie. Adam Newman is a smart guy.
He knows how to scale businesses, and he knows how he comes off to people. When you're charismatic,
people, you understand, you're very self-aware how people view you.
So, I mean, I think that's an interesting point about just how someone's charisma can take them
so far and undercut that insane privilege he has that you were just talking about.
Exactly.
And you also mentioned it just before talking about Elizabeth Holmes, right? This is a female
founder, which by the way, female founders are extremely rare, and there are firms out there
dedicated just to backing female founders. Yeah. And Christina Williams, she has a fund that's
like just for women founders, right? Yeah, exactly. Yeah. I mean, that's my point exactly.
And at the end of the day, Elizabeth Holmes, Theranos was a unicorn startup, and she defrauded
investors. Well, let's say what Theranos is. Another background point, Theranos was this
company where she promised that these blood tests essentially would tell you a lot of information,
but it ended up being a fake product, didn't work at all. She, however, is going to jail. She's
having another child come up. Maybe we'll make an episode on it. Very interesting. Hulu has a docu
series on it. So if you want to know more, check that out. And at the same time though, right? So
she did, look, her and Adam Newman, very different people. Adam Newman had a product. He was selling
to people. It wasn't something like Theranos where you had to do a bunch of scientific research and
R&D to prove that it worked. People were using WeWork. People were using it, and for all intents
and purposes, it worked. Elizabeth Holmes, she directly defrauded people. And so there's a
difference there. At the same time, they've had equal amounts of media coverage, and this woman's
going to jail, and he has since had almost $400 million in additional funding for what he's doing,
which is insane. Why is that? Is there a big difference? Well, I think one of the things I'd
like to go back to the point that you were just talking about is this idea of him being charismatic
and how that factors into you being a CEO or a manager. Yeah, he's a salesman essentially.
You know, I'm pretty sure the way he got his second building for WeWork is he got drunk with
someone, went out, the guy said yes. Later the guy tried to back out. He comes like,
you can't really back out. You made a deal. You got to honor the code. But the fact is that he's
a very likable guy. You want to go out and get drinks with him. You find him interesting. He
has so much passion. That's really what I love about founders in general is just the passion
they have. They're risking their entire livelihood. Like we said, he dropped out of college with
four credits left. He's risking everything. But I mean, look, so being a good salesman,
obviously there's so many pros. Like when you're running a successful business, whether it's like
getting new clients or helping convince like your C-suite or the board of what you're doing,
being a salesman is great. But how about when it starts to give you that privilege to build
things that might not actually deliver any value? And so I think that's like, let's segue to talk
about the immediate next thing you did, Flow Carbon. Yeah, Flow Carbon. So Flow Carbon is
a Web3 product, crypto product. It's really the rage nowadays. And essentially what they do is
they trade these carbon credits. So companies can use greenhouse gases with these carbon credits.
But using Web3 makes it lower costs, much easier to make these transactions. And A16Z poured this
money in, but they had this giant fund. They had like the biggest Web3 fund. So some argue they're
just throwing money into everything. And even an established founder, he was able to take a startup
from starting, a very startup to IPO. So he is able to gain reap investments to investors, but
it was once it became an IPO that everyone understood what he was promising wasn't factual.
So he's founded Flow Carbon, goes completely under the radar. Yeah. Doesn't put his name on
the about section. I mean, that's a little suspect. That's absurd, right? It's a suspect.
I mean, it's not the equivalent, but imagine if, look, there's the Jeffrey Dahmer doc right now.
And obviously he's no longer alive at this point, but imagine he founded a startup and he's not in
the about page. It's like, dude, this person's like- No one wants to use this product now.
No one want to use that product. So this goes completely under the radar. And it has kind of
segued into what is now Anderson Horowitz or A16Z like we talked about before. Their largest
investment they have ever made in a founder of $350 million in Adam Newman's now third WeWork,
then Flow Carbon, now Flow. So Flow is his third product. So- Explain Flow a little bit.
So let's just avoid the confusion a little bit. So there's Flow Carbon. That was this
Weprary- The second one. Yeah. Weprary Carbon tokenized product, excuse me. And now there's
Flow. And Flow does kind of a similar version of what WeWork was doing. Essentially there's
very limited information on what they're doing, but it should allow people who use the product
to gain some type of equity in real estate investments. Again, there's very, very limited
information. So it's like you kind of get to own the building that you're living in, consider it.
And it's like most simplistic terms. And do you know if it slices up commercial and residential
real estate into like little portions that you can own for equity? Yeah, exactly. Yeah. So you own,
if you live there, you own the building itself. You might not own like, you don't own like one
unit, right? You own like a fraction, maybe you own like a fraction of like said units, said building.
Okay. Interesting. And obviously, right, Anderson Horowitz, right, they put $350 million into this
company. They have a history of being super pro repeat founder. And now what a repeat founder is,
just some more like technical terms, all that is, is someone, it feels kind of self-evident,
who has founded more than one venture and more than one startup. And there's actually a lot of
really, really interesting data on repeat founders. There was a study in 2006. I got to pull it up.
There's a study in 2006 from professors at Stanford and MIT on repeat founders and their success.
I'm going to pull it up. It's on my computer right here. So it says that, and this was in 2006,
I'll give you some data. 2006, there were 18,900 companies. So basically 19,000 companies founded
by first time founders. So imagine like you've never founded a company before you found a startup,
you go into that 19,000. In that 19,000 number, right? 0.6% of companies, 0.6% went through a
funding round. So funding round is, you're getting some venture money. Someone is throwing money at
you. They're, you know, trusting you. Right. Exactly. So 0.6% of that number. Okay. So that's
very, very little. That's probably around, I think it's like a hundred of those, of those 19,000,
or 190 basically. Consulting math. A little bit, a little bit less. And then of that, 4% had an
exit. And an exit is a fancy VC word for your company's getting bought out. You're selling
your company. And so if you're a VC investor and you're investing in a company, your goal
is an exit. Right? Exactly. You want someone to buy the company you've invested in. That's how
you're recouping the money you put in for an exit round return. Exactly. Right. And so that's just
for first time founders. Now this is where the data gets crazy. Okay. The data gets crazy when
you look at people who founded two or three companies before. Like Adam Newman. Like Adam
Newman. So Adam Newman has founded three companies. Okay. Got it. Three major venture funded companies.
I'm sure he's had other, other small things before. 2006, same year. People who founded
three companies was only 420 people. So that's opposed to 19,000 companies with first time
founders. Of that, an average of 1% were founded. Right? So that's double the number before.
10% had an exit. So that's three times the number from before. And the percent with a big exit,
which is at least $10 million, is 3%. Which is crazy. That's a lot of money. Yeah. Which is
crazy. Huge percent. There are angel investors out there. An angel investor, another technical term,
is someone who just makes a one-off investment. They're not an accredited investor. And it can
be like, it's usually into very, very early stages of startup. Definitely not generating any revenue,
maybe one or two employees. It might just be an idea. Yeah. Like a lot of people have, you may
have heard of Peter Thiel. He was like Facebook's angel investor. And so when Mark Zuckerberg was
first starting out in 2007 or whatever, Peter Thiel just gave them $100,000. Just like a random
guy. Right? So think of it like that. Let's say you're an angel investor and you give someone
$10,000 and then they make a big exit for $10 million. Like that's substantial. Right. So
I think in a weird way, like Anderton Horowitz is that sole angel that's just supporting
Newman through all this right now. You think so? They're the sole angel that's supporting...
They're supporting him in a big way with $350 million. Well, I think it's a terrible look if
you're like... Unless you have a really strong thesis on why their new company is great. And by
the way, I'm sure Anderton Horowitz has that. They're not disclosing it. Yeah. I'm sure you
had a great pitch. They really see the future, COVID, the housing market. A lot of residences
are going to be commercially bought, they say, in the future. More like entities buying housing
rather than a person going out. There's some predictions out there, but this is slightly
different than that. But here's the thing. It's like Anderton Horowitz has always prided themselves,
and this has a little bit more background on them. Yeah. Because they've always prided themselves on
repeat founders. I talked about this a little bit before. Anderton Horowitz used to have a policy
that you couldn't work there unless you'd founded something yourself. Wow. I didn't know that.
That's really interesting. Yeah. That's cool. We'll put in the comments one of Ben Horowitz's books
that I used to read talks all about it. They wouldn't let you in the door for an interview
if you haven't walked the walk. Right? Wow. And so I think... And they've changed it since,
because now a lot of VC firms... Yeah. I think they take like two analysts. I heard they took
like two analysts, I think. Yeah. Which is crazy. But they're shifting. But I think the underlying
point there is like, they want to know that you can walk the walk. And if they are... They're
uber aware. They've seen the videos. They've publicly written about how they don't like the
We Crash documentary. They're aware of the reputation this dude has, and they're putting
more money that they put into his original failed company into his new thing. Yeah. But do you think
there's a sense of privilege there that he's like, he's allowed to go out there and get through it.
A lot of people think he's not allowed to go out there. He doesn't get this second chance. What
do you think? I don't know. I think he's a... Does he get a second chance? I think everyone deserves
a second chance. Him particularly, scaring people, losing money. I don't think... He doesn't have
malicious intent. I think there's a difference between having... Like Elizabeth Holmes, there's a
malicious intent. She was knowingly fraudulent in her actions. But Adam Newman, he truly believed.
He might've been delusional. And it's delusional... Him being delusional is what caused people to lose
money, but he still was able to bring this idea all the way to this, making it onto our podcast,
talking about a failed company to once again making $350 million in venture capital funding.
So I do think he should get a second chance. However, I don't think it should be from a
prominent firm like A16Z. I think he should be funding himself, backing himself, for instance.
If this started becoming just as big, then I can see metrics coming in. But a series of
A's like Seed, I don't really see how it's justifiable that he got this amount of venture
capital funding when there's so many startup ideas out there. I agree. Their fund is not that big.
That's a substantial amount for any fund. There are only so many funds in the United States.
And a fund, by the way, is just the money that a venture capital firm collects from their other
investors that then they give to startups to return it to their investors. There are only so
many funds that have a billion dollars. There's barely, maybe like, I don't know.
When you hear, by the way, there's probably 20 super massive VCs in the United States.
Exactly. And you'll hear every couple of months, like,
oh, Anderson Horowitz has raised their new fund worth $2 billion or $1 billion. That's a lot of
money. They just invested $350 million on one company. That's a third. One guy, not even a
company. One guy. One guy. He doesn't even have like a, he's not even fully built out or established
in any means. I think, look, I completely agree with your point. And I think that he unknowingly
failed his company, right? Like, he made poor managerial decisions that led to the death of
his company. He was delusional. He really thought he always accredited it'd be the next Facebook.
He wanted it to be like the next Mark Zuckerberg. He wanted to change society.
You're absolutely right. But the difference there is that Elizabeth Holmes knowingly was making
wrong decisions. Exactly. He wasn't anything. People were using WeWork.
So, I mean, look, I don't necessarily, like, I think there's undoubtedly a great deal of privilege
in him being a repeat founder as like this white dude who like has made very strong connects in
the industry, who's like super rich. His wife is the cousin of Gwyneth Paltrow. There's like
undoubtedly privilege. But do I think that means that he shouldn't get the investment? He doesn't
he doesn't deserve a second chance. I don't think so. I think it really heavily depends like how
Flo Carmen is doing, you know, the one like he got, you know, A16Z. Like maybe that company is
flourishing, really like changing the game. And that would justify this investment so much. It's
like, it's not just going from a failure to let's give him a second chance. It's like, okay, let's
go to a guy that, you know, has already made some changes, has already, you know, found his way back
to be successful. He's proven, he's proven himself to success twice in terms of startups, not actually
IPO. Then I think it's a justifiable investment. But you know, from my public view, I can't see
inside their models. I don't know exactly the pitch he gave them and like what they see this becoming.
But I just don't think so right now. I agree. Who are we going to have talking about this with us
next week? So next week, we're going to have Yasmina come on. She's a founder herself. So
we're going to get her thoughts on really founders, scaling businesses, but also from the venture
capital perspective as well. You guys got a treat. She's going to be sick. Yeah, we're really excited.
We're going to post it on Halloween, hopefully. So we have another little surprise for you guys.
Then good stuff. Anyways, hope you guys enjoyed the episode. This was on unvested. Thank you.