Adam Neumann Was Their Biggest Investor — Now He’s Their Biggest Competitor

It didn’t take long for Adam Neumann to find controversy. Before starting his new residential real estate startup Flow, Neumann made a big investment in a company that’s suspiciously similar.


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From an excellent report out yesterday in Forbes:

When staff at real estate startup Alfred arrived at work last Monday morning, they were surprised to discover that their largest investor, former WeWork CEO Adam Neumann, appeared to have started a rival company — and raised $350 million to compete against them.

Flow, Neumann’s splashy but mysterious new real estate venture, was aiming to build “the future of living,” influential venture capitalist Marc Andreessen wrote in a blog post announcing the investment. Alfred’s motto — “welcome to the future of living” — sounded uncomfortably similar.

Neumann is still a major investor, though he has stepped back from the board.

Neumann had wanted to acquire Alfred, but the terms of a new funding round blocked it. He appears to have set up Flow as a response.

Investors in startups are not supposed to back competing companies.

An investor is privy to tons of confidential information about a startup. Were that information disclosed to a competitor, even accidentally, it could cause serious damage.

Starting a competing company rarely comes up, but should be out of bounds for the same reasons.

Flow already appears to be cannibalizing Alfred’s business:

Alfred may have already started seeing the effects of Neumann’s influence. One of the Norwalk, Connecticut, apartments where Alfred participated in the experiment with Greystar had been featured on Alfred’s site as an example of how it works with landlords. But when a Forbes reporter stopped by to speak to residents, one told them that the app the building offered for use was Carson, the Neumann-owned competitor. The Norwalk apartments have since disappeared from Alfred’s site.

With a serious competitor that just raised $350 million, Alfred will find it hard to raise more money. Do investors want to back Alfred’s team against a more experienced and better funded rival?

This controversy shows the danger of doing business with unscrupulous people. Neumann’s money was tempting, but the juice wasn’t worth the squeeze.

Normally, a founder who created a multibillion dollar public company would be a great business partner — even if he’d made some mistakes. Mistakes help people learn.

But we must distinguish between strategic errors and plain lack of ethics. You can learn strategy, but you can’t learn scruples.

What do you think of Neumann’s return? Leave a comment at the bottom and let me know!

More on tech:

Will Adam Neumann Change Housing Forever?

John Doerr’s Biggest Mistake

Talking Startup Fundraising with Travis King of Launch Point Labs

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Photo: WeWork and Flow founder Adam Neumann

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