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This weekend, I burrowed into the couch and turned on WeCrashed, the fascinating new series on WeWork’s rise and fall. I’m actually in an upcoming episode as an extra; more on that in another post. 🙂

Jared Leto’s energy and Anne Hathaway’s icy poise make for great television. But what about the real Adam Neumann?

I recently finished the book The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion. This entertaining and incisive volume gives a great inside view of the startup’s rise and fall.

Neumann conjured WeWork out of almost nothing. He convinced the landlord of his baby clothes business to sublease him a floor in a building the landlord owned, a clever strategy to start a company with little capital.

It took off immediately, filling with young creatives. Not satisfied with his early success, Neumann’s dissembling started early.

Tours of the offices with investors were faked. If a WeWork floor was empty, employees were told to move there and make it look busy.

Neumann’s erratic behavior also quickly surfaced. He offered shots of tequila to prospective investors and landlords, even in the morning.

Still, by 2011, WeWork was growing fast and close to profitability. That year, it raised a series A from Benchmark, one of the world’s best venture capital firms.

As the company’s success grew, so did Neumann’s avarice. He used some of Benchmark’s money to pay rent in buildings he owned personally, a highly suspect move.

Neumann also put himself ahead of his employees. He sold shares at better prices than they could. And after he banned meat in the company cafeteria, he was frequently seen eating it.

By 2017, many of the rents WeWork was paying had doubled as the real estate market strengthened. Losses ballooned, but Neumann kept expanding.

Two years later, WeWork reached the end of its rope. A huge financing with Softbank fell apart, leaving the company forced to go public just to raise enough capital to avoid bankruptcy.

But the public markets weren’t buying it, turned off by big losses and an erratic CEO. The IPO fell apart.

As WeWork faced bankruptcy, Softbank agreed to save the company. Its price: a valuation of just $8 billion, down from $47 billion in the last financing round.

The board forced Neumann out soon after and he and his family left for Israel.

In a final humiliation, they flew coach.

So what did I learn from this, as an angel investor? Here are a few of my takeaways:

1) Avoid self-dealing founders
2) Beware FOMO. Both Neumann and Elizabeth Holmes of Theranos were experts at leveraging it.
3) Focus on unit economics. You can’t “lose money on every one, but make it up in volume.”
4) Don’t value an old economy business like a software business.

Neumann may be plotting his return. He has acquired more than $1 billion worth of apartments in recent years.

I don’t know what his angle is, but I’m pretty sure he has one.

More on tech:

FOMO: Investors’ Worst Enemy

How Startups Can Dominate the Elevator Pitch

The Top 3 Startup Pitch Mistakes

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Photo: “TechCrunch Disrupt NY 2017 – Day 1” by TechCrunch is marked with CC BY 2.0.

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