ADAM NEUMANN IN DEFENSE OF
also heads the Vision Fund, the world’s largest venture capital fund. Masa has escaped the WeWork mess with far less media scrutiny than Neumann, who’s often portrayed as an incompetent, greedy, spoiled brat. That may be so... But if Neumann is a spoiled brat, then Masa is the entitled, undisciplined parent. The WeWork debacle began in 2017. Back then, Neumann was an eccentric entrepreneur looking for funding. Meanwhile, Masa was flush with cash after raising $100 billion for his Vision Fund, more than half of which came from the sovereign funds of Saudi Arabia and Abu Dhabi. With the money burning a hole in his pocket, Masa set out giving entrepreneurs far more money than they were looking for. Masa figured that if a good business requires $10 million in funding... then it can be a great business if you give it $100 million. According the Wall Street Journal, “Mr. Neumann has told others that Mr. Son appreciated how he was crazy – but thought that he needed to be crazier.” Neumann took Masa’s urging to “be crazier” very seriously. Backed by Masa’s money, WeWork’s annual revenues grew from around $400 million to around $3 billion. That sounds great until you read its S-1 and discover that during the first six months of 2019... the company’s operations burned around $1.4 billion on about $1.5 billion in revenue.
The company maintained that its losses were simply a function of investment in growth. WeWork could, Neumann asserted, turn on the profit faucets whenever it wanted. Despite the obvious fact that WeWork was nothing but a real estate company, Neumann insisted his business deserved the valuation of a high- flying tech darling. As the profits fell, Masa responded by funneling more and more money into the business, at ever-increasing valuations – a $49 billion valuation in January 2019, versus $22 billion and $21 billion in August 2017 and November 2018, respectively . That’s right, folks. According to Masa, WeWork’s value increased 133% over a two- month period, despite losing cash at an ever- increasing rate. But here’s the thing. As Masa recklessly threw good money after bad... Adam Neumann was selling shares at almost every opportunity. In nearly every funding round between 2014 and 2018, Neumann sold part of his shares. According to the Wall Street Journal, he also “took out loans of several hundred million dollars backed by WeWork shares,” and then used that cash to buy buildings... which he leased back to WeWork! Through it all, Neumann maintained his stranglehold on the company. The original S-1 proposed that Neumann’s shares would have 20 times the voting rights as an outsider’s shares, which would have made it impossible to oust the founder. He also initially planned for Rebekah (a yoga
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December 2019
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