Why Your Gen-Z Workers Are Stressed About Using AI Tools at Work
Why Climate Tech Companies Have a Recycling Problem
Jerome Powell: Remote Work Won't Cause a Banking Crisis--Most Likely
Mark Cuban Doubles Down on Support for DEI After Trading Barbs With Anti-Diversity Crusader Elon Musk
Americans Trust Small Businesses More Than Any Other Institution
Has the Credit Crunch Peaked? Lenders Offer Their Take in New Report
Persistent Labor Shortages? A New Bipartisan Senate Agreement Would Create 90,000 Additional Employment Visas
Adam Neumann was once the public face--and barefoot savant--of WeWork. He co-founded the shared office space company in 2010, led it to unicorn status and later a $47 billion valuation--before being pushed out in 2019. Now he wants to buy WeWork back.
A lawyer representing Neumann and his new real estate company, Flow, sent a letter Monday to WeWork's bankruptcy lawyers. The letter, first reported on by The New York Times, said that since December Neumann had been trying to engage with WeWork on a potential purchase or $200 million bankruptcy financing.
WeWork, which filed for chapter 11 bankruptcy protection in New Jersey on November 6, released a response statement calling itself "an extraordinary company" that was restructuring and renegotiating leases "to ensure WeWork is best positioned as an independent, valuable, financially strong and sustainable company long into the future."
At the time of Neumann's departure, WeWork was New York City's largest commercial leaseholder, but questions swirled about the company's finances and underlying business model and a planned IPO was scrapped. WeWork eventually went public in 2021 at a valuation of about $9 billion but struggled to adapt to the changing commercial real estate market. In bankruptcy court this month, the company said it may need a bankruptcy loan to survive, and that it has been withholding payments to landlords to extract better terms.
So why does Neumann want the company? And what is he actually up to?
The short answer: There is intellectual property at stake. Neumann and his brand, once known for its bright Mid-century furnishings and kombucha on tap, more than any others, made coworking hip, and then mainstream. Setting aside financial mismanagement for a moment, Neumann and his team did foresee the demand for flexible office arrangements, long before the pandemic.
He may also be acting out of sheer attachment to what he'd built.
"If you have a big enough ego to start a company, I think you always have a big enough ego to say, 'If they hadn't kicked me out, I could have made that thing work,'" says Eric Koester, a serial entrepreneur and adjunct professor at Georgetown University's McDonough School of Business.
Notable founders including Steve Jobs, Jack Dorsey, Michael Dell, and Steve Huffman all returned to companies they founded after exiting for one reason or another. The founders of ice cream brand Ample Hills worked with investors to buy back their company (nevermind they were then forced out by their new board).
"From an emotional standpoint, it's clearly something you built, and you are attached to, and you want to see it succeed," says MoviePass CEO Stacy Spikes. Spikes knows firsthand: He co-founded MoviePass in 2011, which was acquired in 2017, but struggled to stay afloat. Spikes bought the company out of bankruptcy in 2021 and relaunched it the following year.
Spikes describes a nerve-wracking process for a bankruptcy auction: In his case, the bidding was blind, so he did not know if other parties were offering more. He later learned he was the only bidder. "I didn't sleep for almost a month," Spikes says of the weeks between when he put in a bid and when the sale was approved by a bankruptcy judge in New York.
Bankruptcy court procedures are governed by federal law, so they vary little from state to state. Generally speaking, however, the court will vet a potential buyer and the buyer has a chance to do due diligence. Conversations will cover what's included in the sale, including: intellectual property, patents, trademarks, or proprietary code. Personal information on customers was not included in the MoviePass sale, but according to U.S. bankruptcy code, a company can sell its customer data as long as that's allowed by the company's privacy policy.
If the sale is approved, the buyer will begin negotiating the terms of the sale, as well as securing funding, since most buyers--at least those without Neumann's notoriety--won't have financing lined up in advance. "Adam very well may have some people willing to bet on him," says Spikes. "He probably had to have conversations ahead of time, and said, 'if I go do this, would you be willing to back me?'"
Chances are, returning founders won't get the Jobsian ending they are hoping for. Koester cautions that the example of the Apple co-founder returning to his Cupertino, California-based company is over-romanticized, and not every founder can execute a turnaround on that scale. Jobs recognized a structural change--a revolution in mobile communications--that was taking place.
But investors make bets knowing that most will not make real returns--and founders who've previously flamed out may still be deemed less risky because they have valuable experience and a track record of raising capital. "So few companies ever raise that kind of money that WeWork did," Koester says. "What Adam did the first time is pretty remarkable, so I think he has a lot of structural advantages that other people don't have in that he's already done it before."
Indeed, Neumann has had no trouble lining up funding, raising $350 million for his still largely undefined venture Flow from investors including Andreesen Horowitz. Monday's letter to WeWork said that Neumann's acquisition had the support of hedge fund Third Point, although Third Point has since said the talks are preliminary.
Not every re-acquisition works out, as Seth Goldman learned when he tried to buy back Honest Tea, the company he co-founded in 1998. Coca-Cola bought Honest Tea in 2011, at a time when the company was doing about $75 million in sales. In May 2022, Goldman, who in the interim launched a snack brand called Eat the Change, got the news that Coca-Cola was retiring the brand Honest Tea--but the company rebuffed his offer to buy back the brand.
"Pretty quickly, my thinking pivoted from being sad and mournful to 'well, wait a minute, that's an amazing business opportunity,'" says Goldman. Two weeks later, Eat the Change launched a new tea brand called Just Ice Tea.
Even though he couldn't buy back the IP to his business, Goldman realized he could easily access other elements that made it successful. His team got the product to market in three months by rekindling relationships with the whole supply chain from Honest Tea-tea growers, bottling plants, glass suppliers, distributors, and retailers. They even had the help and institutional knowledge of 11 Honest Tea employees, who now worked at Eat the Change.
He advises entrepreneurs in his position to be mindful of what copyrights might be the property of another company. His new brand couldn't use the name Honest Tea, the phrase "Just a tad sweet," nor, ironically, the founder's own name, because Coca-Cola owned the "Seth and Barry" signature on the bottle, which referred to Goldman and his co-founder Barry Nalebuff.
"Each one, we found a solution," says Goldman. Brand name: Just Ice Tea. Tagline: "Just Sweet Enough." Signature: "Seth, Spike, and Barry," to include their new co-founder Spike Mendelsohn. Cheekily, the back of the bottle label does include the word "honestly."
"The assets we have are the talent and the knowledge and relationships to build a brand. What we lacked was an existing trademark," says Goldman. "The former was more important than the latter in terms of activating a brand. That's what really counted."
None of this means Neumann will have it easy when-or if--he's allowed to buy back WeWork. The company faces a lot more competition than it did when WeWork was snapping up urban real estate and hosting tequila-soaked company retreats. New coworking spaces have popped up in cities across the country offering more specialized communities (like Minneapolis's the Coven) or more luxurious amenities (like Soho Works). Newer offerings also learned from WeWork's struggles with taking on too many commercial leases and many upstarts strike partnerships with landlords or operating agreements with existing spaces, rather than taking out their own leases.
Still Neumann's fame--this is a man who was portrayed by Jared Leto in an Apple TV series, after all--may help score him another chance to reinvent office life. "In this country, we know there's been a lot of bounce-back stories," says Koester. "There's still something pretty sexy about being a part of a fast-growing company."
Now accepting applications for Inc.’s Best Workplace awards. Apply by February 9 for your chance to be featured!
A refreshed look at leadership from the desk of CEO and chief content officer Stephanie Mehta
Privacy Policy
login
who are we?
contact us
qosheapp
Toi Staff
Gideon Levy
Belen Fernandez
Andrew Mitrovica
Mort Laitner
Nikkei Editorial
Rami G Khouri
Ali Fathollah-Nejad
visit website
