In 2020, Adam Neumann’s family office became a lead investor in real estate tech company Alfred. Less than two years later, the ex-WeWork CEO announced a new venture, Flow, with $350 million in funding. Its similarities to Alfred’s business raise questions about Neumann’s motives — and concerns about possible conflicts of interest.
By Iain Martin, Alex Konrad and Cyrus Farivar
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 — who still owns about 10% of WeWork, the coworking company he cofounded in 2010 — helped New York-based Alfred with a $20 million capital injection at the start of the pandemic, and then invested again in 2022. Through his family office 166 2nd Financial Services, Neumann representatives held two board seats at Alfred from October 2020 until May 2022.
But interviews with eight sources who have knowledge of Alfred and Neumann’s operations show this isn’t a typical investor relationship. Neumann distanced himself from Alfred after he no longer would have a way to gain full control of his portfolio company, and then launched a startup that appears to compete with its product.
“If he scorch-earths [Alfred], that would be really awful.”
An investor potentially launching a competitor after growing concerned about a portfolio company’s direction, or becoming convinced they could better address a similar opportunity themselves, isn’t unheard of in Silicon Valley. But as lines blurred between Neumann’s business interests, the former WeWork cofounder appears to have laid the groundwork for an Alfred challenger before he began to extricate himself from his portfolio company. Forbes estimates Neumann still owns more than 10% of Alfred.
“I worry he’s been given an unfair advantage,” said one ex-Alfred employee. “Will he be a grown-up here? If he scorch-earths [Alfred], that would be really awful.”
Founded by Harvard Business School classmates, and former McKinsey consultants Marcela Sapone and Jessica Beck, Alfred originally offered an app-based concierge for the millennial set, which allowed residents to book home services like laundry and grocery pickup. It then expanded to work with landlords at upscale properties to offer those services as an amenity.
During an experiment at several buildings Neumann owned in Connecticut where Alfred and condo manager Greystar were involved, the real opportunity became clear: Using software to manage properties would be far more lucrative than the services Alfred was offering. Property filings show that Neumann was able to turn a profit on the sale of the buildings as well.
Alfred began to reorient toward this new direction, and in March 2022 it raised $125 million to buy a property management firm. But for Alfred to raise the funds, Neumann gave up terms from his initial investment that would have given him the ability to eventually become a majority owner. After he conceded the possibility to control Alfred in the future, Neumann began to step away from his portfolio company, with his two board members resigning just a few months after the deal closed.
According to two sources, these board members said they resigned because they might soon work on a project with the potential to compete with Alfred. Forbes has granted anonymity to some sources mentioned in this story because they were not authorized to publicly discuss Alfred or Neumann’s business dealings.
A spokesperson for Neumann and his family office 166 2nd Financial Services, David Goldin, denied that Flow will compete with Alfred and disputed that account, saying the two board members resigned merely due to the risk of the public appearance of a conflict of interest. He declined to comment further on any personnel issues.
Before Neumann began distancing himself from Alfred, he started getting involved with one of its competitors. In 2021, the founder of a small startup that provided similar services to Alfred’s, called Carson Living, consulted with Alfred management on Neumann’s behalf, according to a source at the company. Then, Neumann quietly acquired Carson, which appears to have ties to his new venture, business filings show. Carson’s founder now works on Flow’s products, according to one of its former investors. The Carson acquisition has not previously been reported.
Neumann’s various acquired multi-tenant real estate properties are now part of Flow, Goldin said. Flow’s product and business model have not yet been announced, but it appears the startup is aiming to offer concierge-like benefits to renters and also provide management services for Neumann’s properties and third-party landlords, according to The New York Times. Given that Alfred now runs software for tenants and landlords, and owns a property management firm, the two startups’ ambitions seem uncannily similar.
“It’s optically not good.”
In response to a detailed list of questions, Alfred provided only a brief statement from vice president of communications and marketing Britta Mulderrig, describing the company’s mission and function, and noting it currently manages 20,000 units and has over 300,000 U.S. residents using its technology. Flow investor Andreessen Horowitz and Alfred investors including NEA, Spark Capital and SV Angel declined to comment for this story.
“We’ve been supporters of Marcela, Jess, and the Alfred team since investing two years ago,” Neumann spokesperson Goldin said in a statement. “We are excited to watch Alfred continue to grow and look forward to future opportunities to partner with the company.”
The circumstances under which Neumann launched Flow raise questions about the perception of a conflict of interest, just as Alfred’s former board members expected.
If Flow were going to “explicitly build an Alfred-like software as part of their overall business, then Alfred should not be happy and Alfred’s other investors should not be happy,” said Sean Foote, a venture capitalist who is also a lecturer at UC Berkeley’s Haas School of Business. He continued: “It’s optically not good.”
Named for the fictional butler of Bruce Wayne, Alfred was launched out of Boston in 2014. Founders Sapone and Beck raised $60 million in five years to build a virtual concierge service through which busy urbanites could outsource household tasks.
In 2020, the cofounders and early investors, including VC firms Spark Capital and NEA and property developers Divco West and Invesco, welcomed a new lead investor to Alfred’s cap table: Neumann. That October, the investor’s family office poured $20 million into Alfred as the lead in its $42 million Series C round.
Alfred’s ambition — which now included providing virtual concierge services as an amenity in luxury buildings — resonated with the former WeWork CEO, who had been ousted from his company after a failed IPO process in 2019. “Adam has been impressed by what these two visionary founders have accomplished over the last six years as they work to transform apartment living,” a Neumann spokesperson told CNN Business at the time.
Neumann took two board seats at Alfred as part of his investment, though he delegated them to DJ Mauch and Ilan Stern, managers of his family office, two sources said. Arik Benzino, WeWork’s former president, was appointed to the same role at Alfred.
As Neumann and his allies shared their operations insights from building the co-working giant, the Alfred team helped Neumann and condo operator Greystar in an experiment to jazz up a trio of apartment blocks owned by Neumann, and co-investors, in Norwalk, Connecticut.
Goldin and Neumann’s co-owner Invictus Real Estate Partners diminished Alfred’s role in this project, claiming Greystar managed the three Norwalk apartment buildings, with Alfred facilitating minor concierge services, like home cleaning and dog walking. Invictus spoke to Forbes at the request of Goldin.
“We erased the lines between Alfred, the property management, and in essence, ownership.”
But current and past Alfred staff disputed this characterization. As did Greystar CEO Bob Faith, who told Forbes that the lines between his company and Alfred were blurred as part of the experiment and that they co-managed the properties together. Greystar and Faith are Alfred shareholders and previously announced a strategic partnership with it in 2019.
“We erased the lines between Alfred, the property management, and in essence, ownership, because [Adam] said, ‘Let’s break the box and build it back, and see what we can learn,’” Faith said.
The real estate investment itself proved lucrative for Neumann’s family office, 166 2nd Financial Services. According to property filings, Neumann and his co-investors sold the three Norwalk, Connecticut, properties for $293 million — $67 million more than they paid for them, just 16 months after acquiring them in January 2021. Goldin disputed that Neumann profited from any such transaction.
But the experiment revealed to everyone involved that the services side of Alfred’s business alone wasn’t lucrative. Instead, it became apparent that the real money was in Greystar’s side, using software to manage properties, such as approving a resident’s maintenance request or a building refurbishment. To do that directly, Alfred — or a rival — would need to work directly with landlords and become an end-to-end property management solution, not just a bolt-on technology.
With the lessons from the Connecticut project in mind, Alfred began to seek new investors in December 2021, in part to bankroll the purchase of a Charlotte, North Carolina-based property manager called RKW Residential. Already managing 30,000 homes in the southeastern U.S., RKW could kickstart Alfred’s shift into a more promising line of business. But at a price tag of $35 million, Alfred would need to raise new funding to pull it off.
It had a problem: When Neumann originally invested in Alfred back in 2020, Alfred’s founders agreed to unusually favorable conditions for the WeWork cofounder. Warrants inserted into the deal provided that, should Alfred reach certain performance milestones, Neumann would have the option to receive more shares at a discount, enough for a 51% stake, according to two sources. Now, though, those provisions made Alfred an unpalatable investment for new backers, three sources said.
When Alfred went to raise money again, the company asked Neumann’s office to relinquish them, a situation that complicated the fundraising process, according to the sources.
But ultimately, Neumann and 166 2nd gave up the warrants, and Alfred raised $125 million from Rialto Capital, existing investors and others, and acquired RKW in a deal announced in March. Now Alfred was not just a startup providing technology for renters and landlords. It was a property manager, too. In the aftermath of the acquisition, the company went through at least one round of layoffs. Alfred declined to comment on the layoffs.
Then in May, Neumann’s representatives Mauch and Stern resigned from Alfred’s board due to concerns about conflicts of interest.
While Neumann’s team was stepping back from Alfred, his associates began registering various business entities to operate in Florida, many of which use the terms “Flow,” Neumann’s company name, or “FOL” — ostensibly an abbreviation for “future of living.”
In a series of filings registered in Florida on the same day in July 2022, a number of corporate entities with “Flow” or “FOL” in their name listed Marie Stella Templo, the former general counsel for WeWork, as a point of contact. They provided the same address in Bay Harbor Islands, just north of Miami Beach.
One of these companies is called Flow Carson, a name that appears related to Carson Living, the Alfred competitor that Neumann acquired in 2021. Carson investor Jerry Kestenbaum confirmed the acquisition but did not respond to questions about exactly when it occurred; however, his LinkedIn page lists the end date for his role as “Investor/Board member” of Carson as July 2021. Flow Carson’s filing to operate in Florida lists a corresponding Delaware entity registered in August 2021.
Another of these companies is called FOL Management LLC. Before it was registered to do business in Florida in July 2022, it was first registered in Delaware in September 2021 — months before Neumann gave up his rights to obtain ownership of Alfred as part of the $125 million funding round.
Job listings for FOL Management that have since been taken down described FOL Management as “keen to reinvent the residential real estate ecosystem” and “redefine the economic experience of renters” by “leveraging new technology” — a goal the listings called “an ambitious vision for the future of living.”
In the blog post announcing Flow, Marc Andreessen described Flow and Neumann’s efforts in similar terms, calling it a “direct strike” on current residential real estate challenges that would “rethink the entire value chain” for renters.
Goldin declined to explain how Flow and the various FOL companies all fit together. Flow does not appear connected with Flowcarbon, another recent Neumann project, which promises to reinvent carbon credit trading with a cryptocurrency called Goddess Nature Tokens.
Over at Alfred, Benzino — its president, and Neumann’s former lieutenant — recently signed a separation agreement and has quietly left the company, two sources say. (Benzino did not respond to a comment request.) But as of publication, Neumann remained a major investor in the business, and that may not change anytime soon. Since his family office team stepped off the board, he would no longer hold a fiduciary responsibility to Alfred, said Eric Koester, an adjunct professor of business at Georgetown University. Goldin declined to comment on Neumann’s plans for his equity stake.
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.
David Jeans and Alex Levine contributed reporting to this story.
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