WeWorks founder makes his best business move yet: quit

Listen, don't worry about Adam Neumann, who was just removed as CEO of The We Company; First of all, he is still non-executive chairman of The We Company. Also, entrepreneurs are like vampires: unless you put a share through the heart, they come back. (Just ask Travis Kalanick, who claims his next act will be "bigger than Uber.") Neumann will do well. The better question is whether we are doing well. Another good question is whether SoftBank, We are the largest shareholder, will do well.

For those of you wondering what the hell is going on, welcome! The short version of events is that The We Company – the company formerly known as WeWork – was about to go public and publish a bunch of papers. This paperwork revealed, all in one place, the following: that Neumann leased its own buildings to The We Company, that Neumann had secured loans from The We Company, and that to rename The We Company from WeWork, the company paid for naming rights from … Adam Neumann. It started to feel like the point of The We Company, the loud language of "lifting" one's "awareness", was just to give Adam Neumann money.

And that's before we even get to, uh unusual . As chronically published by The Wall Street Journal Neumann's peccadillo included smoking a hatch on a private jet to Israel from the United States, releasing the aircraft owner; fire seven percent of their staff, then bring in Darryl McDaniels from Run-DMC and drink tequila with the remaining staff; and fly seniors to a summer camp where he struggled to solve the problem of orphans and eradicate world hunger.

We are now in the process of relaxing from Adam Neumann, who has even exercised majority control over the company – his supervisory shares, once worth 20 votes (against the one vote a pleb would get), are now only worth three votes, The New York Times reports. He no longer has the power to fire the entire board. He has also repaid $ 5.9 million he earned on brand change. And he is out as CEO. His wife and co-founder, Rebekah Paltrow Neumann (Gwyneth's first cousin), has also given up her titles and roles, according to Bloomberg .

That's fine, I guess? Like, definitely congratulations to The We Company for trying to do the right thing, but late. But while Neumann's exaggerations were not apparent to the public markets until recently, We's private investors – which include SoftBank and Benchmark Capital – knew about it. It's literally their job! They have seats to know these things . The part of this that I'm confused about is why they waited until now to tough Neumann in.

Filling up on a stock exchange seems like a lot of work, and The We Company literally had to write all 10 pages of Neumann – related disclosures to do that, you know? Absolutely no one raised eyebrows and went hmm, but will the markets go for this ? No? How … how stupid does the VC world think we all are? Also, for that matter: how stupid do JP Morgan and Goldman Sachs think we all are?

Listen, I know things have been scary in the tech investment sector for … actually, quite a long time. . Softbank's "big chip bully" investment strategy definitely did not help. We are not a technical company. It is very clear a real estate company, but apparently just saying "tech" is a great way to get people to behave like you sell software as a service and give you money as if you have have the same upsides?

It seems private investors have not made hard purchases as much as they have come high on their own supply. Founder worship and devaluation of investors essentially means, as Bloomberg Matt Levine wrote:

The company is not a joint venture between the founder (who gives the vision and the work and the name) and the investors (who gives the money) ; The company belongs to the founder, and investors are leased providers of a relatively low value input (money), who can only expect a nagging financial stake, not some kind of say in running the business.

Yeah, well, we all saw how it worked here. Neumann's previous business venture included women's shoes with folding heels and baby clothes with knee pads that had the really chilling slogan "Just because they don't tell you doesn't mean they don't hurt." and neither hinted, you know, good judgment. In a world that makes sense, investors may have gotten cold feet about Neumann's leadership before and tried to farm We Company out in the public markets.

We do not live in a world that makes sense; We do not live in a world that makes sense.

The We Company is growing fast. It is also unprofitable. One of the reasons investors expressed concern was its frankly funny corporate governance – but another major concern is the literal business model . For example, WeWork earned $ 1.8 billion in revenue last year. This sounds pretty good until you realize that the company lost $ 1.6 billion. In the first half of 2019, the company spent a dollar for every dollar it generated. "Without new funding or lower spending, the amount of cash that WeWork can freely use can shrink to $ 400 million by next March from $ 1.9 billion," The Information wrote.

And that's why the company is now considering firing as many as 5,000 employees, The New York Times and The Information say. We employed around 12,500 people since the last submission by the authorities. The brilliant money people who got We into this mess discusses the firing of 40 percent of the workforce . In addition, they have considered hiding the educational and residential parts of the business and slowing the expansion of The We Company. It seems drastic.

Again, I want to be clear: WeWork's finances are definitely not a surprise to investors like SoftBank founder Masayoshi Son. They had access to them all the time! SoftBank has a seat! A former member of SoftBank's board also has the board! In fact, SoftBank's whole deal is that they pump money into companies until they dominate the market, profits are condemned. In 2017, Son Neumann met, and according to New York Magazine he told "to make WeWork & # 39; ten times larger than your original plan & # 39; and to acknowledge that in a fight, being crazy is better than being smart – and that WeWork wasn't "crazy enough." "

I want to take a break here, so we can all imagine the guy who wants to be president of the world – the guy who sticks cereal boxes with hatches on private planes that don't belongs to him while traveling internationally – that he is not crazy enough. Continue. Close your eyes. Visualize it. Let the power of We flow through you. Doesn't Neumann's whole deal make much more sense now?

Things aren't quite rosy for SoftBank, even beyond the IP flop of We Company – several of the company's other investments, such as Uber and Slack, have underperformed the S&P 500 for the period since their IPOs, Fortune tells us . And the scandal surrounding We are now threatening SoftBank's attempt at another Vision Fund, reported Bloomberg . It did not catch my attention that in the public statement about what we would call tactful WeWork's leadership change that SoftBank was not mentioned once, despite reports indicating that SoftBank was leading the coup against Neumann.

Still, Adam Neumann is gone now, and presumably the leaders who still played Run-DMC's "It's Tricky" in a very sad and nostalgic way before taking tequila shots in his honor. Perhaps "raising the consciousness of the world" should have waited for The We Company to lift its business model. This task now rests with Chief Financial Officer Artie Minson and We Vice President Sebastian Gunningham, both of whom are replacing Neumann.

Co-CEOs, I guess, are really going to bring the energy to Vi.