WeWork Coworking Space, Vancouver. Image via Wikimedia Commons (cc)
From The Nation:
WeWork was the latest and greatest “unicorn,” a massive disrupter to the commercial real estate industry, for whom the sky was literally the limit. And Neumann was the archetypal Silicon Valley founder, a genius wunderkind with a taste for lavish spending—more than $80 million on five homes since founding WeWork in 2010—and “eccentric” habits, such as bringing so much marijuana onto an international flight that the private jet’s owner feared drug trafficking charges.
Then, suddenly, the man and the myth came crashing down. In August, WeWork filed paperwork for its initial public offering, which showed spiraling losses over the last three years, including a net loss of $1.6 billion in 2018 on revenue of $1.8 billion. Investors started to panic, the company delayed its IPO, and then The Wall Street Journal published a bombshell profile of Neumann, revealing a founder who had used his cash-hemorrhaging company’s funds to buy himself a $60 million private jet and host a booze-filled private music festival just outside London.
For those of us who have long been skeptical of the fetishization of start-ups—whose “disruption” of sectors from taxis to toothbrushes often rests on a combination of worker exploitation and cult of personality—Neumann’s fall from grace is just the latest instance of start-up schadenfreude. From Theranos’s Elizabeth Holmes to Uber’s Travis Kalanick, some of the last decade’s most prominent business stars have been laid bare as glorified con artists, while a growing chorus of podcast-listening and TV-watching fans have feasted on tales of their self-immolation.
The twilight of the Silicon Valley founder feels pretty great. But the obvious alternative may be no better.
That’s because it’s not just ordinary people who have grown skeptical of Neumann and his ilk: Big investors and financiers are also out for blood. Venture capitalists have long been the great enablers of the founders, shoving their glut of capital into any pitch deck that says “disrupt” enough times. The logic—if you can call it that—was that exceptional returns in the face of mediocre fundamentals could only be the product of exceptional founders. Or, to put it another way: Even though the emperor has no clothes, you can still turn a profit from them, so long as everyone believes in the myth.
But as the start-up bubble risks bursting, investors are seeing founders less as human ATMs, and more as liabilities.
The result may well be a return to the old model of start-ups: rule of the shareholder.