WSJ is back with another WeWork deep dive, this time, exploring the evolution of the man who has become perhaps the most pivotal player in the IPO saga: WeWork co-founder and CEO Adam Neumann.
In a piece published Thursday, WSJ explores how Neumann found success with WeWork almost by accident after trying a few other startup concepts that didn't work out.
Adam & Rebekah Neumann
One of the most ridiculous startup ideas that Neumann reportedly tried out was "Krawlers", baby clothes with built-in knee pads to make crawling more comfortable for tots. The company's tagline? "Just because they don't tell you, doesn't mean they don't hurt."
Raised in Israel on a kibbutz, Mr. Neumann moved to the U.S. when he was 22, where he attended Baruch College and tried to start businesses. One was a collapsible heel on women’s shoes that didn’t get off the ground. Working out of his Tribeca apartment, he started Krawlers, which sought to make baby clothes with knee pads to make crawling more comfortable. The slogan, he has said: "Just because they don’t tell you, doesn’t mean they don’t hurt." It never gained traction.
As WeWork's valuation has plunged over the past couple of weeks, from $47 billion to under $10 billion.
The story focused on Neumann and his outlandish behavior. Not only is WeWork rife with blatant self-dealing between Neumann and his company, the CEO's attitude and party-hard persona can be off-putting to some smaller investors.
"This is not the way everybody behaves," said Dick Costolo, former CEO of Twitter Inc., who led the company through one of the larger tech IPOs of the past decade. "The degree of self-dealing in the S-1 is so egregious, and it comes at a time when you’ve got regulators and politicians and folks across the country looking out at Silicon Valley and wondering if there’s the appropriate level of self-awareness."
Given the prominence of the IPO, he added, "that is a big problem."
WSJ's story includes several laughable tidbits, including this:
They determined employees couldn’t expense meals with meat, but they could eat it in company offices, so long as the company didn’t pay. Former employees say they have since seen Mr. Neumann eat meat.
Neumann's wife, Rebekah Paltrow Neumann, is said to have a broad remit across the company. Not only is she chief brand officer, but she's also the head of WeGrow, the We Company's private preschool and elementary school that costs $42,000 a year.
But she's also allegedly incredibly impulsive.
Both Neumanns could be impulsive at times, former executives say. Ms. Neumann has ordered multiple employees fired after meeting them for just minutes, telling staff she didn’t like their energy. She and Mr. Neumann have sent maintenance and IT staff to their homes to fix various items.
WSJ makes Neumann look like a stoner who refuses to obey laws about not smoking during flight.
Mr. Neumann also enjoys marijuana, his friends and former executives say. As with the Israel trip, multiple people who have been on planes with him say he often smokes while airborne.
Much of this culture has been pared back as the company has matured. The summer camp was canceled this year.
A few years ago, the company ripped off its employees during a share buyback program.
In a 2015 investment round, Mr. Neumann sold tens of millions of dollars of shares. Soon after, the company launched a buyback program offering to purchase employees’ shares too. But the company gave employees a different arrangement, giving them a payout per share worth substantially less than what Mr. Neumann was paid, people familiar with the sale said. Mr. Neumann’s sale wasn’t publicized within the company.
We executives have said the buyback price couldn’t be higher for tax reasons. More recent stock sales have been more equitable.
Last year, WeWork hosted a 'summer camp' for all its employees in the UK. The company flew all of its employees to the event, where alcohol flowed liberally and the CEO posed for pictures with staff from around the world. But that's not all. Neumann has reportedly told his friends that his ambitions include becoming the prime minister of Israel, and the world's first trillionaire. He has also said he wants to be 'leader of the world', and that he hopes to live forever with his massive fortune.
He told at least one person directly that his ambitions included becoming Israel’s prime minister. More recently, he said that if he ran for anything, it would be president of the world, according to another person who spoke with him.
"The influence and impact that we are going to have on this Earth is going to be so big," he said last year at a "summer camp" southeast of London, where the company’s staff were all flown for a music festival-like event. One day, he proposed, the company could "solve the problem of children without parents," and from there go onto other causes such as eradicating world hunger.
Alcohol flowed in great quantities; bartenders handed out free rosé by the bottle. Employees from around the globe posed for photos with the CEO. Some seminars had a spiritual component, including one with holistic health expert Deepak Chopra, who advocates regular meditation and yoga.
Mr. Neumann has told several people over the past two years that a personal goal is to become the world’s first trillionaire.
With the IPO on hold, the bigger question for Neumann is: Can 'We' change? And can the co-founder start winning back investors' confidence and shirking his frat-boy reputation? Then again, he can make all the governance changes he wants - he can't change the fact that the company is still burning $2 in cash for every $1 of revenue that it takes in.