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$350 million for WeWork co-founder shows how broken and biased venture capital is

From left to right: Entrepreneurs Rebekah Bastian, Lizelle van Vuuren, Amy Nelson, Katica Roy and Jaclyn Fu.
Lisa Elliot, Lizelle van Vuuren, Jane G. Photography, Katica Roy and Jaclyn Fu
From left to right: Entrepreneurs Rebekah Bastian, Lizelle van Vuuren, Amy Nelson, Katica Roy and Jaclyn Fu.

A reported $350 million investment into a new, yet-to-be-launched real estate venture founded by a controversial businessman has drawn criticism from women entrepreneurs.

The investment, which was made and publicly shared by venture capital powerhouse Andreessen Horowitz, is in Flow, the new company of WeWork co-founder Adam Neumann.

Given Neumann's questionable business dealings and his abrupt exit from WeWork amid a fraught initial public offering in 2019, this new investment typifies the immense gap that exists in comparison with how much money venture-funded companies founded solely by women garner, experts say.

The investment is a prime example of how venture capital (VC) ecosystems "have always been inequitable," Rebekah Bastian, the CEO and co-founder of OwnTrail, a startup that helps people achieve their next personal and professional milestones, told NPR.

"When 16% of investment partners at VC firms are women, 3% are Black and 4% are Latinx, it's not shocking that women founders have received 1.9% of venture dollars so far in 2022," Bastian told NPR over email. "Black-founded startups in the U.S. raised less in Q2 2022 in aggregate ($324 million) than Adam Neumann received in a single check from Andreessen Horowitz."

Andreessen Horowitz did not respond to requests for comment.

Why the venture funding for Neumann received such a visceral response

To understand why Neumann, Flow and the millions of dollars raised caused a groundswell of condemnation among women, one place to start is Aug. 14, 2019.

That's the day WeWork first released its paperwork to go public and revealed to the world how Neumann had taken out hundreds of millions of dollars for himself, restructured the company to provide himself a tax break and rented his own properties to WeWork.

A month later, The Wall Street Journal reported on Neumann's partying and "unusual exuberance and excess." One of the more puzzling aspects of Neumann's tenure was how an entity he controlled sold the rights to the "We family" of trademarks, (WeWork, WeBank, WeLive, etc,) to the company for almost $6 million "before public pressure led him to unwind the deal," the Journal reported.

Neumann stepped down as WeWork's CEO on Sept. 24, 2019, not long after the company's valuation, once estimated at $47 billion, dropped precipitously.

To see Neumann raise hundreds of millions of dollars roughly three years after his exit from WeWork is a sign of how "there will be Adam Neumanns but there won't be Abagail Neumanns," said Katica Roy, a gender economist and the CEO and founder of Pipeline, an award-winning startup that uses artificial intelligence and cloud computing to close the gender equity gap in the workplace. Roy is also the daughter of a refugee who was brought to the U.S. on Air Force One after being granted passage by President Dwight Eisenhower.

"The Flow funding illustrates perhaps the most high-profile example of 'prove it again' bias, or the fact that women have to work harder than men to substantiate their competence," Roy told NPR over email. "These biases lead to smaller and fewer checks for women entrepreneurs and entrepreneurs of color."

Neumann and Flow also reveal a double standard that exists around second chances in business, said Amy Nelson, co-CEO of The Riveter, which has built a collective of work and event spaces for working women across the United States.

"I think the outrage is about the fact that a lot of Black and brown founders, a lot of women, don't even get the chance to fail. You can't show the world a comeback if you can't even get into the arena," Nelson told NPR.

How bias is woven into the world of venture capital

Despite a banner year that brought in a record $330 billion of venture capital funding in the U.S., only 2% of funds in 2021 went to women-founded teams, Roy said.

Part of this disparity stems from how investors question founders who are women in comparison with those who are men.

A 2018 journal article, "We Ask Men to Win and Women Not to Lose: Closing the Gender Gap in Startup Funding," revealed how women receive more prevention questions from potential investors. Prevention questions focus on safety, responsibility, security and vigilance; for example, "How predictable are your future cash flows?"

Meanwhile, men receive more promotion questions from potential investors, according to the article, published in Academy of Management Journal. Promotion questions focus on hopes, achievements, advancement and ideals; for example, "What major milestones are you targeting this year?"

"These biases also reflect the entrepreneurial ecosystem in the U.S. Fully 65% of VC firms have zero women partners or GPs [general partners], and women represent only 4.9% of all VC partners in the U.S.," Nelson added. "We call ourselves the land of opportunity. However, as we see time and time again, opportunity is not equitably distributed."

These issues are among the many that explain why entrepreneurs like Jaclyn Fu did not seek out venture funding when starting their companies.

Fu and her co-founder, also a woman of color, launched a 470% successfully funded Kickstarter campaign that helped get their business, Pepper, a direct-to-consumer bra brand for small-chested women, off the ground.

The venture capital that Neumann raised is just another sign that the industry hasn't progressed, Fu told NPR.

"I was furious that time and time again, VCs invested in the same pattern that rewards toxic, growth-at-all-cost behavior and ineffective stewardship of capital," Fu said. "It's wild that safe bets for VCs look more like Neumann with fanciful 'vision' versus founders who can actually prove product-market fit and real customer opportunity."

Change is slow but coming to the venture capital industry

Andreessen Horowitz and its co-founder Marc Andreessen do not care what the world thinks when it comes to their investments, Nelson said.

"No white man has to care," Nelson added. "White men account for almost all of venture capital investors and almost all of venture-backed founders, and I'm convinced that their money flows in a circle."

That circle must be broken, said Lizelle van Vuuren, a U.S.-based South African who is co-founder of Undock and founder of Women Who Startup, a learning community for women entrepreneurs. Van Vuuren is also the chief growth officer at OwnTrail.

Van Vuuren was among the first of many women to respond to Neumann's VC raise on Twitter. When it comes to the world of venture capital, women not only have "to change the game, the rules and the playing field, we have to do it with a smile," she tweeted.

"I think more women are going to win. I think more Black and brown, Asian, immigrants and disabled founders are going to continue to win, because we're not going to shut up," van Vuuren told NPR. "Every generation has yearning for improvement. That is the beauty of human evolution. We will always, hopefully, be focused on improving the way we found things, especially younger generations. So whether Adam continues to make headlines or whatnot is irrelevant to someone right now, at her desk, trying to build a startup with four team members with about $400,000 in the bank. They're gonna be out of money in several months. And she has to figure out how to raise money. She's focused on that."

Editor's note: We have updated the language to more accurately reflect our original reporting.

Copyright 2022 NPR. To see more, visit https://www.npr.org.

Corrected: August 29, 2022 at 11:00 PM CDT
This story has been corrected to make clear that Neumann sold the rights to the "We family" of trademarks and not to the word "we."
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Fernando Alfonso III
Fernando Alfonso III is a supervising editor who manages a team of editors and reporters responsible for powering NPR.org.