Investing in Flow |  Andreessen Horowitz

Investing in Flow | Andreessen Horowitz

Our nation has a housing crisis.

The demographic trends driving America’s housing market are impossible to ignore: our country is creating households faster than we’re building houses. Structural shortages in available homes for sale push housing prices higher, while young people are staying single for longer and increasingly concentrating in highly desirable urban centers. These factors put enormous pressure on rents in the nation’s most dynamic cities, starkly revealing the troubling realities of both sides of the housing market’s two historical models.

The first model is: you own a home you call your own, typically with a multi-decade mortgage, near your current employer. IF you can find a house, as these locations often aren’t building new housing. IF you can afford that house, as housing prices in many such places have skyrocketed. And even then, you’re now stuck — you can’t move, even if your economic opportunity or life path wants to take you somewhere else.

The second model: you rent an apartment, but: it’s a soulless experience; do you even meet your neighbors, much less have any friends in your complex? Does it feel like home, or just a place to sleep? Are you proud to bring friends and family to visit, or hesitant? And you can pay rent for decades and still own zero equity — nothing. There’s a reason the federal government started subsidizing home mortgages: someone who is bought in to where he lives cares more about where he lives. Without this, apartments don’t generate any bond between person and place and without community, no bond between person to person.

Now drop the impact of the post-COVID world into this. Many people will live in places far away from where they work and many more will shift to a hybrid environment. As a result, they will experience much less, if any, of the in-office social bonding and friendships that local workers enjoy. For many of these people, increased screentime and reduced in-person interaction will cause challenges that are not just limited to work, such as alienation and loneliness. This is not a good path for anyone and it needs to be addressed directly, right now.

At the same time, in the last two years, we have seen a shift in life priorities. For hundreds of years, ambitious young people have had to move to immediate geographic colocation with employers to have access to the best jobs for their skills and talents. That is suddenly no longer true. This newfound flexibility has triggered the “Great Resignation”, where people prioritized other factors over professional considerations. Many people are voting with their feet and moving away from traditional economic hub cities to different cities, towns, or rural areas, with no diminishment of economic opportunity. My partner Katherine Boyle has written about this, and I think she’s right: Can Zoom Save the American Family? and Can Starlink Save the American Mother?

The residential real estate world needs to address these changing dynamics. And yet virtually no aspect of the modern housing market is ready for these changes.

And so, we are excited to partner with Adam Neumann and his colleaguare on Flow, which is a direct strike on precisely this problem.

Adam is a visionary leader who revolutionized the second largest asset class in the world — commercial real estate — by bringing community and brand to an industry in which neither existed before. Adam, and the story of WeWork, have been exhaustively chronicled, analyzed, and fictionalized – sometimes accurately. For all the energy put into covering the story, it’s often under appreciated that only one person has fundamentally redesigned the office experience and led a paradigm-changing global company in the process: Adam Neumann. We understand how difficult it is to build something like this and we love seeing repeat-founders build on past successes by growing from lessons learned. For Adam, the successes and lessons are plenty and we are excited to go on this journey with him and his colleagues building the future of living.

We think it is natural that for his first venture since WeWork, Adam returns to the theme of connecting people through transforming their physical spaces and building communities where people spend the most time: their homes. Residential real estate — the world’s largest asset class — is ready for exactly this change.

Shelter is one of our most basic needs. In a world where limited access to home ownership continues to be a driving force behind inequality and anxiety, giving renters a sense of security, community, and genuine ownership has transformative power for our society. When you care for people at their home and provide them with a sense of physical and financial security, you empower them to do more and build things. Solving this problem is key to increasing opportunity for everyone.

Make no mistake, this kind of mission is a heavy lift. Only through a seismic shift in the way industry relationships are structured and the mechanisms through which value is delivered can we hope to address the underlying problems of the current system and build the solution. Doing this requires combining community-driven, experience-centric service with the latest technology in a way that has never been done before to create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders. And given the fragmented nature of the ecosystem today, we can only hope to accomplish any of this by bringing every aspect of the living experience together.

We are thrilled by the scope and aspiration of this project. It is not lacking in vision or ambition, but only projects with such lofty goals have a chance at changing the world.

***

The views expressed here are those of the individual AH Capital Management, LLC (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be related upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments /.

Charts and graphs provided within are for informational purposes solely and should not be related upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

Leave a Comment

Your email address will not be published.