How WeWork Incentivized CEO Adam Neumann to Take the Company Public: Term Sheet
Now that we’ve all had a chance to digest WeWork’s prospectus, my colleague Lucinda Shen breaks it down even further.
She found an unusual clause that could allow WeWork CEO and founder Adam Neumann to make millions if the company hits a market cap of $90 billion — which would make the firm larger by value than General Electric, which is valued at about $82 billion, CVS Health ($78 billion), and T-Mobile ($76.8 billion).
Neumann, who earned no equity awards from the company prior to 2019, could be rewarded with hundreds of millions in equity depending on how shares of We Company trade in the public sphere. Neumann is set to earn 9.4 million so-called profits interests, which entitle the holder to one Class C Common share of the We Company, if WeWork becomes a $90 billion company and maintains that market capitalization for at least 60 days. Neumann is also set to earn an two 7.1 million profits-interests payouts should WeWork attains a valuation of $50 billion and separately $72 billion for at least 60 days each.
The equity came as part of a plan to convince the firm's leaders to file for an IPO, per the filing. "As the Company grew, our board of directors desired to provide a significant incentive to Adam to conduct an initial public offering, based on the premise that the Company’s value would be maximized as a public entity rather than remaining privately held," the S-1 filing read.
As such, Neumann will also receive 9.4 million profits interests that vest over a period of five years upon the completion of the offering. Prior to the IPO filing's reveal, Neumann also posted an IOU to the tune of $362.1 million to the company in order to acquire some 9.4 million stock options, which he later repaid by surrendering shares in the company. WeWork later issued profits interests to Neumann equal to the number of shares he surrendered.
Let’s see if WeWork can keep accelerating and reach this market cap goal. But as Lucinda notes, “In a market that is in the late stages of a bull run and signs of a global slowdown emerging, WeWork is certainly facing an uphill battle.”
NEW SOFTBANK DEAL: SoftBank’s Vision Fund just made its first ever energy storage bet. It will invest $110 million into Energy Vault, a Switzerland-based manufacturer of energy storage and transmission equipment. Bloomberg explains how it works:
An electric crane hoists up blocks of concrete and stacks them into a tower when power is plentiful. When power is needed, it uses gravity to take the structure apart brick by brick. The weight of the descending blocks converts kinetic energy into electricity.
The Vision Fund is betting on the need for more affordable and bigger storage systems to expand the use of renewable power and wean the world off fossil fuels, the story notes. Finding a more inexpensive way to bottle up clean power & dispatch it could be revolutionary.
AN INSTAGRAM-FRIENDLY DEAL: You guys know The Museum of Ice Cream? I despise ice cream (don’t ask), so I’ve never actually been inside, but I hear it’s very flashy, interactive, and of course, Instagram-friendly.
Here’s how it started: Founder Maryellis Bunn was disappointed by a recent visit to Disneyland because the park didn’t “optimize for social engagement.” So Bunn created the ultimate Instagram-optimized space & called it The Museum of Ice Cream. Every wall has a colorful pattern, the lighting is flattering for your selfies, and well, it’s ice-cream themed.
“Advertising is dead. The way in which we are able to have our visitors physically, tangibly, sensually engage with brands has a return on investment that no ad could ever come close to,” she said in this 2017 New York Magazine profile.
As far as I’m aware, The Museum of Ice Cream was the first to kick off this “pop up experience” craze and woo millennials into these experience-infused museum art installation things. Welcome to the next generation of advertising.
But that’s not even the crazy part! Figure8, the parent company behind The Museum of Ice Cream just unveiled $40 million in funding at a $200 million valuation! Elizabeth Street Ventures and Maywic Select Investments co-led the round, and were joined by OCV Partners.
In the profile, the reporter asked Bunn what her ultimate dream was. “I want to be the next Disney,” she said. “I could take all of those different installations that we just went through, and I could build them out into city blocks. It would be my Heaven. Could you imagine?”
Apparently, her investors can.
A NEW HOME DEAL: Flyhomes, a Seattle-based company seeks to streamline the home-buying process for its clients, has raised $141 million in new financing. The capital includes a $21 million Series B round led by early-stage venture capital firm Canvas Ventures, as well as $120 million in debt from lenders including Goldman Sachs-backed Genesis Capital. Read more at Fortune.
100 FASTEST-GROWING COMPANIES: Fortune’s annual list of the Fastest Growing Companies went live this morning. The 2019 ranking of the world’s top three-year performers in revenues, profits, and stock returns provides a snapshot of the trends driving the global economy.
For the second year in a row, the technology sector placed the most companies on the list, matching last year’s total of 32. The once-dominant energy industry, meanwhile, continues to lag. Explore the full list here.
– Nomad Health, a New York-based online marketplace for healthcare jobs, raised $34 million in equity and debt funding. Icon Ventures led the round, and was joined by investors including Polaris Partners, RRE Ventures, .406 Ventures, and Silicon Valley Bank.
– Kobo360, a Nigeria-based logistics startup, raised $30 million in funding. Goldman Sachs led the round.
– Hipcamp, a San Francisco-based marketplace where people can list, discover, and book campsites and accommodations on private and public land, raised $25 million in Series B funding. Investors include Jay-Z (Marcy Venture Partners) and Will Smith (Dreamers Fund).
– Mason, a Seattle-based provider of mobile infrastructure for smart hardware products, raised $25 million in Series A funding. Coatue Management led the round, and was joined by investors including GGV Capital and Base10.
– Buoy Health, a Boston-based developer of software that would analyze the symptoms communicated by users, raised $15 million in Series B funding. Hambrecht Ducera Growth Ventures led the round, and was joined by investors including Humana, F-Prime and Optum Ventures.
HEALTH & LIFE SCIENCES DEALS
– Renovacor, a Philadelphia-based preclinical-stage biopharmaceutical company, raised $11 million in a Series A funding. Investors include Novartis Venture Fund, Broadview Ventures, BioAdvance, New Leaf Venture Partners and Innogest Capital.
– VeriSIM Life, a San Francisco-based builder of personalized disease models, raised $5.2 million in funding. Investors include Susa Ventures, Intel Capital and OCA.
– Imago Systems, a Lansdowne, Va.-based medical imaging company, raised funding of an undisclosed amount, from Mayo Clinic.
– InCrowd, a Boston-based provider of real-time data market insights in the life sciences industry, raised funding of an undisclosed amount, from SARORAS Private Capital.
PRIVATE EQUITY DEALS
– Surgent, a portfolio company of Spire Capital Partners, acquired PharmCon, a Myrtle Beach, S.C.-based provider of continuing education services to pharmacists, pharmacy technicians and other healthcare professionals. Financial terms weren’t disclosed.
– Anser Advisory, a portfolio company of RTC Partners LLC, acquired Inline Management, a construction management and owner’s representative firm specializing in school construction and capital improvement projects. Financial terms weren’t disclosed.
– Genstar Capital made an investment in Insightsoftware, a provider of ERP reporting and corporate performance management software. Financial terms weren’t disclosed.
– Metco Landscape, a portfolio company of Westhook Capital, acquired PGM Inc, a Colorado Springs, Colo-based provider of commercial landscape maintenance services in. Financial terms weren’t disclosed.
– Mobileum Inc, a portfolio company of Audax Private Equity, acquired WeDo Technologies, a Portugal-based of analytics-based roaming and risk management solutions. Financial terms weren’t disclosed.
– Samoyed Holding, a Shenzhen-based credit card repayment firm, withdrew plans for an $80 million IPO. It posted revenue of $36.3 million in 2017 and loss of $13.3 million. CITIC backs the firm. Morgan Stanley, Deutsche Bank, and CICC are underwriters. It plans to list on the NYSE as “SMY.” Read more.
– AtriCure Inc agreed to acquire SentreHEART Inc, a Redwood City, Calif.-based developer of percutaneous left atrial appendage management solutions, for upward of $300 million. SntreHEART raised approximately $69 million in venture funding from investors including Deerfield Management Company, U.S. Venture Partners, Prospect Ventures, Vivo Capital and Decheng Capital.
– Accel-KKR sold JAGGAER, a Morrisville, N.C.-based independent spend management company, to Cinven. Financial terms weren’t disclosed.
FIRMS & FUNDS
– Actis, a private equity and venture capital firm, raised $1.23 billion for its Actis Long Life Infrastructure fund.
– Brick & Mortar Ventures, a construction tech venture firm, raised $97.2 million for its new fund.
– Villi Iltchev joined Two Sigma Ventures as a partner. Previously, he was at August Capital.