There used to be an unusual tradition at WeWork during company events, and even during work hours: It was customary to drink shots, usually tequila, which were brought in to meeting rooms on trays. This was just part of the culture encouraged by WeWork’s founder and CEO, Adam Neumann. Roee Adler, who worked for the company from 2013 to 2019 and served as its chief product officer, among other roles, knew that some of his team did not drink – and so he made sure that half of the shot glasses were filled with water. “Without a doubt, the work culture at WeWork was too party-like, so much so that it felt excessive,” Adler admits today.
Adler left the workspace rental company shortly after its highly-public collapse and Neumann's ouster. Now, he is getting ready for the pilot run of his new startup, Santa, which seeks to reinvent the model of the brick-and-mortar retail store. He started the company with entrepreneur Shai Wininger – who also founded Lemonade and Fiverr – and with Menachem Katz, also from WeWork, along with a group of Israelis and Americans, mostly from WeWork too.
The WeWork rollercoaster left Adler, who has been in the high tech world for about 20 years, with two main lessons, which seem particularly pertinent in now with the crazy investment boom in the high tech industry. “The first insight is not to get confused between raising money and business success, and not to think that the higher the valuation, the better it is,” Adler said in an interview with TheMarker. "Raising money is critical, and valuations are important. But there is such a thing as raising too much money and getting too high a valuation, when they lose touch with the company’s actual numbers."
The second insight, Adler said, is that companies need to remember the fundamental law of business: buy low and sell high. "At the center, there must be a business mechanism with the potential to be profitable," he says.
"WeWork had something that made sense, but there were mountains on top of it of stuff that made no sense at all"
Two loves: Programming and judo
Adler, 42, is married with three children and lives in Tel Aviv. Born and raised in Netanya, he comes from a family of carpenters, and developed two passions early on in life: programming and judo. In high school, he programmed computer games with his buddies (future high tech entrepreneur, Soluto and Spot.im founder) Yishay Green and (future founding partner and CEO of Monday.com) Roy Mann. “We were nerds who studied programming languages and went to competitions in Ashkelon and Upper Nazareth,” Adler recalls.
In a soccer-centered city like Netanya, Adler and his friends had to hide their love of computers. In an effort to balance out his nerdy image – "What does it really mean to be a nerd? It’s about taking joy in amassing knowledge" – he took up judo. “I was a lousy competitor, but a good instructor,” he says. Years later, he went on to coach kids and teens, including future world champion Yarden Gerbi, and became a board member of the Israel Judo Association.
- The 20 most promising Israeli startups to follow in 2021
- Israeli drones to help Walmart with airborne deliveries
- Israel wants a massive supercomputer - no matter the cost
After high school, Green tapped him for a secret technology unit in the IDF's Intelligence Corps, now known as Unit 81, where he was exposed to tech fields like computing hardware and optics. “For a curious kid like me, it was paradise,” he says. After the army, he got a B.A. in computer science from the Interdisciplinary Center in Herzliya, graduating in the same year as Green and Mann. In the years that followed, he worked at several startups and more established companies, including the microchip company Envara (sold to Intel in 2004), where he worked under Yaniv Garty, now the CEO of Intel Israel.
In those early years, Adler also founded two companies, including one startup called Neocraft that tried (and failed) to build a new kind of electric guitar. “That’s where I realized that while I may understand the technological side, I don't understand the business side. I lacked the tools to analyze the product’s odds of success, how much it would cost and if people would be willing to pay for it,” he says. This insight prompted Adler to pursue an MBA degree.
In 2009, he got a conference call from Green and another childhood friend, Tomer Dvir, who had founded a new startup called Soluto. “There’s someone here who wants to talk to you,” they told him. On the other end of the line was Naftali Bennett, then a successful entrepreneur who had co-founded Cyota, a payment security provider for financial institutions, which was later sold to RSA. Bennett had invested in the first rounds of Soluto before he was asked to come on board as CEO. "He said to me, ‘These guys have told me about you. I checked it out and I think you ought to join us as VP of product management,'" Adler says.
He met with Bennett, was extremely impressed and agreed to join Soluto. But after about a month, Bennett told him that he got an offer to lead the Yesha Council, the umbrella organization of the Israeli settlements in the West Bank. "I have to fulfill this mission," Bennett told him. "I knew it was important to him and I respected that," Adler says. "We stayed in touch over the years and would meet in New York when he came there for visits, sometimes on ministerial business.”
"Bennett and I stayed in touch over the years and would meet in New York when he came there for visits, sometimes on ministerial business”
By the start of the last decade, Soluto was a well-known startup in Israel, in part thanks to winning the TechCrunch Disrupt contest. It developed technology to boost computer performance and provide long-distance tech support. It was later sold to the American insurance company Asurion for $120 million.
The crazy years at WeWork
In 2013, the family moved to New York when Adler’s wife Avital, a neuroscientist, began a post-doctoral fellowship there. Because of the move, Adler had to shift some of his responsibilities at Soluto, and began focusing on sales, marketing and business development. “I’m okay in these fields, but I would never have recruited myself for these positions,” he admits.
Adler had another problem. He and his wife were living in a small apartment in Manhattan, and he was working from home with two babies in the house. He needed a workspace. "I talked to some friends, and Eden Shochat and Michael Eisenberg (venture capital investors, currently partners in Israel’s Aleph VC Fund) put me in touch with Neumann and with WeWork, which at the time had around 60 employees and a $100 million valuation, similar to Soluto. Its buildings were all full and with a waiting list. It sounds funny today, but it was profitable then."
Adler thought the meeting was about getting a workspace, but really it was a job interview. Neumann was looking for a chief product officer, and Shochat and Eisenberg had fixed them up. "After some deliberation, I decided to join the company," Adler says.
What did you think of Neumann?
“He’s super sharp, warm and nice to talk to. He’s an ambitious person with a big vision.”
Adler was among the company’s first 60 employees and initially managed a team of five people in engineering and development, which quickly grew, peaking at 150 people. He went on to found a new group called WeWork-Labs, which dealt with connecting startups and corporations.
WeWork has faced criticism for insistently labelling itself as a high tech company when it was essentially a real estate and office rental company. Adler agrees to some extent with the criticism. “WeWork went overboard in positioning the technology as part of what it was, but in order to reach the magnitude it did, it had to build entire technology systems from scratch," he says. Adler was responsible for overseeing a key segment of the technology developed at WeWork, including software to manage entry control, payments and accounting for the company’s buildings and clients.
Adler was there in the years of rapid growth, when Neumann – showy and wild, charismatic and charming – sold investors and employees on his grandiose vision of turning the company into an empire worth trillions.
Adler was there in the years of rapid growth, when Neumann – showy and wild, charismatic and charming – sold investors and employees on his grandiose vision
How do you see the change in Neumann over the years?
“He became more ambitious. His level of ambition rose in accordance with the amount of money that investors gave him.”
Adler is careful, and declines to elaborate on sensitive incidents that occurred at WeWork. “The first years were special and the last years were bizarre, with things that are hard to explain,” he says. Asked if there were things that he found excessive, he talks about the “party culture,” but also about the intensive work culture that included working nights and weekends. “Still, I wouldn’t say that I have any great criticism about that. That’s the kind of behavior you find in a rapidly growing company in the early stages. You’re constantly asking yourself if it’s an okay time to rest or will I push the whole company forward if I work that additional hour. My wife and I had set days with the kids. It was hard. I’m not sure anyone really knows how to successfully balance work and private life.”
In August 2019, WeWork published a prospectus ahead of an IPO that revealed its problematic model and dubious practices, and the company’s fortunes swiftly turned: Its valuation plummeted nearly overnight from $47 billion to $15 billion, the IPO was aborted, and Neumann left. The company is currently planning to enter the stock market through a merger with SPAC, at a $9 billion valuation. “We read the prospectus and were horrified, and we watched in astonishment at how things went south at a crazy pace," Adler says.
"WeWork had something that made sense, but there were mountains on top of it of stuff that made no sense at all," Adler says. It was clear to him that the company was headed for aggressive change and that his future was no longer there.
Brilliant or ridiculous?
After about seven years in New York, the family was heading back to Israel. In November 2019, Adler sat down for a decisive talk with his friend Wininger, the entrepreneur. “He reminded me that what’s really fun in life is building technology and companies. He came with an idea, and we started working on it bit by bit.”
It was an idea unlikely to leave anyone indifferent. Some will hear it and say it’s brilliant, others will say it’s far fethced, but all will agree that it is incredibly ambitious: a company that operates “mobile shops” – trucks – that will arrive on demand at customers’ homes in small towns and suburbs in the United States. In these “stores,” they’ll be able to try on and check out different kinds of items (like shoes and clothes) with the aid of a salesperson, and buy them on the spot.
"Everyone thinks the world has shifted to online trade. But in 2020, purchases at physical stores crossed the $4.1 trillion mark, and 70 percent of that happens in small towns."
The idea became Santa, which was officially launch in November 2020. “Santa is a new type of physical store that is not attached to the ground but comes to the customer’s home,” Adler says. “We enable the customer to try out the product, to experience it and look in the mirror with the salesperson assisting them. It’s a store where if you love something – it can be yours right that instant. On the other hand, it’s a store whose costs are minimal – the staff is smaller and the storage space is larger than you’d expect – and unlike a regular store, it isn’t confined to customers who physically come to it.”
“Everyone thinks the world has shifted to online trade, which has crossed the $700 billion mark in the U.S., and most of the innovation is going there," Adler notes. "But in 2020, purchases at physical stores crossed the $4.1 trillion mark, and 70 percent of that happens in small towns.
“At the same time, there is still a gap between the small towns and the big cities in America: The level of service of online shopping is low, it sometimes takes a package two weeks to arrive. And when a store goes out of business in a small town, no one tries to replace it with something else. So there’s an interesting market here: You’ve got a huge population that spends trillions of dollars on purchases, but the level of service that it receives keeps declining."
The company will soon launch its first pilot in two neighboring towns in Texas, Plano and Frisco, with two mobile stores. The selection of products will include fashion, shoes, home design, toys and camping gear, and the company is working on partnerships with product distributors.
How will it actually work? A user who has installed the Santa app will receive a notification on his phone, telling him that a Santa “store” is nearby and could be at his home in 10 minutes. The customer is asked whether there is anything he would like to buy, and presented with a selection of 10-20 items. A few minutes later, there will be a knock on the door, and a salesperson will show him the chosen item. The customer can try things on and decide if they want to buy anything right away, or to keep the item for 48 hours before making a final decision.
'Compared to physical stores, our economic model looks amazing'
Of course, the idea raises more than a few questions. First and foremost – Santa intends to keep a large fleet of trucks with goods traveling over large areas, which will entail heavy costs for logistics, operating expenses, purchasing, inventory and warehouse management, and especially when each customer has to be reached personally and tended to for an extended period.
Adler is aware that this is a massive operational challenge, which will not be solved with software and technology. He notes that the company's executives have extensive knowledge and experience in the retail, fashion and operations sectors. One of them is Menachem Katz, who grew up in the ultra-Orthodox Mea She’arim neighborhood in Jerusalem, and became a chef before he moved into the field of logistics and operations in the food and restaurant industry, where he gained experience working in American companies, including WeWork.
Adler says that Santa’s American team also has people with experience in store management, marketing and retail who had worked at companies such as J. Crew, Nautica and Urban Outfitters. “We spent the first months, before raising money, on researching the business and operational model, to understand where each dollar is going and what potential there was to build a big business," Adler says. "Compared to physical stores, our economic model looks amazing. The operational costs of a truck are minimal compared to that of a physical store.”
There are some other challenges ahead: Before it sells a single product, Santa will have to spend heavily on marketing in order to reach a broad base of potential customers and get them to install its app. Additionally, it’s hard to predict how well a truck’s location and the selection of items available will fit what people will want to buy when the “mobile store” is in their area. And a customer who is disappointed once, might never return.
"We believe that once our stores are moving around town, everyone will quickly become familiar with Santa"
“We’ll connect with a city, we’ll work with local businesses, and it will all be accompanied by marketing and advertising," Adler promises. "We believe that once our stores are moving around town, everyone will quickly become familiar with Santa. We’re going for quality products with known labels, the things you want the most when you go to the mall."
Santa has raised tens of millions of dollars and currently employs 29 people, mostly in Tel Aviv. The founding team includes women and men from various fields of technology, operations and business. The company is labeled as a tech startup: it employs programmers, is focused on fast growth, it introduces innovation to a veteran industry and relies on venture capital funding. But the product and service Santa supplies are not technological. In this sense, it belongs less to the high tech industry and more to the retail industry.
Adler concurs with this definition. “Most of the software the company has built deals with the operations side,” he says. “Santa’s model requires a different way of thinking about warehouses, inventory, operation of a store that moves from place to place, which products are most suited to each customer, what is the ideal route for the store, how to create a perfect shopping experience – it’s all guided by technology. The complexity lies in creating a software system that will try to give the best result it can, and then to take this output and use it like putty in the hand of the human creator.”