SoftBank’s New Strategy: Screw Over Startups Not Investors

SoftBank’s Vision Fund is already a graveyard of broken tech startups, featuring companies like Uber, WeWork, DoorDash, Fair, Katerra, and Oyo—wholly unprofitable enterprises whose business models rely on using investor capital to subsidize prices, achieve a monopoly, then hike prices up again. In pursuit of profits for their investors, these companies have either undergone layoffs,…

SoftBank’s New Strategy: Screw Over Startups Not Investors

SoftBank’s Vision Fund is already a graveyard of broken tech startups, featuring companies like Uber, WeWork, DoorDash, Fair, Katerra, and Oyo—wholly unprofitable enterprises whose business models rely on using investor capital to subsidize prices, achieve a monopoly, then hike prices up again. In pursuit of profits for their investors, these companies have either undergone layoffs, implemented steep pay cuts, violated labor laws, or sold off major operating units to try and forge some path to profitability. None are there yet. Last week, Axios reported that SoftBank had for months been trying a new approach: shafting startups, instead of investors. Three startups, in particular, were each offered hundreds of millions of dollars by SoftBank, but as terms were finalized or signed off on, SoftBank would suddenly kill the deal and walk away. Things don’t end there, however, as other SoftBank investments have been experiencing trouble these last few months. In December, SoftBank gave back its nearly 50 percent stake in Wag, a dog-walking “tech” startup, along with the two board seats it secured with a $300 million investment in the company that inflated Wag’s valuation to $650 million. This came after the company’s second round of layoffs as part of an attempt to forge a path to profitability. Also in December, Katerra announced a round of layoffs, closing one factory in Phoenix while opening another in California, all part of its master plan to achieve profitability by the end of 2020. Another SoftBank portfolio company’s IPO flopped in December (not a good month for SoftBank), this time a Chinese finance technology company named OneConnect. SoftBank’s investments valued OneConnect
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