8 ms·

SoftBank Gives Startups Billions of Reasons to Hold Off IPOs

100 points by dsr12 8y ago

josephjrobison 8y ago
Anyone think that SoftBank seems to be investing a dangerously large amount of money in these startups, which could be a big risk if there's multiple failures? Or is it all good if it's private money?
- chx 8y ago
  Based on https://www.cnn.com/2018/10/15/tech/softbank-stock-saudi-arabia/index.html https://www.cnn.com/2018/10/15/tech/softbank-stock-saudi-ara... https://techcrunch.com/2016/10/14/softbank-and-saudi-arabias-pif-planning-100bn-tech-fund/ https://techcrunch.com/2016/10/14/softbank-and-saudi-arabias... it seems about half of that is Saudi money, a quarter of it is SoftBank money and while there are a few trust accounts among the SoftBank principal shareholders https://group.softbank/en/corp/irinfo/stock/ownership/#sec-01 https://group.softbank/en/corp/irinfo/stock/ownership/#sec-0... they do not seem to have a large percentage. How bad it would be if the Saudis would lose a few (ten) billion dollars, that I can't tell. Arm Holdings is held fully by SoftBank and the Vision Fund, should they fail, i am not sure what would happen but my guess is Arm would get out of the tumble relatively unscathed, it's too valuable.
- liftbigweights 8y ago
  Masayoshi Son ( founder of SoftBank ) is legendary for betting big and winning big and also betting big and losing big. During the dotcom boom, he became the richest man in the world for a few days by betting big and then during the crash, he lost almost all of his net worth. https://www.quora.com/How-did-Masayoshi-Son-lose-70-billion-during-the-dot-com-crash https://www.quora.com/How-did-Masayoshi-Son-lose-70-billion-... He was able to maintain power and keep softbank afloat while losing billions during the dotcom crash. So he has powerful backers and contacts who believe in him and are willing to carry him during rough times. That's very rare. In many ways, he reminds me of bezos and musk. For some reason, they are able to get the support of big money while losing a lot of money.
- Iv 8y ago
  They are using the mud-shotgun technique: throw a thousand mud piles at the wall and see which one sticks. It may fail but it can't be a worst investment than just giving it away as dividends.
- shry4ns 8y ago
  I think it's setting a very dangerous precedent. A lot of startups may be overvalued because of these massive investments
  - anonymous5133 8y ago
    IMO, It is quite obvious there is a bubble in tech forming. I look at some of these companies and don't even know how they can justify the current investor expectations. I see people justify amazon's high valuation by saying stuff like "well if they get x % of WORLD retail sales...". It just shows the lack of depth in understanding that these people have. I am sure there is similar overly optimistic views occurring in the VC space as well.
- IBM 8y ago
  I mean it's obviously bad for the LPs if it all goes to zero. But there's no systemic risk to the financial system that taxpayers will have to shoulder if that happens, which is what the government or regulators should care about.
- anonymous5133 8y ago
  Yes, of course there is going to be a lapse in their due diligence at some point. It is just like the whole housing crisis in 08. Banks eventually were giving money to practically everyone and then we all know what happened in the end. As a VC, at some point, you need to get your money back plus a return to keep the fund going.
takanori 8y ago
It would seem that softbanks backing by the Saudi brutal regime should give Silicon Valley idealistic founders moment of pause before accepting their investment. WeWork founders banned meat from their office meals can they really accept to be owned by this fund? Once the SoftBank money stops flowing does the chamath described Ponzi scheme stop causing the whole thing Venture backed growth story to unravel? https://www.businessinsider.com/softbank-talks-invest-15-billion-to-20-billion-wework-2018-10 https://www.businessinsider.com/softbank-talks-invest-15-bil... https://m.youtube.com/watch?v=RwRZtZQoLtQ https://m.youtube.com/watch?v=RwRZtZQoLtQ
- takanori 8y ago
  It’s worth noting that the commercial real estate companies are exposed should WeWork falter. https://www.cbinsights.com/research/wework-real-estate-earnings-transcripts/ https://www.cbinsights.com/research/wework-real-estate-earni...
- EGreg 8y ago
  I do actually often think twice about accepting a state fund such as from the Saudis. But then what about buying German cars, some of which were started by Hitler (such as VW)?
  - lostmyoldone 8y ago
    That argument you put forth is entirely without substance as far as I can tell, and probably shouldn't have been made at all. One of your examples is ongoing, the other is not. One could change the future, the other can't change anything except other car markers margins. One could be justified, the other can not. I could make a much longer list, but I hope you get the gist.
  - miketery 8y ago
    What are you smoking. Germany has accepted their past, and has moved forward to rebuild and establish an advanced and civilized society.
    - 8y ago
throwaway_trust 8y ago
This is not right. I'm a founder of Series C startup/venture and I'd be inclined to take money from SB only if numbers are looking shaky. Going public creates a strong brand value, and liquidity for all the employees (not just VCs and founders). Not to mention, makes recruiting easy due to perception of "this company made it". While there is lot of scrutiny, I think it's worth it if your numbers are somewhat good (no need to be great as public markets have shown to be forgiving tech companies if you have bright growth prospects or you can paint a great futuristic story).
- deleted 8y ago
  [deleted]
- the_watcher 8y ago
  > and liquidity for all the employees (not just VCs and founders) As mentioned in the article, SoftBank often buys employee shares, giving them liquidity without needing an IPO.
noddy1w 8y ago
Great that the gains of american innovation are accruing to mysogynist oil sheiks
- dmix 8y ago
  At least the Saudis are now diversifying into western markets with their capital. Which they are quickly learning comes with some social and moral constraints that have been largely invisible in the diplomatic/political world. The finance and tech world doesn't need to compromise for some vague fragile security arrangement in the middle east. But regardless money is money and it will find an immoral taker at some point. The best we can do is keep the pressure on companies to hold their investors accountable. That said, I'm not a fan of bringing the fanatical political tribalism, which is very popular in the US at the moment, into the tech/business world.
  - maxxxxx 8y ago
    "The finance and tech world doesn't need to compromise for some vague fragile security arrangement in the middle east. " Once they have investors from there aren't they pretty much beholden to them?
  - tomp 8y ago
    I want to upvote you, but I'm afraid you're mostly dreaming. What companies have refused Saudi money? Maybe a few do, but there's plenty of other takers (talking about startups and hedge funds - it's almost impossible for a publicly traded company to "refuse" an investor I think).
  - msaharia 8y ago
    What social and moral constraints exactly? They invest money through SoftBank, reap the dividends, and then spend it on wars and oppression just like before. It's fine to just admit that the tech world has shaky morals. But utterly delusional to think that investing in tech will somehow make Saudis more pliant.
- eru 8y ago
  So what is it, those investments are stupid and overvalued and will never make money? Or the Saudis are gaining so much profit from it?
neurotech1 8y ago
Non-Paywall: http://archive.is/YPSte http://archive.is/YPSte
- ericintheloft2 8y ago
  Off topic, but how does this work? How can the crawlers bypass the paywall?
  - eru 8y ago
    They explicitly allow eg the Google crawler. Not sure about others.
    - ericintheloft2 8y ago
      Oh ok! Thx for explanation
deleted 8y ago
[deleted]
xivzgrev 8y ago
Anyone who takes Softbank money probably didn't do their due dilligence on what they are like as an investor. I worked at one such company. It sounds good - they come in and offer a huge investment at a high valuation, higher than anyone else. About time someone recognizes how valuable your company actually is! So you take it. You make an announcement, everyone oos and aahs over your new valuation. Talent flocks to you, fuck yea. Things are going great! Fast forward some time. You need some more investment to go chase opp X. Or maybe you burned thru cash, who knows. So you start fundraising. investors look at your numbers and say...umm...you've shown some good growth but we dont agree with Softbank's valuation. We will invest in a downround, or come back when you've posted even more growth. Crap. You need money NOW not later. You did NOT realize that high valuation was a double edged sword. And a downround is totally out of question. Also working with them is...challenging. Gotta love those 8am calls (latest they can do Tokyo time). They ask for metrics that kind of make sense but are different than how you run things so it is a complete waste of time. On the phone they are oh so polite, but you're never sure what they're actually thinking. You're asking yourself why you took their money again? They have had zero strategic impact (they're a Japanese telco) and now it's making fundraising more difficult. Fun times. If I see a company take SB money I assume they are declining (or soon will) or greedy / short sighted. Or there is the rare actual strategic benefit sure. But most times there is none. So why did we work take the money? Sounds like they wanted to avoid going public. But I wonder if they did their homework on this one.
- DoreenMichele 8y ago
  but you're never sure what they're actually thinking. You remind me of an anecdote about an American working in Asia. They were constantly frustrated with communication difficulties. One day, they felt they finally were on the same page with a coworker and they said "We are thinking along parallel lines." to express this. Coworker agrees. Later, the problems came back. They referred back to that conversation. Their Asian coworker says "Yes. Parallel lines never meet."
  - mikeryan 8y ago
    I’m sorry but I’m born and bred in the US and would have read this the same way.

100 points by dsr12 8y ago

Anyone think that SoftBank seems to be investing a dangerously large amount of money in these startups, which could be a big risk if there's multiple failures? Or is it all good if it's private money?

chx 8y ago
Based on https://www.cnn.com/2018/10/15/tech/softbank-stock-saudi-arabia/index.html https://www.cnn.com/2018/10/15/tech/softbank-stock-saudi-ara... https://techcrunch.com/2016/10/14/softbank-and-saudi-arabias-pif-planning-100bn-tech-fund/ https://techcrunch.com/2016/10/14/softbank-and-saudi-arabias... it seems about half of that is Saudi money, a quarter of it is SoftBank money and while there are a few trust accounts among the SoftBank principal shareholders https://group.softbank/en/corp/irinfo/stock/ownership/#sec-01 https://group.softbank/en/corp/irinfo/stock/ownership/#sec-0... they do not seem to have a large percentage. How bad it would be if the Saudis would lose a few (ten) billion dollars, that I can't tell. Arm Holdings is held fully by SoftBank and the Vision Fund, should they fail, i am not sure what would happen but my guess is Arm would get out of the tumble relatively unscathed, it's too valuable.
liftbigweights 8y ago
Masayoshi Son ( founder of SoftBank ) is legendary for betting big and winning big and also betting big and losing big. During the dotcom boom, he became the richest man in the world for a few days by betting big and then during the crash, he lost almost all of his net worth. https://www.quora.com/How-did-Masayoshi-Son-lose-70-billion-during-the-dot-com-crash https://www.quora.com/How-did-Masayoshi-Son-lose-70-billion-... He was able to maintain power and keep softbank afloat while losing billions during the dotcom crash. So he has powerful backers and contacts who believe in him and are willing to carry him during rough times. That's very rare. In many ways, he reminds me of bezos and musk. For some reason, they are able to get the support of big money while losing a lot of money.
Iv 8y ago
They are using the mud-shotgun technique: throw a thousand mud piles at the wall and see which one sticks. It may fail but it can't be a worst investment than just giving it away as dividends.
shry4ns 8y ago
I think it's setting a very dangerous precedent. A lot of startups may be overvalued because of these massive investments
- anonymous5133 8y ago
  IMO, It is quite obvious there is a bubble in tech forming. I look at some of these companies and don't even know how they can justify the current investor expectations. I see people justify amazon's high valuation by saying stuff like "well if they get x % of WORLD retail sales...". It just shows the lack of depth in understanding that these people have. I am sure there is similar overly optimistic views occurring in the VC space as well.
IBM 8y ago
I mean it's obviously bad for the LPs if it all goes to zero. But there's no systemic risk to the financial system that taxpayers will have to shoulder if that happens, which is what the government or regulators should care about.
anonymous5133 8y ago
Yes, of course there is going to be a lapse in their due diligence at some point. It is just like the whole housing crisis in 08. Banks eventually were giving money to practically everyone and then we all know what happened in the end. As a VC, at some point, you need to get your money back plus a return to keep the fund going.

takanori 8y ago

It would seem that softbanks backing by the Saudi brutal regime should give Silicon Valley idealistic founders moment of pause before accepting their investment. WeWork founders banned meat from their office meals can they really accept to be owned by this fund? Once the SoftBank money stops flowing does the chamath described Ponzi scheme stop causing the whole thing Venture backed growth story to unravel? https://www.businessinsider.com/softbank-talks-invest-15-billion-to-20-billion-wework-2018-10 https://www.businessinsider.com/softbank-talks-invest-15-bil... https://m.youtube.com/watch?v=RwRZtZQoLtQ https://m.youtube.com/watch?v=RwRZtZQoLtQ

takanori 8y ago
It’s worth noting that the commercial real estate companies are exposed should WeWork falter. https://www.cbinsights.com/research/wework-real-estate-earnings-transcripts/ https://www.cbinsights.com/research/wework-real-estate-earni...
EGreg 8y ago
I do actually often think twice about accepting a state fund such as from the Saudis. But then what about buying German cars, some of which were started by Hitler (such as VW)?
- lostmyoldone 8y ago
  That argument you put forth is entirely without substance as far as I can tell, and probably shouldn't have been made at all. One of your examples is ongoing, the other is not. One could change the future, the other can't change anything except other car markers margins. One could be justified, the other can not. I could make a much longer list, but I hope you get the gist.
- miketery 8y ago
  What are you smoking. Germany has accepted their past, and has moved forward to rebuild and establish an advanced and civilized society.
  - 8y ago

throwaway_trust 8y ago

This is not right. I'm a founder of Series C startup/venture and I'd be inclined to take money from SB only if numbers are looking shaky. Going public creates a strong brand value, and liquidity for all the employees (not just VCs and founders). Not to mention, makes recruiting easy due to perception of "this company made it". While there is lot of scrutiny, I think it's worth it if your numbers are somewhat good (no need to be great as public markets have shown to be forgiving tech companies if you have bright growth prospects or you can paint a great futuristic story).

deleted 8y ago
[deleted]
the_watcher 8y ago
> and liquidity for all the employees (not just VCs and founders) As mentioned in the article, SoftBank often buys employee shares, giving them liquidity without needing an IPO.

noddy1w 8y ago

Great that the gains of american innovation are accruing to mysogynist oil sheiks

dmix 8y ago
At least the Saudis are now diversifying into western markets with their capital. Which they are quickly learning comes with some social and moral constraints that have been largely invisible in the diplomatic/political world. The finance and tech world doesn't need to compromise for some vague fragile security arrangement in the middle east. But regardless money is money and it will find an immoral taker at some point. The best we can do is keep the pressure on companies to hold their investors accountable. That said, I'm not a fan of bringing the fanatical political tribalism, which is very popular in the US at the moment, into the tech/business world.
- maxxxxx 8y ago
  "The finance and tech world doesn't need to compromise for some vague fragile security arrangement in the middle east. " Once they have investors from there aren't they pretty much beholden to them?
- tomp 8y ago
  I want to upvote you, but I'm afraid you're mostly dreaming. What companies have refused Saudi money? Maybe a few do, but there's plenty of other takers (talking about startups and hedge funds - it's almost impossible for a publicly traded company to "refuse" an investor I think).
- msaharia 8y ago
  What social and moral constraints exactly? They invest money through SoftBank, reap the dividends, and then spend it on wars and oppression just like before. It's fine to just admit that the tech world has shaky morals. But utterly delusional to think that investing in tech will somehow make Saudis more pliant.
eru 8y ago
So what is it, those investments are stupid and overvalued and will never make money? Or the Saudis are gaining so much profit from it?

neurotech1 8y ago

Non-Paywall: http://archive.is/YPSte http://archive.is/YPSte

ericintheloft2 8y ago
Off topic, but how does this work? How can the crawlers bypass the paywall?
- eru 8y ago
  They explicitly allow eg the Google crawler. Not sure about others.
  - ericintheloft2 8y ago
    Oh ok! Thx for explanation

deleted 8y ago

[deleted]

xivzgrev 8y ago

Anyone who takes Softbank money probably didn't do their due dilligence on what they are like as an investor. I worked at one such company. It sounds good - they come in and offer a huge investment at a high valuation, higher than anyone else. About time someone recognizes how valuable your company actually is! So you take it. You make an announcement, everyone oos and aahs over your new valuation. Talent flocks to you, fuck yea. Things are going great! Fast forward some time. You need some more investment to go chase opp X. Or maybe you burned thru cash, who knows. So you start fundraising. investors look at your numbers and say...umm...you've shown some good growth but we dont agree with Softbank's valuation. We will invest in a downround, or come back when you've posted even more growth. Crap. You need money NOW not later. You did NOT realize that high valuation was a double edged sword. And a downround is totally out of question. Also working with them is...challenging. Gotta love those 8am calls (latest they can do Tokyo time). They ask for metrics that kind of make sense but are different than how you run things so it is a complete waste of time. On the phone they are oh so polite, but you're never sure what they're actually thinking. You're asking yourself why you took their money again? They have had zero strategic impact (they're a Japanese telco) and now it's making fundraising more difficult. Fun times. If I see a company take SB money I assume they are declining (or soon will) or greedy / short sighted. Or there is the rare actual strategic benefit sure. But most times there is none. So why did we work take the money? Sounds like they wanted to avoid going public. But I wonder if they did their homework on this one.

DoreenMichele 8y ago
but you're never sure what they're actually thinking. You remind me of an anecdote about an American working in Asia. They were constantly frustrated with communication difficulties. One day, they felt they finally were on the same page with a coworker and they said "We are thinking along parallel lines." to express this. Coworker agrees. Later, the problems came back. They referred back to that conversation. Their Asian coworker says "Yes. Parallel lines never meet."
- mikeryan 8y ago
  I’m sorry but I’m born and bred in the US and would have read this the same way.