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SoftBank Is Selling Wag Stake Back to Company
- a_band 7y ago> If you need a little bit of money to grow your business modestly, you can raise a lot of money from SoftBank to grow your business crazily, and then put most of it in the bank and use a little bit of it to grow modestly instead. SoftBank will be disappointed with the modest growth, and you can say “sorry it didn’t work out” and then buy them out at a lower valuation with the money you have left over from not growing your business crazily. Free (modest) growth capital! It's interesting how much SoftBank has screwed themselves with their strategy lately in such high profile ways. I wonder if this is unique to SoftBank or if there's other big VCs that are experiencing similar problems and flying under the radar. Who funded Evernote in and out of the unicorn club?
- raverbashing 7y agoThat sounds like turning the vc strategy up to 11 Hey, instead of 1Mi A round, why not 100Mi?! You can grow 100x faster, right?
- madengr 7y agoThere seems to be a lot of bullshit that people are investing in, which I suppose is fine if you have money burning a hole in you pocket. Things like uBeam, and the Tesla Wardenclyff wireless power thing in TX, come to mind.
- mkagenius 7y agoMore than themselves Softbank has/is harming the entrepreneurs who now think having modest growth is something one should never aspire for. They see headlines of billions of dollars in funding and assume this is the norm and if they don't get so much of funding then they have not succeeded. But of course, the Softbank doesn't care - they have a different vision.
- sombremesa 7y agoHN is not innocent in the propagation of the idea that modest growth is unacceptable. Just look at the number of people "validating" their ideas with landing pages versus just building something that solves their own problems (or problems within their circles) and growing organically from there.
- wolco 7y agoThe landing page strategy felt like giving up too easily and early.
- blackearl 7y agoYou're blaming people for trying to hit the lottery. Who wouldn't want to build a thing and then flip it for a billion dollars, all in a few years?
- Fomite 7y agoWe generally tell people that trying to hit the actual lottery is a bad idea.
- Apocryphon 7y agoActually it’s less like a regulated lottery at this point and more like loot boxes.
- nradov 7y agoPlaying the lottery isn't necessarily a bad idea if other people are giving you money to buy tickets.
- Spellman 7y agoAs long as they don't come looking for those returns you promised
- smabie 7y ago
- duxup 7y agoI remember someone telling me something about how 'hard' it is to get a good return when you have a massive amount of money. I suppose they meant beat the market or something like that... But there are so many examples of folks with massive amounts of cash trying to hit it big(er) ... maybe at some point that big wad of cash really is better off in some index fund or some mixed fund that offsets risks or whatever. It seems like shooting for the moon makes people make bad choices because they feel they have to do things differently.. and ignore some obvious missteps.
- gopalv 7y ago> how 'hard' it is to get a good return when you have a massive amount of money The real problem with scale close to whole countries is that if your money isn't contributing to the growth of the entire economy, you can't really get a return at all. You can't extract value out of an economy that is stagnant, if the money you are pumping in is merely recirculating in zero-sum mode. At the small scale this can work, because there are enough small-time losers who lost money when you got it without hurting the balance of the economy, but at the large scale this cannot since there aren't enough losers to lose money to pay you off (or alternatively, there is a war going and/or the government is buying). So any investment portfolio big enough which doesn't move the economy to be more productive is bounded by the entire economy and in general do worse, because the market might be reacting to the fund & preying on it. Also "more productive" is a very weird term - giving people public transportation, fast internet or cheap child-care can make a society more productive. Underemployment of intelligent people into subsistence levels of productivity is basically a crime perpetuated by well intentioned folks from the pre-automation era.
- TheOtherHobbes 7y agoThe real problem is the idea that you need a return on your money. You don't. If you're a multi-billionaire you can spend the rest of your life wasting millions a year on super-expensive toys and prestige houses and whatever else you feel like amusing yourself with, and you're not going to run out. The irony is that this kind of gameified wealth chasing is itself paper-pushing makework. At best it's a financial version of Minecraft - building a pointless but showy thing just to prove you can - with the markets as the gaming environment. WeWork, WagLabs, and most VC investments contribute absolutely nothing of value to the world. If they didn't exist, no one would even notice their absence. Meanwhile real problems - climate change, political stability, creating a dynamic culture of scientific innovation and creativity - go unaddressed.
- RcouF1uZ4gsC 7y agoMaybe Masayoshi Son secretly hates Mohammad bin Salman and the whole Softbank Vision Fund was just a clever way to basically light Saudi oil money on fire while maintaining plausible deniability. Looking at Softbank's investments, I am having trouble coming up with a better explanation for their behavior.
- devicetray0 7y agoI doubt that, but sounds like a decent short story idea for /r/writingprompts
- GrayTextIsTruth 7y agoi don't know why it bothers me so much when i see redditors spam /r/thing outside of reddit.
- williamscales 7y agoBecause it applies the convention of one forum to another. It assumes that the readers of this forum will be familiar with them and appreciate their inclusion.
- GrayTextIsTruth 7y ago>It assumes that the readers of this forum will be familiar with them It assumes users of this forum are redditors, but the way they say it shows how they view reddit as the center of discussion
- draw_down 7y agoIt's not that I disagree, so much as there are much more entertaining ways to set money on fire, so why do it this way? I mean, at this point would you rather be Adam Neumann or Masa Son? I know my answer. Maybe he just sucks at investing and many of his successes were lucky/flukes.
- AndrewStephens 7y ago
- paulddraper 7y ago> you can say “sorry it didn’t work out” and then buy them out at a lower valuation with the money you have left over from not growing your business crazily. Does SoftBank not have liquidation preferences??? This is the exact sort of thing that liquidation preferences prevent: buybacks at a lower value with the investor's own money. Because otherwise, yes, you can indeed unscrupulously print capital. EDIT: I suspect the author is either ignorant or grossly overstating the point.
- mschuster91 7y ago> EDIT: I suspect the author is either ignorant or grossly overstating the point Or SoftBank has a massive lack of core competency combined with being lucky enough to have hit the Saudi oil money well while drilling... imagine an alternate reality where Uber and WeWork have worked out, people would have hailed SoftBank as revolutionary visionaries.
- paulddraper 7y agoVisionary for not having liquidation preferences? That's like saying "visionary for not doing due diligence".
- jjeaff 7y agoLiquidation preference would not come into play unless you are selling off the whole company. The author says that the value of the shares was not public, but one would assume they did not get back nearly what they put in. Did you read the article before calling the author incompetent?
- paulddraper 7y ago> Liquidation preference would not come into play unless you are selling off the whole company. The wholesale liquidation would presumably provide a floor to the partial liquidation value. That's not necessarily true, but probably is. ("Overstatement")
- blackearl 7y ago
- ergothus 7y agoI've heard this "it's hard to make money even when you're rich" often, and I just don't understand it. You don't need to beat the market, you just need to beat inflation + your rate of spending, and you're winning the economic gain. That's very difficult when you're poor, but when rich it shouldn't be harder than a set of diversified index funds and not hemorrhaging money just because you're "rich". Is there something I'm missing?
- currymj 7y agoi think the attitude is that if you theoretically could be making more money, then you are actually losing money.
- awrence 7y agoNope, you're exactly right, and it's one of the main engines behind wealth inequality. Once you reach what I personally call material escape velocity, the point at which your lifestyle + inflation < yield on your capital, your wealth accrues up relentlessly. It's like escaping a financial gravity well. Eventually you get to a level where you can weather just about any market shock and then there's basically no way to get sucked back down barring things like death, taxes, divorce etc. The people that have reached this point casually boost on higher while everyone else who hasn't and can't save vs lifestyle needs gets left behind. You're also right people are thinking beating the market, but that's also a bit silly, you can just buy the market and match it, who needs to beat anything if they've reached this point...
- kortilla 7y ago> The people that have reached this point casually boost on higher while everyone else who hasn't and can't save vs lifestyle needs gets left behind. The mistake in this line of thinking is that a small pool of billionaires getting richer doesn’t leave everyone else behind. Their money is effectively irrelevant in how rich the rest of us are. A 100% wealth tax on all billionaires isn’t enough to fund UBI for one year. The only upside to “solving wealth inequality” is just to reduce rich people’s ability to big influence in politics. There is no economic or financial reason to do so.
- shaneprrlt 7y ago>> The first iteration successfully used Remote Viewing to forecast market motion of a SPY-related index. Things like this used to bum me out, but now I try to remember the eventual heat death of the universe and I start to feel better.
- corporateslave5 7y agoThe reality is there’s too much money floating around. The saudis will eventually stop making so much from oil, they need income and cannot afford to sit on cash. But neither can anyone else, so they take risks to deploy huge capital. Probably they’ve made out big elsewhere
- rexpop 7y ago> The reality is there’s too much money floating around. Jeeze, it frustrates me to hear such notions when Flint and many other cities still have toxic drinking water, millions are in debt for education and medical bills, impoverished by our rental arrangements, etc.
- onlyrealcuzzo 7y agoIn VC? One of KSA's best known VC investment so far is Uber. They invested $3.5Bn at $65Bn valuation [1]. Uber has a current market cap of $47Bn. One of their best investments has a near negative 30% return. If they just put money in the S&P 500 in 2016, they'd have gotten a ~64% return (positive). [1] https://www.vox.com/2018/2/9/16996834/uber-latest-valuation-72-billion-waymo-lawsuit-settlement https://www.vox.com/2018/2/9/16996834/uber-latest-valuation-...
- blackearl 7y agoSure, but I'm aiming to moonshot, own the taxi, car, and self-driving AI industries, and become the world's first trillionaire.
- slovenlyrobot 7y agoThe, like peppering of like, "like", as some kind of like, pause, even if like, it was done like intentionally in an attempt to be like, humorous, is insanely fucking like, annoying Whoever wrote this article is like, unprofessional, you know?
- twic 7y agoPart of the fun of this newsletter is encountering that highly relaxed conversation style in the context of the otherwise ultra-business Bloomberg. Anyway.
- NullPrefix 7y agoYou got to ask, why no emojis?
- 0xffff2 7y agoYeah, sure, it's a bit idiosyncratic, but Matt Levine is a pretty well-known and popular columnist, not just some random guy. It's a daily opinion column on finance. He's not really going for "professional" so much as "approachable" IMO.
- DonHopkins 7y agoI'm having a hard time getting my head around the name "Wag Labs". https://en.wikipedia.org/wiki/Wag_(company) https://en.wikipedia.org/wiki/Wag_(company) Do they have a research laboratory where they come up with patented cutting edge technology for walking dogs, like the Q Division in James Bond movies? Or do they specialize in walking Labradors? And I'm not so sure that "Uber for Dogs" is a such good metaphor, because nobody wants their dog sexually assaulted.
- MS90 7y agoYou jest, but you'll see the light once you try out their new cutting edge carbon fiber aerodynamically optimized dog leashes. Shave tenths of a second off your dog walk time. There's racing drivers that would literally KILL for that kind of time saving.
- nkrisc 7y agoIt's "Labs" because they're a "tech" company because they have an app. An app makes you a sophisticated technology laboratory. Right? Definitely not just a company that uses "gig economy" workers to walk dogs.
- DonHopkins 7y agoI wonder if Wag Lab's advanced sophisticated app supports Andy Quitmeyer's revolutionary disruptive fully open-source "Mark Your Territory" technology, from Georgia Institute of Technology and Digital Naturalism Laboratories, that enables your dog to check into Foursquare by peeing? You could track your dog walking and checking into their favorite places in real time! https://www.instructables.com/id/Pee-to-Check-In-to-Foursquare-Mark-Your-Territor/ https://www.instructables.com/id/Pee-to-Check-In-to-Foursqua... https://web.archive.org/web/20111130012110/http://www.markyourterritory.org/ https://web.archive.org/web/20111130012110/http://www.markyo... http://andy.dorkfort.com/andy/man/ http://andy.dorkfort.com/andy/man/
- triceratops 7y agoIs there a whitelabel gig economy platform that someone could use to start their own company? Kind of like a Shopify for the gig economy - you get your own branded website, apps, management platforms etc.
- dmix 7y ago> with officials at the $100 billion fund preferring to sell or liquidate the company and other investors preferring to downsize the business while focusing on sustainable growth and profitability. The fact they went with continuing to grow a sustainable company is what is most interesting about this story and counter to the popular SV narrative. There is still hope left past the headlines. There are a lot of people looking to build legitimate businesses in the startup world and VCs doing pump-and-dump growth>product schemes tend to be the exception not the rule. The high-risk splashy investors like Softbank get 100x the amount of press... the Wall St crowd also loves talking about them, which is the subsection of the SV/tech world Levine excels at critiquing.
- Qwertystop 7y agoI have difficulty seeing Unicorn (the scooter company) here as anything other than an intentional joke on current VC. They call it Unicorn, they put nothing into actually making a product, and they close up shop immediately after spending all the money on growth -- unlike with Wag, that really doesn't seem like something accidental.
- sharadov 7y agoThe Saudi's are definitely pissed with Son, and they are ruthless.
- neonate 7y agohttp://archive.is/1K5IA http://archive.is/1K5IA
- IOT_Apprentice 7y ago$300 million for a fucking dog walking out sourcer? Who signs off on this kind of shit?
- redisman 7y agoI use Rover pretty often for medium-term dog care for trips and such. It usually costs me $400-$1000 for a week or two so it definitely provides a valuable service and good revenue.
- wavefunction 7y agoJeez I can take my two dogs to a full on dog ranch for a week for less than that. They get to play all day with dogs and run around on an old farm... dog ranch = dog kennel
- brianpayne2 7y agoOptions in major cities are much more limiting. The nice places like that are absurdly expensive. Rover helps make it more affordable to board your pup for longer trips.
- smabie 7y agoMy boy Levine strikes again! Truly the greatest guy on the internet!
- paxys 7y agoThis paragraph is amazing > Wag was looking to raise $75 million. It went to SoftBank and was like “will you give us $75 million?” SoftBank was like “no haha we’ll give you $300 million,” because that is SoftBank’s whole thing, it loves to give startups vastly more money than they want or need. And so Wag took the money. And then like a year and a half later Wag will get rid of SoftBank by giving back, I don’t know, but I am going to say some number less than $225 million (“well below” the valuation at which it invested). Wag got the $75 million it needed for free.