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Is this really all that significant? It seems that since the WeWork fiasco, all of SoftBank's failures are being covered by news organizations. But isn't that s

Is this really all that significant? It seems that since the WeWork fiasco, all of SoftBank's failures are being covered by news organizations. But isn't that simply the nature of venture capital? Invest in a lot of different things, most of which will fail, and make up for the losses with the Ubers of the world. (edit: It sounds like Uber was a bad example to use) $375 million sounds like a lot of money, but it's 0.3% of their investment fund. I'm not sure if SoftBank is suddenly performing worse than they have been in the past or if people simply just care more about the losses since they had such a major one recently.

OnlineGladiator 7y ago
> Invest in a lot of different things, most of which will fail, and make up for the losses with the Ubers of the world. Ironically, SoftBank is one of few investors to lose money by investing in Uber.
- jakemal 7y ago
  I wasn't aware of that. So it's a bad example but the idea behind VC investing still stands.
  - OnlineGladiator 7y ago
    I understand your point. My point (which I didn't really explain, so that's my fault) is that SoftBank is an especially terrible VC firm - at least when it comes to making money.
  - rhizome 7y ago
    Eh, in general, but equating the reasonableness of a fund by the percentage of their total is not sound. $100B can still be dumb money, and inventing valuations as a product of this is actually harmful to actually-viable companies. It sucks the air out with bad money (if you can believe in such a thing). "VC" is not a synonym for "smart money," and "the idea behind VC" being "everybody is betting tho" doesn't explain their outsized presence and outsized effects.
- sillysaurusx 7y ago
  How did SoftBank manage to lose money by investing in Uber?
  - oldgradstudent 7y ago
    Join late at a very high valuation. > “There were many naysayers when SoftBank invested last year at a valuation around $49 billion,” said Chris Lane, an analyst at Sanford C. Bernstein & Co. “The successful IPO of Uber at a valuation anywhere near $100 billion will be a strong validation for SoftBank and its Vision Fund. This is also very good news for SoftBank’s other ride-hailing investments.” Oops. https://www.bloomberg.com/news/articles/2019-04-12/softbank-s-son-stands-to-double-7-7-billion-stake-in-uber-ipo https://www.bloomberg.com/news/articles/2019-04-12/softbank-...
    - dntbnmpls 7y ago
      > “There were many naysayers when SoftBank invested last year at a valuation around $49 billion,” > Oops. But the current UBER market cap is $68 billion. So if softbank invested at $49 billion and now UBER is worth $68 billion, how exactly is that an oops?
    - skinnymuch 7y ago
      The market cap of Uber is higher than the investment valuation.
- skinnymuch 7y ago
  How? Uber’s market cap is higher than the investment by SoftBank. Plus they had possible deals during IPO.
creddit 7y ago
Their loss in Uber is quite small now, relatively. Uber's stock is back in the $40s approaching the IPO price.
- trhway 7y ago
  what loss? Looks like Softbank is already making small (by the tech standards) profit (if they had the stomach to make through the trough of course) - $7.6B invested for 220 million shares at the current stock price is more than $8.6B : https://www.cnbc.com/2019/09/03/softbank-more-than-600-million-underwater-on-uber.html https://www.cnbc.com/2019/09/03/softbank-more-than-600-milli... ". The Japanese conglomerate spent about $6.6 billion to buy just over 200 million shares from existing investors, including former CEO Travis Kalanick, at around $32.87 a piece. It provided another $1.05 billion in fresh capital to Uber, buying 21.45 million shares at about $48.77 each."
yaacov 7y ago
That deal valued Zume at $2.25b, which is about 1/5 of the market cap of market leader Dominos. So SoftBank was betting on a >20% chance that Zume would succeed to that degree. This is quite different from traditional VC, which expects much lower probabilities of success in each investment.
tempsy 7y ago
I think part of the problem is how uncritically tech journalism covers these companies pre-scandal. Even call it a "robot" pizza company is strange...I can't imagine that the inside of any factory for frozen pizzas would look that different than what this company was offering.
- oldgradstudent 7y ago
  > I can't imagine that the inside of any factory for frozen pizzas would look that different than what this company was offering. Very different. Frozen pizza factories are impressively efficient (with decades old tech). Compare random frozen pizza machine https://www.youtube.com/watch?v=7anib2L7uUk https://www.youtube.com/watch?v=7anib2L7uUk with the hilarity that is Zume https://www.youtube.com/watch?v=uFSdxwRVh8A https://www.youtube.com/watch?v=uFSdxwRVh8A
  - allovernow 7y ago
    How the hell can people controlling so much money be so ridiculously gullible? WTF did I just watch? A 6 axis factory robot who's sole purpose is to move a pizza 2 feet from a conveyor belt into an oven? Not only that but they're still relying on humans to actually place toppings? And they got $375MM for this bullshit? Serious question: would this investment have been awarded if the cofounder weren't a minority female?
    - deleted 7y ago
      [deleted]
    - delusional 7y ago
      Even worse. It just moved it from one conveyor to another. It could literally be replaced with a corner conveyor.
    - Xorlev 7y ago
      > A 6 axis factory robot who's sole purpose is to move a pizza 2 feet from a conveyor belt into an oven? I have to believe they bought it with the idea of doing much much more but hadn't figured out how. Overall, it seems they knew they wanted to "automate pizza" but really had no idea how. Another comment shows a real pizza assembly line that looks both simple and efficient. Lets talk a minute about their "mobile ovens". WTH do they need 56 ovens for? It seems like assembly still has to happen at a "hub", but how many pizzas do you really need to bake on the way? Maybe a max of 10 for huge orders? > Serious question: would this investment have been awarded if the cofounder weren't a minority female? Lets not go there.
mbesto 7y ago
The economics on the Vision Fund are basically unprecedented. No one has ever managed a $100B "Venture" fund before so the fund economics are basically unknown at this point. That being said, it's much easier to return 100x on a seed fund than it is a late-stage fund. This is basically been proven over and over in the PE world. > I'm not sure if SoftBank is suddenly performing worse than they have been in the past or if people simply just care more about the losses since they had such a major one recently. The only reason people like talking about anything SoftBank is because (1) its so abnormal in the investing world...it's essentially an unproven model, (2) SoftBank's fund is basically "Masayoshi-son made the most significant investing venture bet ever in history with Alibaba and we want to try to do this 100x more" (3) the investing principles are so abnormal (Masayhoshi-son basically has to bless the founder/idea) that it makes for great headlines. Masayoshi-son has proven he can throw he dice pretty well, however the jury is still out on whether this model will actually produce outsize returns.
- rrdharan 7y ago
  Has he proven that? One successful toss (Alibaba), i.e. a sample size of 1, doesn’t really prove anything does it?
  - mbesto 7y ago
    He founded and runs SoftBank which does $81B in revenue. Yahoo/Alibaba are his most famous investments. Here are many of the other ones: https://en.wikipedia.org/wiki/SoftBank_Group https://en.wikipedia.org/wiki/SoftBank_Group
geofft 7y ago
> But isn't that simply the nature of venture capital? Invest in a lot of different things, most of which will fail, and make up for the losses with the Ubers of the world. One, if that's really the model, then founders had better stay as far away from venture capital as possible. Whether your motivation is "change the world"/"deliver on the vision you have" or "make money," that's not your investor's model. Your investor's model is to convince you and a hundred people like you that each of you is special and going to change the world, while expecting only one of you to succeed. Your investor's model is to push you to be Uber-scale even if you're overextending yourself and to convince you that you can do it even if you probably can't, because it's better to let you fail and cut you loose than to let you have a modest and small success that doesn't make a dent in the portfolio. If you and everyone else is aiming for safe successes instead of high-risk-high-reward gambles, then the let-a-thousand-startups-bloom approach stops being profitable for the investor, so investors can't let that happen. Two, I think the rest of the world - and perhaps even the industry itself - doesn't quite intuitively understand that. If that's really the model, "We have $375M from SoftBank" isn't an indicator of anything, neither to other investors nor to potential employees.
- ganstyles 7y ago
  One: It's really the model. There are almost 200 years of data on VC in the US. That's the model, I promise. Two: It's not as simple as just throwing money at a bunch of random things and hoping one sticks. They work hard to invest in companies they think will make large returns, knowing that despite their best efforts a large portion likely won't. This is intuitively understood. But this more nuanced understanding leads to the conclusion that "[w]e have $375M from SoftBank" is meaningful because they're a successful entity in that space, with subject matter experts, and if they invest in you it indicates you're doing something right.
- paulddraper 7y ago
  > then founders had better stay as far away from venture capital as possible There's always tradeoffs. You seem to think that no VC money is safer, but that not necessarily true. Without capital, you spend 10 years finding out that your bootstrapped robot pizza company is in fact utter garbage. With capital, that would have taken 2 years. > that's not your investor's model And it's not my customer's model either. Or my employee's model. Just because we don't all have the same exact goals doesn't mean we can't create a mutually beneficial arrangement for all parties.
heymijo 7y ago
> But isn't that simply the nature of venture capital? Venture capital isn't a monolith. Investing in pre-seed, seed, or series A rounds are significantly different than coming in as an investor in a later round. For Softbank to whiff so badly on such late stage investments is drastically different than an early stage investor failing with a similar portfolio. The risk and uncertainty profiles are starkly different for the early stage and late stage investor.

OnlineGladiator 7y ago

> Invest in a lot of different things, most of which will fail, and make up for the losses with the Ubers of the world. Ironically, SoftBank is one of few investors to lose money by investing in Uber.

jakemal 7y ago
I wasn't aware of that. So it's a bad example but the idea behind VC investing still stands.
- OnlineGladiator 7y ago
  I understand your point. My point (which I didn't really explain, so that's my fault) is that SoftBank is an especially terrible VC firm - at least when it comes to making money.
- rhizome 7y ago
  Eh, in general, but equating the reasonableness of a fund by the percentage of their total is not sound. $100B can still be dumb money, and inventing valuations as a product of this is actually harmful to actually-viable companies. It sucks the air out with bad money (if you can believe in such a thing). "VC" is not a synonym for "smart money," and "the idea behind VC" being "everybody is betting tho" doesn't explain their outsized presence and outsized effects.
sillysaurusx 7y ago
How did SoftBank manage to lose money by investing in Uber?
- oldgradstudent 7y ago
  Join late at a very high valuation. > “There were many naysayers when SoftBank invested last year at a valuation around $49 billion,” said Chris Lane, an analyst at Sanford C. Bernstein & Co. “The successful IPO of Uber at a valuation anywhere near $100 billion will be a strong validation for SoftBank and its Vision Fund. This is also very good news for SoftBank’s other ride-hailing investments.” Oops. https://www.bloomberg.com/news/articles/2019-04-12/softbank-s-son-stands-to-double-7-7-billion-stake-in-uber-ipo https://www.bloomberg.com/news/articles/2019-04-12/softbank-...
  - dntbnmpls 7y ago
    > “There were many naysayers when SoftBank invested last year at a valuation around $49 billion,” > Oops. But the current UBER market cap is $68 billion. So if softbank invested at $49 billion and now UBER is worth $68 billion, how exactly is that an oops?
  - skinnymuch 7y ago
    The market cap of Uber is higher than the investment valuation.
skinnymuch 7y ago
How? Uber’s market cap is higher than the investment by SoftBank. Plus they had possible deals during IPO.

creddit 7y ago

Their loss in Uber is quite small now, relatively. Uber's stock is back in the $40s approaching the IPO price.

trhway 7y ago
what loss? Looks like Softbank is already making small (by the tech standards) profit (if they had the stomach to make through the trough of course) - $7.6B invested for 220 million shares at the current stock price is more than $8.6B : https://www.cnbc.com/2019/09/03/softbank-more-than-600-million-underwater-on-uber.html https://www.cnbc.com/2019/09/03/softbank-more-than-600-milli... ". The Japanese conglomerate spent about $6.6 billion to buy just over 200 million shares from existing investors, including former CEO Travis Kalanick, at around $32.87 a piece. It provided another $1.05 billion in fresh capital to Uber, buying 21.45 million shares at about $48.77 each."

yaacov 7y ago

That deal valued Zume at $2.25b, which is about 1/5 of the market cap of market leader Dominos. So SoftBank was betting on a >20% chance that Zume would succeed to that degree. This is quite different from traditional VC, which expects much lower probabilities of success in each investment.

tempsy 7y ago

I think part of the problem is how uncritically tech journalism covers these companies pre-scandal. Even call it a "robot" pizza company is strange...I can't imagine that the inside of any factory for frozen pizzas would look that different than what this company was offering.

oldgradstudent 7y ago
> I can't imagine that the inside of any factory for frozen pizzas would look that different than what this company was offering. Very different. Frozen pizza factories are impressively efficient (with decades old tech). Compare random frozen pizza machine https://www.youtube.com/watch?v=7anib2L7uUk https://www.youtube.com/watch?v=7anib2L7uUk with the hilarity that is Zume https://www.youtube.com/watch?v=uFSdxwRVh8A https://www.youtube.com/watch?v=uFSdxwRVh8A
- allovernow 7y ago
  How the hell can people controlling so much money be so ridiculously gullible? WTF did I just watch? A 6 axis factory robot who's sole purpose is to move a pizza 2 feet from a conveyor belt into an oven? Not only that but they're still relying on humans to actually place toppings? And they got $375MM for this bullshit? Serious question: would this investment have been awarded if the cofounder weren't a minority female?
  - deleted 7y ago
    [deleted]
  - delusional 7y ago
    Even worse. It just moved it from one conveyor to another. It could literally be replaced with a corner conveyor.
  - Xorlev 7y ago
    > A 6 axis factory robot who's sole purpose is to move a pizza 2 feet from a conveyor belt into an oven? I have to believe they bought it with the idea of doing much much more but hadn't figured out how. Overall, it seems they knew they wanted to "automate pizza" but really had no idea how. Another comment shows a real pizza assembly line that looks both simple and efficient. Lets talk a minute about their "mobile ovens". WTH do they need 56 ovens for? It seems like assembly still has to happen at a "hub", but how many pizzas do you really need to bake on the way? Maybe a max of 10 for huge orders? > Serious question: would this investment have been awarded if the cofounder weren't a minority female? Lets not go there.

mbesto 7y ago

The economics on the Vision Fund are basically unprecedented. No one has ever managed a $100B "Venture" fund before so the fund economics are basically unknown at this point. That being said, it's much easier to return 100x on a seed fund than it is a late-stage fund. This is basically been proven over and over in the PE world. > I'm not sure if SoftBank is suddenly performing worse than they have been in the past or if people simply just care more about the losses since they had such a major one recently. The only reason people like talking about anything SoftBank is because (1) its so abnormal in the investing world...it's essentially an unproven model, (2) SoftBank's fund is basically "Masayoshi-son made the most significant investing venture bet ever in history with Alibaba and we want to try to do this 100x more" (3) the investing principles are so abnormal (Masayhoshi-son basically has to bless the founder/idea) that it makes for great headlines. Masayoshi-son has proven he can throw he dice pretty well, however the jury is still out on whether this model will actually produce outsize returns.

rrdharan 7y ago
Has he proven that? One successful toss (Alibaba), i.e. a sample size of 1, doesn’t really prove anything does it?
- mbesto 7y ago
  He founded and runs SoftBank which does $81B in revenue. Yahoo/Alibaba are his most famous investments. Here are many of the other ones: https://en.wikipedia.org/wiki/SoftBank_Group https://en.wikipedia.org/wiki/SoftBank_Group

geofft 7y ago

> But isn't that simply the nature of venture capital? Invest in a lot of different things, most of which will fail, and make up for the losses with the Ubers of the world. One, if that's really the model, then founders had better stay as far away from venture capital as possible. Whether your motivation is "change the world"/"deliver on the vision you have" or "make money," that's not your investor's model. Your investor's model is to convince you and a hundred people like you that each of you is special and going to change the world, while expecting only one of you to succeed. Your investor's model is to push you to be Uber-scale even if you're overextending yourself and to convince you that you can do it even if you probably can't, because it's better to let you fail and cut you loose than to let you have a modest and small success that doesn't make a dent in the portfolio. If you and everyone else is aiming for safe successes instead of high-risk-high-reward gambles, then the let-a-thousand-startups-bloom approach stops being profitable for the investor, so investors can't let that happen. Two, I think the rest of the world - and perhaps even the industry itself - doesn't quite intuitively understand that. If that's really the model, "We have $375M from SoftBank" isn't an indicator of anything, neither to other investors nor to potential employees.

ganstyles 7y ago
One: It's really the model. There are almost 200 years of data on VC in the US. That's the model, I promise. Two: It's not as simple as just throwing money at a bunch of random things and hoping one sticks. They work hard to invest in companies they think will make large returns, knowing that despite their best efforts a large portion likely won't. This is intuitively understood. But this more nuanced understanding leads to the conclusion that "[w]e have $375M from SoftBank" is meaningful because they're a successful entity in that space, with subject matter experts, and if they invest in you it indicates you're doing something right.
paulddraper 7y ago
> then founders had better stay as far away from venture capital as possible There's always tradeoffs. You seem to think that no VC money is safer, but that not necessarily true. Without capital, you spend 10 years finding out that your bootstrapped robot pizza company is in fact utter garbage. With capital, that would have taken 2 years. > that's not your investor's model And it's not my customer's model either. Or my employee's model. Just because we don't all have the same exact goals doesn't mean we can't create a mutually beneficial arrangement for all parties.

heymijo 7y ago

> But isn't that simply the nature of venture capital? Venture capital isn't a monolith. Investing in pre-seed, seed, or series A rounds are significantly different than coming in as an investor in a later round. For Softbank to whiff so badly on such late stage investments is drastically different than an early stage investor failing with a similar portfolio. The risk and uncertainty profiles are starkly different for the early stage and late stage investor.