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You're forgetting the other half of SoftBank's strategy: that with a billion dollar cash injection, SoftBank could play kingmaker and decide the winners in any

You're forgetting the other half of SoftBank's strategy: that with a billion dollar cash injection, SoftBank could play kingmaker and decide the winners in any given market. SoftBank didn't just invest a billion dollars because they thought WeWork could win the market, they invested a billion dollars to make them the winners. Which SoftBank would then own the controlling stake of. But, uh, yeah, turns out that didn't quite work. Turns out when you Silicon Valley tech executives a billion dollars, they don't really think too about long-term business plans. And a billion dollars dries up a lot faster than you think.

Lazare 5y ago
Well...yes and no. We can argue about whether Softbanks plan of handing out billions to let tech companies blitzscale and obtain market dominance via first mover advantage and network effects and the power of SaaS economics (good scaling; low capital intensiveness) and so forth was a good idea or not. But WeWork was 1) not a tech company 2) had no hope of obtaining market dominance 3) wasn't the first mover 4) existed in a market with no network effects 5) wasn't a SaaS company but instead was in a capital intensive business that scaled linearly. No part of the Softbank plan applied here! > Turns out when you Silicon Valley tech executives a billion dollars What about when you hand some real estate developers...what did it end up being in the end? $18.5B dollars? (On a similar note, in other markets - specifically ride hailing - Softbank picked multiple competitors in a single market and funded both sides ensuring no single market leader would emerge. Again, even if the core Softbank strategy would have worked, it can't work when you don't even try and follow it.)
- nradov 5y ago
  There was a bit of a network effect. Business travelers could use WeWork office and meeting space in any city, so expanding that network of facilities increased the total value in more than a linear way. But of course that wasn't nearly enough to justify the valuation.
deleted 5y ago
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lambdasquirrel 5y ago
I'd agree with the other opinion here. If you want to decide the winner in the real estate market (i.e. corner it), you're going to need even more money than even what SoftBank was providing. It comes back to what the parent was saying. There's just no getting around the mismatch between the VC model of high-risk, high-growth versus the capital-intensive and low-margin business of real estate.

Lazare 5y ago

Well...yes and no. We can argue about whether Softbanks plan of handing out billions to let tech companies blitzscale and obtain market dominance via first mover advantage and network effects and the power of SaaS economics (good scaling; low capital intensiveness) and so forth was a good idea or not. But WeWork was 1) not a tech company 2) had no hope of obtaining market dominance 3) wasn't the first mover 4) existed in a market with no network effects 5) wasn't a SaaS company but instead was in a capital intensive business that scaled linearly. No part of the Softbank plan applied here! > Turns out when you Silicon Valley tech executives a billion dollars What about when you hand some real estate developers...what did it end up being in the end? $18.5B dollars? (On a similar note, in other markets - specifically ride hailing - Softbank picked multiple competitors in a single market and funded both sides ensuring no single market leader would emerge. Again, even if the core Softbank strategy would have worked, it can't work when you don't even try and follow it.)

nradov 5y ago
There was a bit of a network effect. Business travelers could use WeWork office and meeting space in any city, so expanding that network of facilities increased the total value in more than a linear way. But of course that wasn't nearly enough to justify the valuation.

deleted 5y ago

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lambdasquirrel 5y ago

I'd agree with the other opinion here. If you want to decide the winner in the real estate market (i.e. corner it), you're going to need even more money than even what SoftBank was providing. It comes back to what the parent was saying. There's just no getting around the mismatch between the VC model of high-risk, high-growth versus the capital-intensive and low-margin business of real estate.