A Chicago real estate agent was unable to access basic marketing materials after joining brokerage Compass. A hotel owner in India is facing eviction after hospitality startup Oyo stopped making payments. And an employee for Rappi, a Colombian delivery startup, was told he would need to buy a new phone after he was robbed on the job.
These people are among those sidelined by startups backed by SoftBank’s $100 billion Vision Fund, which provided them with immense sums of capital and a simple mantra: grow as fast as possible. Those startups have grown at breakneck speed with little oversight or regard for corporate governance, according to the New York Times.
WeWork and Uber, the two most prominent examples of SoftBank’s bets going awry, have provided a window into how the Japanese conglomerate has inflated the value of startups with profound consequences.
This fall, WeWork abandoned plans to go public after investors refused to accept its $47 billion valuation, and its charismatic CEO Adam Neumann left the company after SoftBank paid him more than $1 billion. SoftBank was forced to provide the company with a $9 billion lifeline to salvage it from potential bankruptcy. At Uber, the ride-share startup had an underwhelming IPO and recently posted losses of more than $1 billion.
Since these companies have floundered, some have begun to look at early warning signs in other startups backed SoftBank’s Vision Fund, which has invested in 88 companies.
Rappi, a Colombian startup received $1 billion from SoftBank and contracts delivery drivers in nine Latin countries. The company does not provide insurance or safety equipment such as a helmet to protect riders, who earn $1 per delivery. Dozens of riders have been injured.
Compass, which is valued at $6.4 billion thanks to large investments by SoftBank, has recently faced tough questions about its parallels to WeWork. According to the Times, Chicago broker Tricia Ponicki joined the firm after being offered generous incentives, but made just one deal this year. She has returned to former brokerage @properties, where she used to annually pull in $100,000.
Another firm, Oyo, a $10 billion Indian startup founded by a 19-year-old in 2013, has also been propped up by the Vision Fund. In some cases, it has stopped paying hotel owners, to whom it directs customers, forcing them into financial hardship. [NYT] –– David Jeans