SoftBank Crisis - Startup | Startup Info
SoftBank is a well-known name in India since 2014. The name has become so popular in India because of its aggressive investment in Indian Startups. Let's take a look at the rise and fall of the SoftBank.
The Beginning
SoftBank has started in 1981 by Masayoshi Son at the age of 24. SoftBank was in the business of computer parts at the beginning. Then it has shifted its business to publishing magazines and started publishing Technology & Computer magazines. Very soon SoftBank became the market leader of the Technology & Computer magazines.
In 1996, SoftBank joined hands with Yahoo and launched Yahoo Japan which very soon became the most used search engine in Japan.
Because of the dot com boom during 1996-2000, SoftBank shares surged high because of which SoftBank valuation jumped to USD 200 bn and Masayoshi Son became the richest person in the world. Once the dot com boom started to burst SoftBank valuation dropped to USD 2 bn and the net worth of Masayoshi Son declined by 99%.
The Rise
In 2000, SoftBank has invested USD 20 mn in Jack Ma lead Alibaba whose current value is about USD 50 bn to USD 70 bn. After the dot com bubble burst, SoftBank has launched it's VisionFund 1 of USD 100 bn in which SoftBank takes money from investors and invest in Startups.
A major investment of SoftBank goes to Uber, Slack, WeWork, Flipkart, OYO, DiDi, Ola and others. SoftBank has earned a good return from Flipkart & Nvidia of USD 1.3 bn & USD 2.6 bn respectively.
The Fall
Like the saying, everything that goes up has to come down. SoftBank VisionFund 1 has invested a lot of money in WeWork. In August 2019, WeWork planned to launch its IPO at a valuation of USD 45 bn on paper. But the public investors did not see a sustainable business model which resulted in declining WeWork Valuation at around USD 8 bn within 2 months. So many people loosed trust in paper valuation. Recently WeWork has reported a loss of USD 1.25 bn.
Also, investment in Uber is a loss-making investment for SoftBank as the loss of Uber increasing every quarter. Recently Uber has reported a loss of USD 1 bn.
Almost every startup in which SoftBank has invested is in loss due to very aggressive expansion and cash burning. Now Uber, Ola, Swiggy, Zomato, OYO are also in losses not in millions but billions. Ola has reported losses of INR 2,842 crore which is around USD 1 bn.
SoftBank has reported a loss of USD 6.5 bn and USD 8.9 bn in the last two quarters of 2019. And SoftBank is selling assets of USD 41 bn to recover from the losses.
Because of the fall of SoftBank, Indian startups will be facing a huge cash crunch which will impact hugely on jobs which we will be getting into, in our next blog post.
Thank you for reading.
Because of the fall of SoftBank, Indian startups will be facing a huge cash crunch which will impact hugely on jobs which we will be getting into, in our next blog post.
Thank you for reading.