Masayoshi Son’s first Vision Fund is packed with deals now amassing billions in losses and plunging stocks into the red – including Softbank’s.
Softbank still aims to raise a sequel fund to the Vision Fund, and CEO Masayoshi Son and Softbank Investment Advisors CEO Rajeev Misra are reshaping its investment strategy and public messaging.
This leaves Softbank’s global portfolio of apps into an uncomfortable position – the ‘cans’ and the ‘cannots.’ That is, the now-public companies (and, the one Softbank was forced to acquire at a deep discount in order to salvage), the ‘cannots,’ who likely cannot raise any new capital, and the ones that are still private, and ‘can’ sell equity to raise new rounds of capital from other investors. Many may need to do so, in order to maintain viability, losses or not.
Those that beefed up valuations under Son’s first Vision and that now public are in the uncomfortable position of needing to achieve profitability on a very short runway, pare down, or fail.
Certain apps are beginning to show a leveling-off in engagement, at a critical time. Thinknum Alternative Data tracking Uber Eats reflects this. Data tracks rating count over time, a signal of how often a brand is able to engage with users. Since summer 2019 began, it appears engagement with Uber’s food delivery app began to slow.
Uber’s shares hit a peak of nearly $47 each earlier this year, and have fallen more than 41% since. Leading up to the Uber IPO, Softbank stock rose more than 70%, hitting a high in early May, a week before the ridesharing company’s public market debut; in the time since its stock has given up nearly all of its gains.
The good news for Uber, and for its food delivery subsidiary, is that with a rating of roughly 4.95, its Apple Store rating is about as high as an app can get.
It is a common trend among big startups reading a public listing that they’ll trim some job postings as they get ready to make their big debut. WeWork did this, and was forced to keep slashing job postings, as it proved unable to manage the IPO runway and effectively fell into Softbank’s arms in a rescue financing deal.
Over the course of 2019, WeWork job postings are down 75%, with the deepest cuts coming in recent weeks as the grim realization set in that it would achieve neither an IPO, nor a valuation of nearly $50 billion.
Job postings are a very reliable source as an alternative data gauge of a company’s growth plans – especially when they can be narrowed down into specific categories, and to highlight roles or regions where leadership has identified expansion opportunities. Similarly, Slack, which made its direct listing debut earlier this year, has seen job postings fall 35% from their peak to early November, as the messaging service’s share price fell nearly 50% from highs.
For some of Softbank’s other venture deals, there remains a light at the end of the tunnel – at for those that manage their growth better than some of the Vision Fund’s largest deals. Oyo Rooms’ alternative data signals growth potential. Other Vision Fund investments – like Clutter and Cybereason – have steadily grown headcount, according to external data gathered from companies’ LinkedIn staff counts tracked by Thinknum Alternative Data.
And after a rough ride on public markets, some of these startups may yet still be able to reap continued cash infusions from Softbank, which appears increasingly reliant on its growing digital portfolio for its profits as a public company. Son sounds like he is rethinking some of his strategy.
“Companies like WeWork, Slack and Uber, looking at those companies, the timing of IPO, shouldn’t we be more careful and cautious about timing of IPO?,” reflected Son on Softbank’s earnings call in early November. “I’m beginning to think that way.”
