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SoftBank’s Big Bet on WeWork Could Turn Sour: Term Sheet

WeWork’s decisions ahead of its initial public offering have far-reaching effects.
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WeWork’s decisions ahead of its initial public offering have far-reaching effects.

As the co-working behemoth contemplates listing on the public markets at a far lower valuation that previously expected, its biggest backer⁠—SoftBank—is bracing for a potentially staggering loss. This is a stark reminder of the risks of an investing strategy that inflated startup valuations across Silicon Valley.

SoftBank has a roughly 29% stake in the We, the parent company of WeWork, said one executive at an analyst call on Wednesday, after the company plowed a total of $10.65 billion into the startup. The Tokyo conglomerate’s massive stake is a vote of confidence in the unprofitable company, which lost about $1.61 billion last year.

Yesterday, we noted that WeWork was reportedly considering seeking a valuation of about $20 to $30 billion in its IPO. Those figures would mark a significant decline from the $47 billion valuation WeWork achieved this year thanks to an investment from SoftBank. The New York-based company is now said to be considering a market debut at just $20 to $30 billion, fueling tensions among SoftBank employees.

From Fortune:

The WeWork IPO comes at a critical time for SoftBank, which is currently trying to convince investors to bankroll a second $108 billion iteration of its Vision Fund. The company is already mopping up the fallout from another poorly performing IPO. SoftBank put $7.7 billion into Uber, whose market value promptly fell after shares listed publicly at $45 in May. That price has since fallen to about $35, well below the price SoftBank paid for part of its stake.

Some staffers at the Vision Fund are now concerned that WeWork’s valuation could fall further, to even below $20 billion—the valuation of SoftBank’s original investment made by the Vision Fund,according to people familiar with the company who asked not to be identified discussing private matters. Because the Vision Fund is so exposed to WeWork, it will play a substantial role in compensation for employees of the fund. People at the Vision Fund are not paid on a deal-by-deal basis, as with some other venture firms. Vision Fund employees, including high-profile bankers and investors, receive base salaries and bonuses, but only get payouts when profits are booked. They are also on the hook for potential losses, facing clawbacks of 20% and above for some senior staff, and 7% for more junior employees.

Read more.

NEW UNICORN: Getaround, a San Francisco-based used car marketplace, is a freshly minted unicorn. The company raised approximately $200 million in funding at a valuation of $1.7 billion, according to Pitchbook. In total, Getaround has amassed more than $400 million in total funding from investors including SoftBank, GV, Madrona Venture Group and Ashton Kutcher.

TWO FUN THINGS: Since it’s Friday, I wanted to share two things I found amusing this week.

1. Crypto Rap Battle: Greylock’s Reid Hoffman has invested in crypto-focused companies including Coinbase, Xapo, and Blockstream. In a LinkedIn post, Hoffman explained that he is interested in cryptocurrency as an asset, a currency, and a platform.

So he helped produce a Hamilton-inspired rap battle video about the cryptocurrency debate. Like I told my colleague, I really thought I wasn’t going to like this, but it’s actually really good. Watch the rap battle video here.

2. The Billion-Dollar Major: If you went (or plan to go to Stanford), you’ll enjoy this “How to Major in Unicorn” article. It’s a “cynic’s guide to killing it at Stanford.” (As someone who went to a public school in the South, I had literally not a single time thought about “venture capital” in the entirety of my four years, but props to you guys for starting early.)

Here are some tips:

— If you’re emulating … Reid Hoffman (LinkedIn), Marissa Mayer (Google, Yahoo), or Mike Krieger (Instagram) ➽ Symbolic systems is for you. (Yes, that’s a real major, mixing big-picture theory and programming practice)

— “A few years ago, half the school had a SAVE THE SHIRE Palantir T-shirt even if we knew nothing about the company, just because they were giving them out for free so much.”

— “I’m pretty sure I’ve heard of more friends starting companies than have gotten mononucleosis.” —Julian Alvarez, class of ’17, M.A. in philosophy ’19

SIGN UP FOR THE LOOP: Fortune launched a new newsletter on the business of sustainability called The Loop. You can check it out and sign up here.

VENTURE DEALS

Grove Collaborative, a San Francisco-based company that sells natural household and personal care products, raised $150 million in Series D funding at a valuation of more than $1 billion. Lone Pine Capital, General Atlantic, and Glynn Capital co-led the round, and were joined by investors including Greenspring Associates, Norwest Venture Partners, Mayfield Fund, NextView Ventures, MHS Capital, and Heron Rock Capital.

Happy Money, a Costa Mesa, Clif.-based fintech company to help customers save money, raised $70 million in Series D funding. CMFG Ventures led the round.

BigID, a New York-based data-centric personal data privacy and protection company, raised $50 million in Series C funding. Bessemer Venture Partners led the round, and was joined by investors including SAP.io Fund, Comcast Ventures, Boldstart Ventures, Scale Venture Partners, ClearSky, and Salesforce Ventures.

Olivela Inc, a San Francisco-based e-commerce company, raised $35 million in Series A funding. Morgan Stanley & Co. International led the round.

Even Financial, a New York-based API for financial services search, acquisition, and monetization, raised $25 million in funding. Citi Ventures led the round, and was joined by investors including MassMutual Ventures,LendingClub, American Express Ventures, Canaan Partners, F-Prime Capital, GreatPoint Ventures, and Goldman Sachs.

Ori Inc, a Boston-based maker of robotic interior products and systems, raised $20 million in Series B funding. Investors include Sidewalk Labs, Ingka Group, Geolo Capital and Khosla Ventures.

Cogito, a Draper, Utah-based relationship analytics software solutions, raised $20 million in funding. Investors include New York Life Ventures,Salesforce Ventures and Goldman Sachs Growth Equity.

Gambling.com Group Plc, a Malta-based performance marketing company in the online – gambling industry, raised $15.5 million in funding, from Edison Partners.

Fieldin, a Fresno, Calif.-based and Israel-based provider of a farm management platform, raised $12 million in funding. Zeev Ventures led the round.

Health Recovery Solutions, a Hoboken, N.J.-based provider of a remote patient monitoring platform for health systems and home care agencies, raised $10 million in funding. Edison Partners led the round.

Dapix Inc, the company behind the development of the FIO Protocol, raised $5.7 million in Series A funding. Binance Labs led the round.

Aural Analytics Inc, a Scottsdale, Ariz.-based digital health company focused on building an advanced speech analytics platform, raised $4.3 million in funding. Morningside Ventures and Tamarisc Ventures led the round.

HEALTH & LIFE SCIENCES DEALS

Repare Therapeutics, a Montreal and Boston-based precision oncology company, raised $82.5 million in Series B funding. Cowen Healthcare Investments led the round, and was joined by investors including OrbiMed, Redmile, BVF Partners LP, Logos Capital, Versant Ventures, MPM Capital, Fonds de solidarité FTQ and BDC Capital.

iSTAR Medical SA, a Belgium-based developer of ophthalmic implants for the treatment of glaucoma, raised 40 million euros ($44 million) in Series C funding. LSP and Gimv led the round, and was joined by investors including Earlybird, BNP Paribas Fortis Private Equity, Capricorn Partners, Walloon Region Investment Fund and Belgian Federal Investment Fund.

PathoQuest, a Paris-based genomic company focused on the microbiology testing market, raised 8 million euros ($8.8 million) in funding. Investors include Kurma Partners, Idinvest Partners and Charles River Labs.

Sigrid Therapeutics, a Sweden-based developer of a device to lower blood sugar levels, raised $1.6 million in funding. Joyance Partners and Pär Gellerfors led the round.

PRIVATE EQUITY DEALS

Permira made a “significant” investment in Axiom, a New York-based provider of tech-enabled legal, contracts, and compliance solutions for large enterprises. Financial terms weren’t disclosed.

Fortissimo Capital made an investment in Polytex Technologies, an Israel-based developer and manufacturer of systems for garment management in hotels, healthcare institutions, fitness centers and manufacturing sites. Financial terms weren’t disclosed.

The Riverside Company invested in TOOLPORT, a Germany-based online provider of professional tents and spare parts for the consumer and industrial markets. Financial terms weren’t disclosed.

OTHER DEALS

Alibaba will acquire Kaola, a cross-border e-commerce business unit, from NetEase for about $2 billion. Read more.

Bigtincan acquired AsdeqLabs, an Australia-based platform that provides support for field-based employees and mobile service capabilities. Financial terms weren’t disclosed.

IPOs

Metro Pacific filed for an 83.3 billion peso ($1.6 billion) IPO of its hospital unit, the largest hospital chain in the Philippines. Read more.

Verallia, the French glass bottle maker had begun the process for an IPO in Paris. Apollo backs the firm. Read more.

Yitu Technology, a Chinese artificial intelligence startup, is considering an IPO on Shanghai’s new tech bourse, Bloomberg reports, citing people familiar with the matter. Sequoia China backs the firm. Read more.

EXITS

Acquia acquired Cohesion a U.K.-based website builder. Financial terms weren’t disclosed. Cohesion had raised approximately 910,000 pounds ($1.1 million) in venture funding. Investors include Calibrate Management.

Advarra agreed to acquireForte, a provider of standards-based clinical research technology solutions for major academic medical centers, cancer centers, and health systems. Financial terms weren’t disclosed. Forte had raised approximately $950,000 in venture funding from investors including Primus Capital Partners and Madison Development Corporation.

FIRMS + FUNDS

Signia Venture Partners, a Menlo Park, Calif.-based venture capital firm, raised $85 million for its third early-stage fund, Signia Venture Partners III.

PEOPLE

Waud Capital Partners named Matthew Albers as vice president.

Linus Liang was promoted to partner at Signia Venture Partners.

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