In the last 4-5 years, Softbank basically caused hyperinflation in the startup world.
SoftBank to take control of WeWork: Sources
71–80 of 188 posts
Re: SoftBank to take control of WeWork: Sources
#72It's very difficult to see how SoftBank breaks even on this new deal. They're investing $5bn now, with the hope that it's worth more than that when they IPO, but several things have killed that idea. Firstly, their brand is tarnished. Secondly, the growth play will be gone by the time they IPO. Thirdly, the charismatic leader is gone, so the message of "Disrupting" and "We're a tech play' is gone. They've put $5bn in…
What if they are just trying to stem a contagion effect spreading to their other investments. Their other investments are a lot better but the retail market can be very irrational when there is bad news.
Re: SoftBank to take control of WeWork: Sources
#73I don't really get the ongoing obsession with We/Softbank. I kind of got the whole schadenfreude side of it when it all came tumbling down but now it's just turned into a story of a big company trying to dig itself out of a hole created by some dumb decisions it made.
Is there some larger relevance that I'm missing?
Re: SoftBank to take control of WeWork: Sources
#74how on earth does a company go from getting ready to IPO to being cash-strapped and needing an infusion in such a short space of time?
Never saw the numbers in the prospectus, but surely there was some indication?
Re: SoftBank to take control of WeWork: Sources
#75I don't really get the ongoing obsession with We/Softbank. I kind of got the whole schadenfreude side of it when it all came tumbling down but now it's just turned into a story of a big company trying to dig itself out of a hole created by some dumb decisions it made. Is there some larger relevance that I'm missing?
For one thing, I'd argue it's important for startups to understand how Softbank behaves as an investor, since they are a fund many companies might consider taking money from. They have an outsize quantity of capital to invest, so this is more worth watching than other funds' behaviors might be.
Re: SoftBank to take control of WeWork: Sources
#76Earlier quoted context omitted.
Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market. ------ Sure, but $20B valuation seems hard to achieve. US commercial real estate market by revenue is ~$1.1T [0] Office…
Don’t you need to multiply that 22B by 30, or did you get all of those references but you don’t understand the difference between profit and valuation...
you're right, apparently multiplying is hard! I first decided to make my back of napkin calculation (forgot to include the PE ratio) then wrote the post. I've amended it now.
Re: SoftBank to take control of WeWork: Sources
#77Earlier quoted context omitted.
> They are continually sold to new owners because nobody knows how they can generate a profit. They were founded in 1992, were bought by Google and then sold to Softbank. I don't think that qualifies as "continually sold", particularly when the buy-and-seller was Google. I'm not as negative on Google's acquisition strategy as many here, but Google selling companies a few years after acquisition is hardly unheard-of.
Fair point, the way I said it exaggerated the issue. But I still think any company sold more than once has an issue. Boston Dynamics was first sold to Google, and then sold to Softbank - so they meet my criterion.
As far as I understand, the reason why Google sold Boston Dynamics was not because it wasn't able to make a profit, but because the obvious way how it would make a profit - military contracts - were not considered strategically acceptable.
Re: SoftBank to take control of WeWork: Sources
#78Earlier quoted context omitted.
Which is still to my point: Softbanks Vision Fund model is not proven yet. It is just as probable it is more a vehicle to find a place for Middle Eastern money to sit than a true 10x fund strategy, which is becoming more evident since they're already working on Vision Fund 2. Requiring Gitlab doesn't translate into requiring office space either.
Back of a napkin: * Growth in remote workers = 9% per year. * Percentage of remote workers who want an office = 20%. * WeWork market share = 90%. = 1.62% of all workers each year will potentially shift to WeWork.
You think 9% of all workers will switch to being remote every year starting now? By that logic, there won’t be any non-remote workers left in 15 years. The current number is only about 3% [1], so a more reasonable growth number (although still large) is 0.25%, which means (by the rest of your numbers), only 0.045% of all workers (in the US) each year will switch to WeWork.
[1]: https://smallbiztrends.com/2018/04/2018-remote-work-statisti...
Re: SoftBank to take control of WeWork: Sources
#79Earlier quoted context omitted.
They basically bought control of the company for ~$15B. Any valuation north of $20B ought to put them in the black.
Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market. ------ Sure, but $20B valuation seems hard to achieve. US commercial real estate market by revenue is ~$1.1T [0] Office…
[deleted]
Re: SoftBank to take control of WeWork: Sources
#80Earlier quoted context omitted.
Which is still to my point: Softbanks Vision Fund model is not proven yet. It is just as probable it is more a vehicle to find a place for Middle Eastern money to sit than a true 10x fund strategy, which is becoming more evident since they're already working on Vision Fund 2. Requiring Gitlab doesn't translate into requiring office space either.
Back of a napkin: * Growth in remote workers = 9% per year. * Percentage of remote workers who want an office = 20%. * WeWork market share = 90%. = 1.62% of all workers each year will potentially shift to WeWork.
> * WeWork market share = 90%.
I think that's where the error lies. WeWork has no lock-in, there's no good reason to choose them over a competitor and it doesn't take much capital to start a local competitor (and there are many already).
I was looking at offices like this recently and the most important factor was being close to home which had local competitors. When I look at WeWork locations, they're mostly in the CBD, so they're not even attracting anyone with a local office.
It's not even a new business model, just SV hype.