How softbank is ruining startup ecosystem!!
Softbank has helped entrepreneurs to build empires over a good period of time. and due to this success portfolio, many big companies such as apple and even countries like saudi arabia has given their money to mr son to invest according to him. In softbank’s portfolio there are many world leading companies including Alibaba and yahoo. in 2000s, bubble burst mr son lost a considerable amount of wealth. He invested a good amount in internet companies, some of them were generating very few dollars in revenue but still softbank gave them a good valuation along with good funding and the dust flew alway as burst happened.
- Softbank learned a lesson but not completely
After 2000s bubble burst, softbank accepted that it was their mistake to overvalue startups and will not repeat again. Then they made one of most successful investment in mankind history. They invested 20m USD in Alibaba Group which gave them a return of 60B USD when alibaba went public. During this period, from 2000–2014, softbank invested good money in startups. In this time softbank had a lesson which stopped them many times in making more mistakes. but after alibaba’s success, mr son wanted one more alibaba which led them to start a new age of ruining the both, their money and startup ecosystem.
2. Finding new alibaba & Ruining startup ecosystem
After alibaba’s success, mr son again has the craze to drive another 2000s burst. Mr Son again heavily invested large amount with large valuations. He was so obsessed with identifying the next Alibaba early that he happily wrote hefty checks to startups with no viable business model. softbank invested large in many startups which never took off such as @Slack , @Katerra , @Zume Pizza, Wag and many more. these startups’ business model was not viable enough to invest that much amount but still he did. In these attempt softbanks missed many big spots including tesla’s investments.
3. Biggest problem in Softbank’s vision fund is their vision.
Softbank pressurise startups to expand rapidly and after doing so, they ask them to become profitable soon. and then startups expand rapidly but it takes time to become profitable in this high competition market. After softbank’s several pressures they change some business model essentials and start their way of being profitable, then they file for IPO with wrong prospectus and public investors seems not to be interested in that. Result, a good startup which could do great at the time of IPO and forward, has to take back their IPO. Uber, WeWork New York, OYO Rooms, @Snapdeal, Olacabs are some examples of such cases where Softbank pressurised the startups to expand rapidly and then they got a bad response from public investors, which is not only affecting their portfolio startups but it is disturbing competition startups too. Softbank is disturbing startup ecosystem by acquiring startup’s entity in Japan and then leaving it off, similar to OYO Japan and wework’s Japan chapter.
Softbank should also do research in consumer behaviour in the respective field of startups in which they are investing and should take time in deciding when to expand and how to become profitable. Taking broader decisions in startup ecosystem is great but trying to get different results from same practice is foolishness. Softbank has crashed SVF-1 in chance of finding next alibaba but during this they admit that they have wasted more than 10B USD and given inflated valuations to non-deserving startups. Since the investments have good role in any country’s economy, it has to be done with better authority and analysis.
