SoftBank Vision Fund is using the case of its troubled investment in co-working giant WeWork as a case study for what not to do with other investors, according to managing partner Jeff Housenbold.
Speaking today at online technology conference Collision from Home, Housenbold acknowledged that there had been problems with Softbank Vision Fund’s investment in WeWork, but said that learning from the ordeal was “helping SoftBank”.
“WeWork was an idiosyncratic experience. I think the biggest thing we took away from that was that while you want to have leaders and entrepreneurs, you have to make sure you have the corporate governance,” he said.
“So when entrepreneurs are asking for super majority or super voting controls, we get to point at WeWork as an example why that’s probably not the best thing for the organisation and the rest of the investors. With WeWork, we certainly learned that lesson around governance,”
SoftBank has directly invested a reported $18.5bn in WeWork, however its support has attracted growing concern, particularly over a lack of profitability and questionable financials at the startup.
This came to a head this year with the pandemic, which saw SoftBank reduce its valuation of WeWork from $47bn in 2019 to just $2.9bn in May this year. SoftBank CEO Masayoshi Son has also branded the investment “foolish”.
WeWork also announced it was suing SoftBank over its decision to withdraw a $3bn tender offer in April.
SoftBank Vision Fund reported losses of $18bn in May, in part due to the collapse of WeWork’s financials, prompting Alibaba’s Jack Ma to step down from the board.
Despite problems, SoftBank remains positive about WeWork
However, despite the myriad issues SoftBank Vision Fund has had with its investment in WeWork, Housenbold highlighted that the co-working giant is beginning to show positive signs.
“The business announced earnings just yesterday, and for the first time they surpassed a billion dollars in quarterly revenue. Revenue was up 45%. year over year; cash flow was up at significantly: 60% improvement quarter over quarter,” he said.
“Our financial position remains strong there, they have close to $4bn of cash in cash commitments, memberships increased almost 50% year over year. So even with Covid and with kind of right-sizing the business, the value proposition still remains strong.
“And as people are going to think about having more dynamic and flexible workspaces and thinking about distancing people and having more satellite regional offices, we do think that WeWork will be well-positioned from the stay-at-home and shelter-in-place to back-to-work environment.”