Son gives ‘public lesson’ to founders in WeWork ouster
TOKYO: Masayoshi Son, long known as a free-spending benefactor who encouraged startup founders to pursue their dreams even if it meant losing money, had a different message for entrepreneurs last week: Your dreams had better be profitable.
The chief executive officer of Japan’s SoftBank Group Corp. told company leaders gathered at the five-star Langham resort they need to become profitable soon and stressed the importance of good governance, according to a person who attended the event. Public investors aren’t going to tolerate gimmicks, like supervoting rights or complicated share structures, that privilege founders over other stakeholders, he said, adding they should get in shape years before they consider going public.
The “or else” part of the message became clear just days later when SoftBank led the ouster of WeWork’s controversial co-founder Adam Neumann. The co-working giant’s plans to go public this month imploded, with investors balking at paying a premium for a money-losing real estate venture controlled by an eccentric founder. More WeWork executives with close ties to Neumann quickly followed him out the door.
The messy, high-profile coup tarnishes Son’s reputation for picking winners. But Neumann’s removal also shows a new side of Son—an investor willing enforce the kind of discipline that public investors demand at his portfolio companies. “It’s a very public lesson for all the entrepreneurs,” said Chris Lane, an analyst at Sanford C. Bernstein & Co. “No one will want to be Adam.”
A spokeswoman for SoftBank declined to comment on the private event.
Son, the smiling billionaire with a 300-year vision and a goal for his portfolio companies to create “information revolution-happiness for everyone,” has been considered founder-friendly for decades. In 1995, he wrote a $2 million check during his first meeting with Yahoo! co-founder Jerry Yang. Five years later, he invested $20 million in Jack Ma’s Alibaba Group Holding Ltd, a stake that’s now worth more than $100 billion.
That was just a warm-up for his unprecedented $100 billion Vision Fund, raised in 2017. It’s since put money into more than 80 companies a dizzying array of sectors, from ride-hailing and genomics to vertical farms and satellites. In June, Son claimed his returns were 62% so far. But Silicon Valley venture capitalists were quick to cite WeWork as evidence of SoftBank’s failures.
“Welcoming all the converts to the SoftBank is horrible position,” wrote one VC on Twitter.
For entrepreneurs who gathered in Pasadena last week, the lessons of WeWork are only now becoming clear. Among the portfolio companies that have yet to go public are ride-hailing giants Didi Chuxing and Grab and Indian finance startup Paytm. But even as his lieutenants were laying the groundwork for Neumann’s ouster, Son took the stage to tell entrepreneurs that daring and ambition are still a winning formula.