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VC & PE News for January: SoftBank, WeWork, and Slack

SoftBank Drastically Reduces Investment in WeWork

Despite initially pledging $16 billion for investment in WeWork, SoftBank invested a mere fraction of that amount—$2 Billion—in the workspace-sharing startup this month.

An overall decline in tech stocks at the end of 2018 and massive losses by WeWork both led to SoftBank making a much lower investment than previously intended. Regardless, $2 billion is no number to shake a stick at. For current investors in WeWork, Softbank’s involvement gives real hope that the company can turn itself around.

Founded in 2010, WeWork’s idea was simple: provide a mutual coworking space for entrepreneurs that provided snacks, drinks, internet, office furniture, equipment like photocopiers, and supplies. In fact, WeWork expanded to 425 locations worldwide before experiencing issues with finances.

One of the main reasons for WeWork’s financial struggles was an all-too-rapid expansion that far exceeded revenues. In Q1, Q2, and Q3 of 2018, WeWork barely broke even, losing $1.22 billion and generating just $1.25 in revenue.

Years earlier, WeWork had garnered investment from JP Morgan, Goldman Sachs, and Softbank itself. At that time, Softbank’s investment valued WeWork at $42 billion, setting Adam Neumann’s (WeWork’s CEO) remaining stake in the company at $2.5 billion in value.

Regardless of huge past valuations and investments, it still remains to be seen in WeWork can finally turn a profit. In Q1 of 2018, the company reported a loss of $723 million.

Slack Follows in Spotify’s Footsteps

Early last year, Spotify took an alternative route towards going public: making a direct listing. While releasing an IPO is the typical course of action for private companies wanting to reach public markets, direct listings have become more common in recent years.

Why? Because companies like Spotify and Slack are already well-known by the general public; they don’t need to market or advertise themselves to bankers. Simply by the names, “Spotify” and “Slack,” these tech juggernauts are recognized and respected by potential investors.

One of the main issues with Slack choosing a direct listing has to do with timing. In contrast with the traditional IPO route, direct listings involve much more “direct” involvement with the SEC. And with a government shutdown currently underway, it’s hard to say when they’ll open their doors again for business.

Originally slated for Q1 2019, Slack’s plans of going public appear to be on hold until everything settles down in Washington.

At Apogee Accelerator Group, we provide business acceleration services for companies seeking Series A to Series C funding. To learn more, please visit our page.

Written by Corey Singleton

"As a business owner, I put big money into sales and marketing without ever really knowing what results I was going to get. Tired of this ambiguity, I decided to create a new kind of sales support company: one that provides a guarantee.

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