Masayoshi Son-Funded Start-Ups Not Going 'Soft' On Employees
With Vision Fund II in sight, Softbank's portfolio companies in India and across the world are cutting jobs in order to reduce losses and shore up investor sentiment.
A year ago, Masayoshi Son was one of the most prolific investors in the world. Softbank made investments in companies that saw rapid, unprecedented growth, almost each of them regularly in the public eye for one reason too many. With the world's largest technology-focused venture capital (VC) fund that had a $100 billion corpus and a reputation behind him, Son had the global start-up ecosystem swooning over.
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Now, a year later, that famed repute of old has been replaced by an image that neither reflects well on the man or his vision. Several of his investments, most notably real estate unicorn WeWork, have seen their business models being questioned, raising questions over whether some of them could ever taste profit.
In India, where the start-up ecosystem is perhaps moving at a faster clip than ever before, the debacle around WeWork's failed initial public offering has put focus on investments such as hospitality unicorn OYO, founded by Ritesh Agarwal, whose highly publicized success story is still a matter of inspiration. Softbank's portfolio companies in recent times have come under intense pressure to cut down costs and create definitive paths towards positive bottomlines.
Severe Pullback
OYO, whose last fundraise took its valuation to $10 billion, has announced a slew of job cuts in India and China. Several news outlets have reported the number to be in excess of thousands.
Earlier this month, Bloomberg reported that the company has let go of 12 per cent of its 10,000-strong workforce in India, citing people familiar with the matter. It plans to cut 1,200 more jobs over the next four months, the report said.
Having invested more than $1 billion in the Gurugram-headquartered start-up, Son and Softbank finally seem to be pulling back on the rapid scale that the company has managed to achieve with the constant flow of funds. For fiscal 2019, OYO posted a loss of INR 2,384.69 crore, compared with INR 360.43 crore the year earlier.
Three days ago, in a LinkedIn post that has since gone viral, one OYO employee who lost his job talks about his reason for joining the company and how he had not been able to get a reply from Agarwal.
Laid off from the Delhi hub, the man posted a letter to Agarwal explaining his motives for moving from Byju's, another Indian Unicorn, to join OYO last August. According to him, none from the human resource team could give him the basis on which the job loss occurred.
The job cuts, however, are not limited to OYO alone. Another Softbank-backed company, the ride-hailing Unicorn Ola is also cutting off 350 jobs in India, The Economic Times reported in November. Separately, Entrackr reported the same month that Paytm, the company which has been at the forefront of India's digitization of payments, was cutting off 500 employees.
Layoffs at start-ups funded by Son are happening across the world, including in the likes of robotics pizza company Zume and Latin American food delivery company Rappi. WeWork, which started it all, slashed 2,400 jobs or about 20 per cent of its global workforce in November.
This push for companies to cut down losses also comes at a time when Son is trying to raise money for Vision Fund II, with a target of a $108 billion corpus, according to reports. Reports have also suggested that its biggest backer for the first fund—Saudi Arabia's Public Investment Fund—might pull out until the first one's portfolio is back in good shape.
