Startup investing is by definition investing in loss making companies with a hope and wish that they can scale and build a moat fast enough that the startup can become a roaring success.
However, there is a thin line between taking much needed risk for innovation vs investor profligacy. Usually when easy financing is available, startups get funded for hype. We are tracking stories and lessons learned from these stories out of our own interest to both serve as a reminder and learn the lessons for the next startup story.
2023
Bird: Once high flying scooter startup and valued at $2.5bn files for bankrupcty under chapter-11. Bird Canada and Bird Europe are not part of the bankruptcy filing.
Since inception, Bird's riders have taken 300million miles globally. Last mile-transportation continues to be a challenge.
Hopin - The virtual event darling, founded by Johnny Boufarhat, touched almost $8bn in valuation, and counted top-investors who never held any meaningful stake. None of the investors had a large enough share to push for critical decisions, and the pandemic fuelled growth allowed the founder to cash over $150million without giving an exit to investors.
The company made some savvy acquisitions, while at the same time raising 20x times in valuation of the acquired companies. Investors threw away all investor discipline in allowing the founder cash in generation-level wealth, not owning meaningful stake, and in most cases no board seats. The whole story played during the pandemic and is one of the best beneficiaries of the pandemic boom.
The in-depth Sifted take on Hopin: https://sifted.eu/articles/was-hopin-really-such-a-failure
InFarm - Berlin HQed vertical farming startup raised $500m+ funding and valued at more than $1billion. Quietly disappeared in late 2022 and 2023.
The company followed the startup mantra, "fake it until you make it". Sold strawberries before they were ready, generated €8m revenue on €127.8m loss in 2021. Eventually, ended up disappearing without much of a flutter. It is to be noted much of the fundraising for the startup happened during absolute boom in 2018s to 2020s.
The Sifted in-depth story on InFarm: https://sifted.eu/articles/infarm-raised-500m-and-disappeared
2022
WeWork - valued $47 billion in 2019 filed for bankruptcy in the US in 2022. The company is one of the cases where the founder made tons of money and the investors were left holding the losses. WeWork founded by a great story teller, Adam Neumann, the company took long-term leases and rented "cool" and temporary real estate offices for companies. Startups moved-in, and some large companies as well.
A lot of people had doubts about long-term leases for short-term rents. But then Masayoshi Son (Softbank) happened. His $100billion fund made deals by the gut, and Adam Neumann impressed Mr Son. Mr Neumann later fell out of favor, the company's lossses kept mounting, and Mr Neumann cashed out at many instances, including when he was ousted as the CEO. Much of the investments came from Softbank, and much of the losses were taken by Softbank. It's an incredible story, and is still playing out.
If we were to describe the WeWork story: Low interest rate environment, large fund, two personalities Mr Neuman and Mr Son. This made for a great story, and possibly a yet to be made, great movie.
Softbank loss: $14bn+. Mr. Son's reputation not accounted for.
The timeline, dubbed one of the worst investments in history: https://www.dailymail.co.uk/news/article-12725419/SoftBank-WeWork-venture-capital-loss-bankruptcy.html
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