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- SoftBank Vision Fund’s recent investments have attracted a great deal of scrutiny in the aftermath of WeWork’s failed IPO, especially after SoftBank Group reported a $6.5 billion loss in the third quarter.
- SoftBank had raised $1.5 billion for SoftBank Capital Partners in 1999, which likely made it the largest late-stage venture fund at the time, according to SoftBank documents.
- SoftBank Capital Partners invested in companies across the web landscape in the late 1990s and 2000, but when the dot-com market subsequently crashed, the fund and other SoftBank investments came close to being wiped out.
- “Serious doubts” about SoftBank’s “increasingly chaotic” internet empire were beginning to swirl, The Economist wrote in March 2000.
- Here’s a look at some of the companies SoftBank Capital Partners plowed its money into and how they ended up.
- Visit Business Insider’s homepage for more stories.
Investor darling Webvan burned through $800 million in cash and went bankrupt.
The online grocer Webvan was one of the most generously financed startups of the dot-com era, raising a whopping $441 million from investors as it promised to shake up a $450 billion grocery market. SoftBank Capital Partners was one of its many investors.
But its fall was one of the most spectacular failures of the dot-com era.
The company planned to sell $345 million worth its stock in an initial public offering right at the time when dot-com stocks were beginning to slide. After an initial delay, the company made its debut on the stock market in November 1999, The New York Times reported. At the time, the company expected to post more than $65 million in losses for that year.
In fact, Webvan had burned through more than $830 million in cash thanks to high overhead costs. The company’s sales revenue was tiny compared with the amount spent on building high-tech warehouses, hiring an army of employees, and assembling a fleet of trucks.
By July 2001, the company had shut down the website, fired 2,000 employees, and filed for bankruptcy, The Wall Street Journal reported.
Kozmo.com’s last-ditch effort to merge with another company fell through, forcing the company to lay off 1,100 employees and shut down.
Run by a charismatic 26-year-old entrepreneur in the East Village neighborhood of Manhattan, the online delivery company Kozmo.com was supposed to be New York’s first big dot-com company.
The company had expanded to nine cities and quickly swelled to 3,300 employees, attracting up to $280 million in investments from heavyweights like Amazon and SoftBank Capital Partners, The New York Times reported.
And the company had big plans: It registered for an IPO in March 2000 and planned to expand to 30 cities across the country.
Then the dot-com bubble burst and Nasdaq tech stocks began to plummet, drying up the public market. Kozmo scrambled to boost its profit margins as investors began to back away from the company.
When a last-ditch effort to merge with a LA-based company fell through in April 2001, the company pulled the plug on its efforts. It shuttered its operations and laid off its remaining 1,100 employees, Bloomberg reported.
Buzzy trading platform OptiMark Technologies went bust.
The buzzy stock-trading system OptiMark Technologies had drummed up investor expectations because of a black-box algorithm that allowed traders to specify how much they were willing to pay for a certain quantity of stock and then anonymously find a match.
It was supposed to revolutionize stock trading and render the New York Stock Exchange obsolete. The company had partnered with Nasdaq and the Pacific Exchange and had strategic partners like Dow Jones, the Los Angeles Times reported.
SoftBank Capital Partners had invested $100 million in OptiMark.
But traders found the system tedious to use and less effective than stock markets. Meanwhile, high overhead costs were causing the company to burn through $6 million in cash each month, making its operations unsustainable.
The company eventually went bust in September 2000, suspending trading operations and eliminating 110 jobs, The Wall Street Journal reported.
Odimo struggled through the crash but couldn’t survive for long. It sold its domain name Diamond.com for $7.5 million and later went bust.
SoftBank Capital Partners invested $31 million in the online luxury retailer Odimo Inc. in February 2000, a company press release said.
Odimo had three different lines of luxury goods sold through different websites: www.ashford.com, www.worldofwatches.com, and the highly sought-after domain name www.diamond.com, which Odimo sold for $7.5 million in 2006.
The company survived for longer than many of its dot-com peers. But its significant losses eventually caught up with it, and a 2005 IPO filing warned that it might not be able to generate sufficient cash.
By April 2007, Odimo had sold its three websites and laid off all its workers.
“Other than Amerisa Kornblum, our President and Chief Executive Officer, who, commencing in 2008, serves the Company for no compensation, we have no full time employees,” a 2007 annual report to the Securities and Exchange Commission said.
Amazon’s favorite online-recruiting business stayed open, eventually getting acquired.
Webhire, based in Massachusetts, was an online-recruiting business that had piqued the interest of investors such as Amazon and SoftBank.
SoftBank Capital Partners spent $31 million to acquire a 40% stake in the company back in 1999, a Dow Jones wire said. Then it syndicated some of that investment to Yahoo, renamed part of the site to Yahoo Resume, and transformed it into a talent data bank for a host of SoftBank-linked companies, The Wall Street Journal reported.
SoftBank continued to buy Webhire shares from Amazon well into 2002.
Webhire was eventually acquired by the recruiting-software platform Kenexa in 2006. The transaction cost Kenexa $34 million, a press release said. Kenexa was later acquired by IBM.
The savvy founders behind Legal Research Network also kept their company thriving.
The corporate-compliance platform LRN (Legal Research Network) promised to revolutionize legal research, prompting SoftBank Capital Partners to invest $30 million in the company in early 2000, the Los Angeles Times reported.
The company wanted scale the extent to which it could offer legal services through the internet, building learning products and software to educate employees on antitrust, discrimination, securities, trade secrets, and other legal areas, The Washington Post reported.
The company was one of SoftBank’s more successful bets. The company recently celebrated its 25th anniversary, and it works with over 400 organizations in countries around the world, LRN’s website said.
National Leisure Group worked its way up the market, eventually getting acquired in 2007.
The National Leisure Group wasn’t a traditional dot-com company. It sold cruise and vacation packages through partner websites like Orbitz, Expedia, Yahoo, and Priceline. It also turned out to be one of SoftBank’s more durable bets.
SoftBank Capital Partners and General Catalyst, a Boston-based private-equity firm, took control of the National Leisure Group in the middle of the dot-com crash in May 2000, a company press release said.
The company would continue to do well, earning close to $1 billion in sales, according to the Boston Business Journal.
It was eventually acquired by World Travel Holdings in 2007, a press release said.
And CyberArk Software kept its head down, waiting until 2014 to go public.
SoftBank Capital Partners helped the security company CyberArk Software raise about $6 million in funding in July 2000, CNET reported.
The company continues to thrive today. Its technology still helps companies protect their data, infrastructure, and assets across the enterprise, in the cloud, and throughout the DevOps pipeline, a description on the company website said.
The company made its debut on the stock market in 2014, a press release said.
And as companies have turned to storing their data online, CyberArk’s offerings have grown only more valuable over time. The company website says it works with more than 5,000 global businesses, more than 50% of which are Fortune 500 companies.
Vision Fund II