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SoftBank takes loss in sale of Wag, dog-walking startup

Wag’s troubles have been particularly pronounced. After its investment, the Vision Fund brought in Hilary Schneider, former chief executive of LifeLock, to lead an aggressive expansion. But it lost ground to Rover, its top competitor. Reports of lost dogs and internal struggles hurt business.

New York Times|
Updated: Dec 11, 2019, 11.40 AM IST
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By Erin Griffith

SAN FRANCISCO: The SoftBank Vision Fund has sold its stake in Wag, the troubled dog-walking startup, back to the company at a loss, according to two people briefed on the deal, in a further sign of turmoil for the Japanese investment powerhouse that has bet big and lost big on the technologies of the future.

Garrett Smallwood, who became Wag’s chief executive in November, said Monday in an internal memo viewed by The New York Times that Wag and SoftBank were “amicably parting ways.” Smallwood characterized the move as part of Wag’s new plan to “refocus on delivering sustainable growth.”

Smallwood’s memo said a number of employees were laid off Monday as part of that plan, which was reported earlier by The Wall Street Journal.

Wag’s unusual business model — like Uber, but for dog walking — symbolized for many the frothiness of the technology investment bubble. Almost two years ago, SoftBank agreed to invest $300 million in Wag.

But the Vision Fund has since been battered by its investment in WeWork, the office company that has shaken the startup scene with the crash of its initial public offering in September. SoftBank Group of Japan, which started the Vision Fund, said last month that it had taken a $4.6 billion hit from its WeWork investment.

WeWork’s flameout, which included the departure of its colorful founder and an emergency bailout by SoftBank, left many other cash-burning companies wondering if they would face similar fates. Startups have been increasingly singing the praises of profits and “sustainable growth” ever since.

SoftBank, WeWork’s largest investor, has pushed its portfolio companies to moderate their growth and make plans to turn a profit. Other unprofitable startups have worked to lower their costs and hoard cash in case of a market downturn.

Wag’s troubles have been particularly pronounced. After its investment, the Vision Fund brought in Hilary Schneider, former chief executive of LifeLock, to lead an aggressive expansion. But it lost ground to Rover, its top competitor. Reports of lost dogs and internal struggles hurt business.

The company endured several rounds of layoffs this year. In November, Schneider stepped down. Her replacement, Smallwood, disagreed with SoftBank about Wag’s strategy, the people familiar with the matter said.

Wag entertained deal talks with Rover and with Petco, the pet supply company, the people said. But they did not get very far, and SoftBank ultimately agreed to be bought out of its shares at a lower price. SoftBank did not give Wag the entire $300 million it had agreed to invest, one of the people said.

Wag’s other investors include Battery Ventures, General Catalyst and ACME Capital, according to PitchBook, which operates an investment database.

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