The tech startup bubble inflated with a big assist from Japanese investor SoftBank Group, which poured more than $100 billion into the market. Now that the air has come out of the bubble, some prominent local startups that got backing from SoftBank are struggling.
Pear Therapeutics, which has developed prescription software treatments for substance use disorders, filed for bankruptcy this month. SoftBank owned 9 percent of the company, according to securities filings.
Cybersecurity firm Cybereason, which laid off one-quarter of its workforce last year, ousted cofounder Lior Div as chief executive and installed a SoftBank executive in his place last week. Div will stay on as an adviser. The company had previously raised $750 million from investors led by Google and SoftBank and got another $100 million in a deal led by SoftBank alongside the leadership change.
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And robotics maker Berkshire Grey accepted a takeover offer from SoftBank last month at $1.40 a share, 85 percent below the price from the company’s 2021 stock market debut. SoftBank already owned 28 percent of the firm, according to securities filings.
The stumbles come as SoftBank is dealing with large losses in its portfolio; it invested in companies like Uber and WeWork during the bubble years, as well as Boston startups Whoop, Perch, and ezCater. At times, the firm’s frantic deal making stunned the rest of the venture capital industry. SoftBank founder Masayoshi Son famously told WeWork chief executive Adam Neumann his business plan was “not crazy enough” after a 2017 investment round injecting $3 billion.
Investing so much money so quickly made SoftBank the leader of the wave of “irrational exuberance” that pushed startups to expand too fast and go public too soon, Columbia Business School professor Len Sherman said.
“SoftBank combined throwing more money by far than had ever been invested in venture capital plus less due diligence,” Sherman said. “I can’t overestimate how extraordinary that was and how it set in motion a complete distortion ... in total venture capital investments.”
SoftBank did not respond immediately to a request for comment.
To be sure, many local startups not backed by SoftBank are also suffering amidst the slowdown in venture capital funding, weaker economy, and higher interest rates.
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Gelesis, a company developing weight-loss treatments, is weighing a 21-cent-per-share takeover offer from PureTech Health. The offer is 98 percent below the price of Gelesis’ stock when it went public by merging with a blank-check company at the beginning of 2022. And wireless Internet provider Starry declared bankruptcy in February after going public last year.
So, what does it all mean?
Fallout from excessive expansion during the bubble will continue for the foreseeable future, Sherman said. “Hopefully, we’ve learned some lessons,” he said.
Aaron Pressman can be reached at [email protected]. Follow him @ampressman.