19-24 minutos - Source: NYT
Last year, a hospitality start-up called Oyo told Mr. Solankey that it would turn the Four Sight into a flagship hotel for corporate customers. It guaranteed him monthly payments whether the rooms were booked or not, as long as he rebranded the property with Oyo’s name and sold the rooms exclusively through its site.
At Oyo’s request, Mr. Solankey sank 600,000 rupees, or $8,400, into reupholstering the hotel’s furniture and adding new linens. But corporate guests did not materialize, and Oyo stopped making the payments. Now he is on the verge of eviction.
Mr. Solankey is one of millions of workers and small-business people who worked with start-ups financed by the biggest venture capital fund in history, the $100 billion Vision Fund run by the Japanese conglomerate SoftBank. The fund was part of a flood of money that has washed over the world in the past decade — and that has upended people’s lives when the start-ups broke their promises.
Many of the young companies used SoftBank’s cash to dangle incentives and other payments to quickly attract as many workers as they could. But when they failed to make a profit and SoftBank changed its tune on growth, the companies often slashed or reneged on those same incentives.
That has now left contractors like Mr. Solankey holding the bag. With little power to fight back, many of them have been financially and personally devastated.
SoftBank’s Vision Fund is an emblem of a broader phenomenon known as “overcapitalization” — essentially, too much cash. Venture funds inundated start-ups with more than $207 billion last year, or almost twice the amount invested globally during the dot-com peak in 2000, according to CB Insights, a firm that tracks private companies.
Flush with the cash, entrepreneurs operated with scant oversight and little regard for profit. All the while, SoftBank and other investors have valued these start-ups at inflated levels, leading to an overheated system filled with unsound businesses. When the companies try to cash out by going public, some have run into hurdles.
At two of SoftBank’s biggest investments, WeWork and Uber, some of these issues have become public. Uber, the ride-hailing service, staged an underwhelming initial public offering in May and posted a $1.2 billion loss last week. WeWork, the office leasing company, recently ousted its chief executive and accepted a rescue plan from SoftBank as its value was cut. Last week, SoftBank reported a $4.6 billion hit from its WeWork investment.
“Since the money started pouring out of SoftBank, they have completely distorted the priorities and focus of young ventures around the world,” said Len Sherman, a Columbia Business School professor.
The model of using contractors, which has defined the last decade of start-up investing, has created work opportunities. But among people who are most dependent on these companies, unrest is growing.
Protests against SoftBank-funded start-ups have erupted in New York, Bogotá, Mumbai and beyond, with many captured on video and posted to YouTube. Some of the videos, which have been viewed thousands of times, showed chanting workers or destruction of property. All displayed a visible frustration.
In China alone, three SoftBank-backed companies — the logistics firm Manbang, the ride-sharing service Didi Chuxing and the food delivery company Ele.me — faced 32 strikes last year, according to data gathered for The Times by the China Labour Bulletin.
Jeff Housenbold, a managing partner at SoftBank’s Vision Fund, said, “This is an important, complex issue that predates the Vision Fund and affects many companies we haven’t backed in equal measure.”
That is of little comfort to contractors like Mr. Solankey. “I am in the pit,” he said.
Now he wanted to diversify. In late 2014, SoftBank started by putting hundreds of millions of dollars into three ride-hailing companies that copied Uber: India’s Ola, GrabTaxi in Southeast Asia and China’s Kuaidi Dache, which later merged with its biggest rival, Didi.
In the last five years, the Japanese firm led or was part of large fund-raising rounds for these 16 companies that rely on contractors.
|Didi Chuxing||China||Ride hailing||$20.4 billion|
|GrabTaxi||Singapore||Ride hailing||$8.65 billion|
|Uber||U.S.||Ride hailing||$6.85 billion|
|Ola||India||Ride hailing||$2.79 billion|
|Compass||U.S.||Real estate||$1.32 billion|
|Wag||U.S.||Dog walking||$300 million|
|99||Brazil||Ride hailing||$200 million|
When he announced the $100 billion Vision Fund, the biggest contributions came from the sovereign wealth funds of Saudi Arabia and Abu Dhabi, with smaller investments from companies like Apple.
Few venture funds had raised even $1 billion before. Mr. Son said he wanted the money to go to companies pursuing artificial intelligence and the “Singularity,” when computers become smarter than humans.
At Ola, where SoftBank was the largest shareholder, 62 percent of what drivers earned in 2016 came from investor money rather than fares, according to the data firm RedSeer.
When some of the start-ups cut costs, often prodded by SoftBank, they reduced payments to workers. Many contractors said they wanted to stop working with the start-ups, but couldn’t because of upfront investments they had to pay off.
In response, drivers for Grab smashed the windows of the company’s offices in Jakarta, Indonesia, last year. At a 2017 demonstration against Ola in Bangalore, India, one driver set himself on fire and another drank poison.
Last week, when Mr. Son discussed SoftBank’s earnings, he said: “I learned a lot of lessons, but no change in our strategy. We don’t see any rough sea.”
That month, Oyo told the hotelier it would bring him high-paying corporate travelers if he joined its network and upgraded the property. Under the arrangement, Oyo guaranteed him monthly payments of 700,000 rupees, or around $10,000, for three years, according to a contract viewed by The Times.
Mr. Solankey, now 63, agreed.
But within a year, the payments evaporated. Instead of business customers, unmarried couples looking for private rooms turned up. And Oyo discounted the rooms so much online that Mr. Solankey could not offer them to guests at a higher price.
“It is suicidal for me,” he said while sitting recently in his hotel’s empty restaurant.
Oyo said Mr. Solankey had misrepresented the health of his business before signing the contract.
Oyo was founded in 2013 as a website to organize and standardize India’s budget hotels. It coaxes small hotels to become Oyo-branded destinations that list exclusively on its site, without its having to own most of the properties.
SoftBank, which began investing in Oyo in 2015 and now owns nearly half the start-up, has pushed to add more hotels to the company’s network. Last month, it helped the site raise $1.5 billion, valuing it at $10 billion and making it India’s second-most-valuable start-up.
“It’s completely a new type of hotel, and they are growing so fast,” Mr. Son said of Oyo last year. “The number of rooms and net growth is going to continue at the pace of more than 10,000.”
It has scaled up partly by promising hoteliers monthly payments, made possible by SoftBank’s money. The payments, which are an advance on the hotel owner’s share of room revenue, were supposed to be paid no matter how many rooms were booked.
In exchange, the hotels added free breakfasts and linens in Oyo’s signature red and white. They agreed to book all rooms — even walk-in guests — through Oyo and let it control how the rooms were sold on other sites.
But those payments led to rising losses in India. And over the last year, SoftBank has pushed Oyo on profitability rather than just growth, said current and former employees of the start-up, who declined to be named for fear of retaliation.
Several hotel associations said Oyo had now canceled or cut the payments. Some also said Oyo had deeply discounted room rates and increased its commissions and fees.
Ritesh Agarwal, who founded Oyo when he was 19, said in an interview that only a few hotels had been unhappy or tried to leave. He said Oyo had occasionally reduced the guaranteed minimums, but only when hotels had misrepresented their business in contract negotiations.
“Asset owners continue to believe that Oyo is the best option in terms of the value proposition we can provide for them,” he said.
Not Mr. Solankey. He said he was losing 150,000 rupees, or $2,100, a month. While he plans to quit Oyo, he needs the money the company owes him. Oyo has offered to pay just half the debt — and then only if he signs a new contract with no guaranteed payments, according to correspondence shared with The Times.
Mr. Solankey has taken out loans, but fallen behind on rent and electricity payments. In September, his power was temporarily cut off. This month, his landlord asked him to vacate the property.
Taking Safety Risks
Mr. Molina, 21, borrowed money from his mother. “They never support us,” he said of Rappi.
Like many SoftBank-funded start-ups, Rappi not only depends on contractors to deliver its services but also offloads its fixed costs — and the risks of the work — onto them.
The company, established in 2016 by three Colombian entrepreneurs, harnesses bike and motorcycle riders to deliver everything from flowers to cash from the A.T.M. In Colombia alone, it has 20,000 couriers.
This year, SoftBank gave Rappi $1 billion — twice as much as what the company had gotten from all its previous investors combined. In announcing the funding, SoftBank declared that the start-up, which it valued at $2.5 billion, would be responsible for “improving the lives of millions in the region.”
SoftBank’s money has helped Rappi expand into nine South American countries. And the company initially offered drivers 3,500 pesos, or around $1, for every delivery — enough to earn more than Colombia’s minimum wage of around $8 a day.
In return, couriers provided their own cellphones, bikes and motorcycles. They had to buy a Rappi delivery bag, which costs around $25. And they have to shoulder most of the physical risks of delivery.
In August, a judge in Argentina ordered Rappi and two other delivery services there to shut down until they provided workers with insurance and safety equipment like helmets. The judge said 25 couriers had been treated in Buenos Aires public hospitals over the previous month.
In September, a survey of 320 Rappi couriers in Colombia, conducted by the University of Rosario and several nonprofits, found that nearly two-thirds had been involved in an accident on the job. Almost none were covered by insurance.
For couriers, the safety risks have been compounded by wage cuts. Rappi slashed its $1 basic delivery fee by 45 percent last year, around the time its annual losses tripled to $45 million, according to government filings.
“I sometimes have to work 17-hour shifts just to get by,” said Walter Salazar, 26, who started delivering for Rappi a year ago and now works seven days a week to afford a bed in a six-room dormitory.
Mr. Borrero said Rappi was designed for part-time workers, not those seeking a full-time living wage.
A Cutting-Edge Brokerage
His New York firm, which received $1 billion from SoftBank, had sprouted to 8,000 real estate agents from 2,100 in a year. Mr. Reffkin said the company had been unprepared to integrate agencies it had bought and had pushed brokers to use technology that wasn’t ready.
“I’ve learned that moving too fast,” Mr. Reffkin wrote in the letter, which was obtained by The Times, “can be just as dangerous as moving too slowly.”
Compass, which Mr. Reffkin founded in 2012 as a tech-enabled real estate firm, has expanded rapidly since SoftBank invested in 2017. Mr. Reffkin, a former Goldman Sachs executive, said in a Wired interview that year that the money would let it compress its three-year growth plan into one.
“They are making a great growth,” Mr. Son said of Compass in 2018. “This company, I believe, is going to be a great unicorn.”
The breakneck growth has led to cracks. Several top executives have recently left, as have recently arrived brokers.
One was Tricia Ponicki, 44, who started at a Compass office in Chicago in February. She said she had been drawn by the generous compensation; the company also promised more resources to aid home sales.
But there was so much turnover in Compass’s marketing offices that it took three months to produce a brochure for a house. When she requested a For Sale sign, she was told they were back ordered. Her husband made the sign instead.
“Right from the beginning, I was constantly being misled and misled,” she said.
Over six months with Compass, Ms. Ponicki sold one property, earning $4,300. A year earlier, she had netted around $100,000 selling homes at a local agency.
In August, the mother of four applied for food stamps. She also returned to her old agency, At Properties, where her sales have picked up, she said.
Compass employees and agents have generated less revenue per person than other online brokerage firms and, sometimes, even traditional ones, according to research by Mike DelPrete, an independent real estate strategist and visiting scholar at the University of Colorado.
Ms. Ponicki said she wondered how long Compass’s spending could last.
“I realized the illusions you see in the mirror are not what they appear to be,” she said.