Startup Street: Masayoshi Son Loves Dogs
Here’s what went down this week on Startup Street.
This week on Startup Street we have Softbank betting on the furry four-legged dogs to earn the serial investor more money. Finance Minister Arun Jaitley throws in some benefits for startups in the Union Budget and on ‘Musk Watch’, the billionaire has turned to a flame gun to fund his boring project.
Masayoshi Son’s Latest Bet
SoftBank Group Corp. is investing $300 million in Wag Labs Inc., a startup that connects dog owners with dog-walkers and dog-sitters through a smartphone app.
Masayoshi Son's company through its Vision Fund had been eager to invest in the pet care space. They pushed Wag to accept the funding for global expansion and fending off competitors, Bloomberg reported citing a person close to the deal. Wag is an on-demand caretaker service for dogs. Softbank had also evaluated Wag’s biggest competitor Rover, but settled for the former, according to Bloomberg.
SoftBank's managing partner Jeffrey Housenbold and senior investor Ted Fike will join the Wag Labs’ board. Housenbold will takeover as the chairman, Wag said in a separate statement. The position fell vacant after Shervin Pishevar resigned on charges of sexual misconduct.
SoftBank has a target of investing $100 billion in innovative technology and has already invested in startups like Uber, WeWork, Flipkart, OYO, NVIDIA and Slack. The fund made 100 investments last year worth $36 billion, according to research firm Preqin.
Budget 2018: A Mixed Bag For India’s Startup Ecosystem?
Smaller Indian startups will now get tax exemptions for seven years after inception. The government has also extended the Startup India scheme by two years to April 2021 in the Union Budget.
"The extension of the Startup India scheme to March 2021 and rationalising the condition of turnover, will enable tens of thousands of start-ups to avail benefits under the Act," Nasscom President R Chandrasekhar told PTI.
Puneet Gupta, Co-Founder & COO, icanstay.com, however was not completely happy.
“The 7 year time period is a welcome move but is insufficient. It should have been at least 10 years as that is the time a startup takes to build good profitability in today’s competitive market. A clear stand on Angel Tax would have been beneficial,” he said in a statement to BloombergQuint.
Finance Minister Arun Jaitley spoke about the government’s commitment to create the right environment for fintech companies to grow and to take additional measures to further strengthen venture capital funds and the angel investor ecosystem in the country.
Ganesh Raju Partner and Leader startup PwC said, “Separate policy allowing Venture Capital firms to invest in hybrid instruments is a welcome move. Permitting issue of hybrid instruments such as redeemable shares, optionally convertible debentures etc. will enable startup founders have greater control over the company rather than diluting their stake through equity funding in initial stages."
Indian Angel Network co-founder and Director Saurabh Srivastava also welcomed the recognition of the contribution made by angels and VCs and "the promise of creating more enabling regulations in this area", in a comment to PTI.
However, Srikanth Sundararajan, Partner at Ventureast, said that the government needs to articulate the next level of details soon with focus on helping startups attract investments, optimise their cash flow and scale.
Elon Musk And New Ways Of Getting Funds
Meet Elon. He doesn't want to rely only on angel investments or private equity giants to fund his dreams. Instead, the supposed real-life Tony Stark of the internet seems to have hit upon a new holy grail for raising money - merchandising.
Over the past few months, Musk has been using his wit and charm on social media to play salesman for his tunneling startup Boring Company's goods. After having sold 50,000 baseball hats for $25 each, the Boring Company started selling Flamethrowers which are "guaranteed to liven up any party!". He also changed his Twitter bio from Hat Salesman to Zombie Defender.
The Boring Company flamethrowers, which Musk claims are the safest in the world, have already been sold out. At $500 apiece, the 20,000 units Boring Company sold would've brought in $10 million for the startup which is digging tunnels in an attempt to bypass the growing city traffic. But that wasn't it, the flamethrowers were being sold with an “overpriced” $30 fire extinguishers. “You can definitely buy one for less elsewhere, but this one comes with a cool sticker,” the website said.
Bloomberg View's Matt Levine has made a case that the flamethrower stunt feels a lot like an initial coin offerings, an alternative way for startups to raise money by offering digital tokens which saw a boom last year thanks to cryptocurrencies gaining popularity. He wrote that “not so unlike” ICOs, Musk's way of getting funds is not dilutive like equity, doesn't have to be paid back like debt, doesn't require actually starting any operations and works mainly through clever internet hype.
This isn't the first time Musk, chief executive of electric car major Tesla and aerospace firm SpaceX, has used unconventional techniques to raise funds. For the much anticipated Model 3 car, the cheapest of the Teslas, Musk took $1,000 deposits from customers to reserve a spot in line to buy one.
He'd founded Boring Co. in 2016 to build underground transportation systems for vehicles after being stuck in traffic one day. The venture is largely financed by Musk himself.
Selling flamethrowers isn't as easy though. According to one of Musk's tweets he is facing trouble from customs agencies that have said they wouldn't ship anything like a flamethrower. Musk soon cheekily renamed the product. Boring Co. has also said its product won’t emit flames exceeding 10 feet, meaning customers can legally operate them in practically every U.S. state without a license.