SoftBank’s interest in mobile dog walking app Wag is scaring away other potential investors, The Information reported earlier this week, citing sources familiar with the matter. Founded in 2014, the Los Angeles, California-based startup attempted to raise $100 million late last year but is still unable to do so because SoftBank’s Vision Fund is pressuring the company to up its target to $300 million, discouraging other interested investors such as Kleiner Perkins and NEA from committing to the funding round as they believe such a figure is too high, according to the report. Wag has yet to raise any additional resources and while SoftBank is still said to be deliberating backing the startup, not doing so now is likely to be a major setback to the firm’s expansion ambitions, especially as the Vision Fund is likely to support a rival if it doesn’t invest in Wag, insiders claim.
The current situation is understood to be reflective of the Vision Fund’s aggressive investment strategy to offload its resources within half a decade and already see some returns on its investments by then. According to SoftBank CEO CEO Masayoshi Son, the fund already generated $3 billion in profit as of late October, five months after being established. Its approach to financing startups leaves little room for companies that don’t fit the definition of the so-called “unicorns,” i.e. private firms with valuations north of $1 billion. Despite taking an interest in Wag, SoftBank is now effectively pressuring the company into raising its funding appetite and push for a higher valuation or risk losing all of the money it counted on to back its near-term expansion and start over. The Japanese conglomerate isn’t the only reason why Wag is now struggling to raise money, with the other one being the existence of Rover, an older competitor with a larger market share and over $150 million in backing. Some investors are also said to be skeptical about the manner in which Wag handles money in general, with the company being estimated to have already raised $50 million in the last three years.
Earlier this week, SoftBank’s Vision Fund completed its largest investment to date, purchasing approximately 15 percent of Uber as part of the largest private stock sale in the history of trading, with the deal itself being estimated to be worth $9.3 billion. The Japanese tech giant gained its ownership in Uber at a significant discount but also injected around $1.25 billion in cash into the company so as to prevent significantly impacting its $68.5 billion valuation from 2014. The sale valued Uber at $48 billion, 30 percent down the previous figure.