After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny

Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by Alex3917 on Thursday November 28, 2019 @12:12PM (#21658816)

> Pouring more money into investments to try and boost the valuation. Using previous investments to invest and boost the value of new investments, guaranteeing massive loans in order to get others to invest at huge valuations. It just looks more and more like laundering money through all sorts of different mechanisms to create paper gains that don't reflect reality.

Is this uncommon? E.g. I don't have any inside information as to what went on with the Coinbase acquisition of Earn.com, but from an outsider perspective it certainly looks like:

1) A16Z invests tens of millions of dollars in Earn.com, which fails.

2) A16Z has their other portfolio company Coinbase buy Earn.com to shift some of their profits from Coinbase back into their earlier fund. (Which as far as I can tell is not only completely useless to Coinbase, but is also a huge legal liability.)

3) A16Z uses the "success" of their fund with Earn.com to raise more money.

4) A16Z then compensates Coinbase by investing in them at a higher paper valuation.

I could easily be 100% off base so I don't want to libel anyone, all I'm saying is that that's just what it looks like as someone who wasn't privy to the actual details.

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by valleycynical on Thursday November 28, 2019 @06:08PM (#21660774)

Same thing happened with Sam Altman and Loopt. A Sequoia VC who put money into Loopt pulled strings to get Green Dot to acquire it, allowing Altman and his supporters (chiefly PG) to claim it to be a success:

> https://news.ycombinator.com/item?id=3684357

Altman went on to become YC President, and has publicly toyed with the idea of running for Governor. Graham has even insinuated that Altman should be PotUS

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by WikipediasBad on Thursday November 28, 2019 @03:15PM (#21659900)

You're not completely off base, in fact, you are 100% on the money (no pun intended). This was such an obvious situation to everyone even remotely paying attention that you'd have to be living under a rock to not see what was actually going on.

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by bhouston on Thursday November 28, 2019 @12:44PM (#21659011)

Was earn.com acquired at a higher than fair valuation? If so the shareholders of coinbase.com should sue.

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by andrewprock on Thursday November 28, 2019 @01:06PM (#21659155)

It's possible it was "sold at a loss" but the early investors made money.

e.g. by investment round:

   A: $1m for a $10m valuation
   B: $5m for a $40m valuation
   C: $12m for a $100m valuation

A "fire sale" of $15m would yield a profit for Series A investors, a probable loss for B, and a certain loss for C.

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by gaogao on Thursday November 28, 2019 @01:11PM (#21659185)

Liquidation preference for later rounds might muck up that calculation.

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by ska on Thursday November 28, 2019 @01:22PM (#21659263)

Or if they were already in financial trouble and C came in with 1.x liquidation preference, they get everything (or near it)

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by user5994461 on Thursday November 28, 2019 @04:20PM (#21660269)

But A and B would have liquidation preference too, so how is the money split?

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Re:After WeWork, SoftBank’s Startup Bookkeeping Draws Scrutiny by ska on Thursday November 28, 2019 @04:44PM (#21660376)

A and B may not have it at all, and anyway if C pushed a hard bargain, theirs will come first.

At any rate, the devil is very much in the details.

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