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According to Reuters’ sources, WeWork co-founder Adam Neumann has started talks with board directors and investors to discuss his future role at the U.S. office-sharing start-up, including the possibility of giving up his title as chief executive but becoming board chairman, as well as remaining as CEO with an independent chairman brought in to join the board.
Meanwhile, the hits keep coming relating to Neumann’s ostensible egomania, with Vanity Fair reporting today that “in conversations with people inside and outside the company,” Neumann’s pronouncements are said to include telling one investor that he’d convinced Rahm Emanuel to run for president in 2020 on the “WeWork agenda” and telling another “finance executive that JPMorgan Chase CEO Jamie Dimon was his ‘personal banker’ and that Dimon might leave JPMorgan to run the Neumanns’ family investment fund.” (A source close to Neumann denied this to Vanity Fair, and a source close to Dimon told VF that Dimon has no plans to leave JPMorgan.)
Perhaps unsurprisingly, things don’t seem to be going so well at SoftBank, which has poured more than $10 billion into WeWork and *really* doesn’t want it go public at a fraction of the valuation the co-working company was last assigned (by SoftBank). According to the Financial Times, the Japanese group has been encouraging executives to take on large personal loans to buy into its portfolio of technology companies, an “investment scheme described internally as a test of loyalty to founder Masayoshi Son.” Indeed, SoftBank is reportedly encouraging these employees to take a huge personal bet on SoftBank’s original $97 billion Vision Fund by borrowing up to 10 times their base salary. Says the FT, “Participation is not obligatory, according to people close to the company, but some employees worry that opting out of it may hurt their career.”
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As Adam Neumann Faces Pressure to Step Down, It’s Looking Like a Fight for Life Between WeWork and SoftBank
According to report in yesterday’s Wall Street Journal, certain members of WeWork’s board, which includes co-founder and CEO Adam Neumann, are planning to pressure Neumann to step down and instead become We’s non-executive chairman. The move, says the outlet, “would allow him to stay at the company he built into one of the country’s most valuable startups, but inject fresh leadership to pursue an IPO that would bring We the cash it needs to keep up its torrid growth.”
The WSJ and Bloomberg are reporting that it is SoftBank specifically that wants Neumann to step down. Neither WeWork nor SoftBank is commenting publicly.
It’s a fascinating development, the kind we saw when Uber’s board successfully forced co-founder and longtime CEO Travis Kalanick to abandon his role as CEO. Still, we’d caution against drawing too close a comparison. While the venture firm Benchmark, which spearheaded Kalanick’s ouster, stood to lose billions of dollars if Kalanick dragged down Uber and continued to push off an IPO, Benchmark was not in a do-or-die situation because of its Uber investment.
SoftBank appears to be in more dire straights, making this standoff a particularly meaningful one.
Let’s back up a minute first, though, and consider who is involved and which way this could potentially go. A few days ago, Business Insider put together a useful cheat sheet about WeWork’s board members that may hint at their allegiance.
1) Ronald Fisher — who is vice chairman at SoftBank Group after founding SoftBank Capital, a U.S. venture arm of SoftBank — joined SoftBank’s board last year. He oversees 114 Class A shares, each of which carries one vote. Obviously, he’s going to side with SoftBank.
2) Lewis Frankfort — the chairman of a fitness studio chain called Flywheel Sports — has been a board member of WeWork for roughly five years, and BI says WeWork once loaned him $6.3 million, which he repaid with interest earlier this year. We have to think he’d stick with Neumann out of loyalty. At the same time, he doesn’t wield much power unless he has the right to block significant actions at the company (some shareholders get these blocking rights; some don’t). What we know: He controls 2 million shares, and 750,000 of them are Class B shares that carry 10 votes each.
3) Benchmark, which first backed WeWork in 2012, is represented on the board by Bruce Dunlevie, the founding partner of the venture firm. Benchmark owns 32.6 million Class A shares, and could go either way, seemingly. On the one hand, Benchmark doesn’t want to establish a reputation for pushing out founders after the Kalanick debacle, and if it supports SoftBank over Neumann, it risks this exact thing happening. On the other hand, Benchmark might not want to battle with SoftBank if it thinks it has staying power or it’s concerned (suddenly) that it allowed Neumann to amass too much control.
Massive Fundings
Sweetgreen, a 12-year-old, Culver City, Ca.-based salad-focused restaurant chain, has raised $150 million in funding at a $1.6 billion led by Lone Pine Capital and D1 Capital Partners, says the WSJ. Earlier backer True Ventures also joined the round. More here.
Unbabel, a six-year-old, Lisbon, Portugal-based startup that says its AI-powered, human-refined translation platform can help translate customer emails, live chat exchanges, FAQ pages, and more, across dozens of languages, has raised $60 million in Series C funding. Point72 Ventures led the round, joined by Microsoft’s M12, Samsung Next, Greycroft, Scale Venture Partners, Notion Capital, Caixa Capital, Faber Ventures, FundersClub, Structure Capital, Indico Capital Partners, and e.ventures. VentureBeat has more here.
Big-But-Not-Crazy-Big Fundings
Bold Penguin, a three-year-old, Columbus, Oh.-based startup that matches commercial insurance carriers with prospects, has raised $32 million in Series B funding, including from Hudson Structured Capital Management, Lightstone, Guggenheim Insurance, Lockton, and individuals from Stone Point Capital. The company has now raised more than $50 million altogether. VentureBeat has more here.
DustPhotonics, a two-year-old, Israel-based startup that provides optical modules to data centers, has raised $25 million in Series B funding led by Intel Capital, with participation from WRVI Capital. Calcalist has more here.
Future State Brands, a five-year-old, Culver City, Ca.-based holding company for cannabis-related consumer brands, has raised $25 million led by Cresco Capital. More here.
Hydrostor, a nine-year-old, Toronto- and Australia-based developer of advanced compressed air energy storage projects, has raised $37 million in funding. Investors include Elemental Energy, Canoe Financial, ArcTern Ventures, MaRS Catalyst Fund and Lorem Partners. Quartz has more here.
Immutable, a year-old, Sydney, Australia-based company that builds video games with player-owned assets, has raised $15 million Series A round led by Naspers Ventures, with participation from the Galaxy Digital EOS VC Fund and Apex Capital Partners. More here.
Kheiron, a three-year-old, London-based machine learning startup that’s setting out to help radiologists detect early signs of cancer, has raised $22 million in Series A funding led by Atomico, with participation from Greycroft, Connect Ventures, Hoxton Ventures, and Exor Seeds. VentureBeat has more here.
Ometria, a six-year-old, London-based “AI-powered” customer marketing platform, has raised $21 million in Series B funding led by Octopus Ventures, with participation from earlier backers Sonae IM, Summit Action, Samos and Adjuvo, along with numerous angel investors. TechCrunch has more here.
Smarter Sorting, a four-year-old, Austin, Tex.-based startup that produces granular, chemical-level data about consumer products, just raised $17 million in Series A funding. US Ecology led the round, joined by RTP Ventures and others. Built in Austin has more here.
Vedanta Biosciences, a nine-year-old, Cambridge, Ma.-based clinical-stage company that says it’s developing a class of drugs that work by modulating the human microbiome, has raised $16.6 million in Series C-2 funding. Investors include QUAD Investment Management, SV Investment Corp., Shinhan Investment-Private Equity, Shinhan Capital-Yeollim Partners, Partners Investment Co., FC Capital, and SymBiosis. More here.
Smaller Fundings
Curamir Therapeutics, a new, Woburn, Ma.-based developer of micro RNA-based cancer drugs, has raised $10 million in Series A funding led by a Hong Kong-based private equity firm called Delos Capital. More here.
InsightRx, a four-year-old, San Francisco-based precision dosing platform, raised $10 million in Series A funding. HealthX Ventures led the round, joined by Rock Health, OSF Healthcare, Leawood VC, Premier Inc., and GreatPoint Ventures. MobiHealthNews has more here.
Julo, a three-year-old, Jakarta, Indonesia-based peer-to-peer lender, just raised $10 million in new Series A funding led by Quona Capital, with participation from Skystar Capital, East Ventures, Provident, Gobi Partners, and Convergence. More here.
Landline, 1.5-year-old, L.A.-based low-fare shuttle service, has raised $3.85 million in seed funding led by Upfront Ventures, with participation from Mucker Capital, Matchstick Ventures and WndrCo. More here.
New Funds
HarbourVest, the Boston-based private equity investment manager, has made a big new bet on Avataar Venture Partners. The India-based venture firm was cofounded by Mohan Kumar, a former partner with Norwest Venture Partners, and Nishant Rao, the former chief operating officer at the Chennai-based SaaS firm Freshworks, and HarbourVest is the sole limited partner in their $300 million debut fund. The deal reportedly represents the fund-of funds’ first-ever direct exposure to venture fund operating in India and Southeast Asia. The Economic Times has more here.
Exits
Facebook has agreed to acquire CTRL-Labs, a four-year-old, New York-based startup that has been building software to let people control a digital avatar using only their thoughts. Facebook is paying between $500 million and $1 billion, says Bloomberg. CTRL-Labs had raised $67 million, says Crunchbase. Its investors include Breyer Capital, Matrix Partners, Spark Capital, GV, and Lux Capital. More here.
Facebook acquired Servicefriend, an Israel-based startup that builds bots, or chat clients for messaging apps based on artificial intelligence. Although Facebook isn’t specifying what the company’s founders will be working on, TechCrunch suggests that the highest likelihood is that they’ll help build a customer service layer for the Calibra digital wallet that Facebook is developing. Servicefriend doesn’t appear to have raised venture funding. More here.
HP has acquired Bromium, a nine-year-old, Cupertino, Ca.-based security startup that had raised roughly $115 million in funding from investors, including Silver Lake Waterman, Andreessen Horowitz, Ignition Partners, Highland Capital Partners, Intel Capital, Lightspeed Venture Partners and Meritech Capital Partners. Terms aren’t being disclosed. ZDNet has more here.
The messaging app Kik, which boasted having more than 300 million registered users a little more than three years ago, is shutting down. BetaKit has more here.
People
Kristin Bannon has joined SoftBank Vision Fund as a vice president. Bannon, a field hockey star at Harvard, has spent the last nine years with Morgan Stanley.
Disney CEO Bob Iger tells Maureen Dowd of the New York Times why he pulled the plug on acquiring Twitter at the eleventh hour in 2016: “The troubles were greater than I wanted to take on, greater than I thought it was responsible for us to take on,” he says. “There were Disney brand issues, the whole impact of technology on society. The nastiness is extraordinary. I like looking at my Twitter newsfeed because I want to follow 15, 20 different subjects. Then you turn and look at your notifications and you’re immediately saying, why am I doing this? Why do I endure this pain? Like a lot of these platforms, they have the ability to do a lot of good in our world. They also have an ability to do a lot of bad. I didn’t want to take that on.”
The most powerful women in business, according to Fortune.
Data
About 42 percent of family offices say they’re raising cash reserves out of growing fears of a recession, according to a new UBS Global Family Office Report. “There’s more caution and fear of the public equity markets among ultra-high-net-worth investors,” Timothy O’Hara, president of Rockefeller Global Family Office, tells Bloomberg. “That has more people thinking about private investments, alternative investments or cash.”
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Essential Reads
The great smoke-out continues. Now Federal prosecutors in California are conducting a criminal probe into e-cigarette maker Juul, reports the WSJ. The company is also being investigated by the The Federal Trade Commission, the Food and Drug Administration and several state attorneys general. The WSJ looks at how doctors uncovered the vaping crisis. In related news, the amount of advice on how to quit Juuling has ramped up significantly on the aggregation and discussion site Reddit, says Vice.
Detours
How to talk to people in crisis.
A $33,000 car for kids is already sold out (and 500 were made).
Colorful leather is coming this spring.
Retail Therapy
Earbuds by Amazon.