Earlier this week, the founder of WeWork, an American company that provides shared workspaces for technology startups and services for other enterprises was shoved out of the company he founded.
Adam Neumann who was also the CEO reached a deal with the company’s majority investor, SoftBank to sever most of his ties with the troubled office-space startup and receive nearly US$1.7 billion windfalls in addition to a US$185 million consulting fee.
WeWork was already in danger of running out of cash in the coming weeks and Adam Neumann was the one responsible as he was accused of having steered the company through a series of poor and needless decisions. The company had to choose a rescue deal from SoftBank.
According to the Wall Street Journal, the deal, which the companies announced late Tuesday, values the company at about US$8 billion, a far cry from what it was aiming for in an initial public offering earlier this year reportedly at US$10 billion and less than the US$47 billion at which a January investment from SoftBank pegged its worth.
While most people were baffled at the payout deal the CEO will get away with, much focus shifts to the amount of funding SoftBank has to date sank in WeWork.
The size of the commitment that SoftBank and its Vision Fund has made to WeWork in the past and now is US$18.5 billion. This is according to the company’s new chairman, Marcelo Claure, a SoftBank executive. But its total equity investment in WeWork is currently pegged at US$13 billion (Excluding the US$5 billion loans).
To put this figure into perspective, the total equity investment amount is nearly six times the total amount of funding raised by African startups over the last 3 years. This is taking into account the highest figure released by either of the reports by Disrupt, Digest Africa, WeeTracker or Partech; The total amount raised by African startups since 2016 is approximately US$2.1 billion.
These are startling figures to think about. Even so, the total equity investment (US$13 billion) also includes the US$1 billion SoftBank made on WeWork in January this year. That single investment alone would have been enough to fund several promising African startups within a calendar year.
SoftBank Vision Fund is a US$100 billion behemoth – the world’s largest technology investor – that has massively disrupted startup investment and deployed more than US$80 billion across startups in Asia and Silicon Valley. The fund is yet to make any investment on any African startup or shown interest to ever plan on making any investment on the continent.
The fund invests from upwards of US$100 million in a single round in any growth stage technology companies. Andela is the only startup from Africa to have gobbled up such kind of amount in a single round.
Of course, any player within the African technology and startup landscape would slaver at the thought of such a fund making forays in the continent. That would mean more deserving startups having access to more funding opportunities.
Probably as they plan to launch Vision Fund II which will also be a US$100 billion fund, a first-time focus on Africa would be an ideal bet. The continent now has a mature tech ecosystem where more startups are now providing homegrown solution serving large markets across the continent and not just a single country.
And here in Africa, the SoftBank will find a different breed of entrepreneurs; and unlike Neumann and co who seemed to zealously burn through the billions of dollars without flickering an eye, African entrepreneurs are religious about startup capital – they will devoutly maximize on that US$10,000 pre-seed capital they were able to raise after two years of operation just to move their startup from point A to B. You can imagine what a US$3 billion fund for African startups can do.
In addition, the signing of the Africa Continental Free Trade Area (AfCFTA) – which will be the world largest free trade area once completed, provides high growth startups like Kobo360, Twiga Foods, Lori among others. with access to markets across 54 countries. This means that for growth-stage investors like SoftBank Group Corp. Africa in itself where growth-stage funding is needed provides a very fertile ground for their kind of investments.