OYO is SoftBank’s Trojan Pig
12/17/2018|3:32:48 PM|The Ken

OYO recently raised $1 billion to fund expansion all over the globe. This round of funding reportedly valued the company at $5 billion—a valuation that is more than twice that of MakeMyTrip’s own current valuation of $2.4 billion.But more importantly, OYO represents multinational conglomerate SoftBank and its $100-billion Vision Fund.

In nearly half of the deals that SoftBank has participated in, it has individually committed a billion or more, racking up a total of $65 billion invested in a single year. This is nearly the same as what the entire US VC industry invests in a single year across thousands of startups.

The standard funding playbook is for a VC to make a small “exploratory” bet in a startup and progressively double down with increasing amounts in follow-on rounds as and when the startup finds product-market-fit and requires more capital to grow. On the other hand, SoftBank’s smallest deals are in the $100-million range and the largest are typically in the billion-dollar range. Most, if not all, of these startups are far from reaching a stage where capital is the constraint. Instead, they are at points where technological challenges need to be overcome and unit economics need to be established. But by force-feeding capital, SoftBank is putting these startups on a grow-at-all-costs trajectory prematurely, and in the process, addicting them to capital.

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