Zume Pizza, Getaround, and OYO are undergoing cost-cutting measures.
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Oh man, it’s not looking good in the land of Softbank-backed startups.
Zume Pizza, the pizza-delivery and food-logistics startup, raised $375 million in funding from SoftBank at the end of 2018, which valued the startup at approximately $2.25 billion. That was a big leap from its prior private valuation of $170 million.
In November 2018, I asked, “Now, we eagerly await to see what Zume does with this avalanche of capital. It can’t just be spent on pizza, can it?”
Well, for one, it hired a lot of people, but as we’ve learned time and time again, money can’t solve all problems. Following an executive exodus, Zume is laying off 80% of its staff, according to a report in Business Insider. The layoffs are reportedly a cost-cutting measure.
Trouble is also brewing at Getaround, the car rental company that raised a $300 million Series D round led by SoftBank in 2018. In a blog post, Getaround CEO Sam Zaid said the startup would continue to invest in product and technology, while also reducing field operations and the size of several global teams. This is startup speak for: We’re eliminating jobs. “Announcing layoffs is not the news we had hoped to share in the New Year, and it was the hardest of decisions given the talented and incredibly passionate team we’ve assembled,” Zaid wrote.
The Information reported that Zaid seemed to place some of the blame on the recent struggles of its deep-pocketed investor. According to the story, “Zaid called SoftBank a ‘thoughtful partner,’ but added that the world’s largest tech investment fund has ‘had their own challenges, and it’s hard to say that doesn’t have a ripple effect across their whole portfolio.’” The Information reports the company will lay off approximately 150 employees, roughly one-fourth of Getaround’s staff.
Finally, OYO, the hotel chain that has been called “SoftBank’s jewel in India,” plans to lay off approximately 2,000 people by the end of January, according to a report in the Economic Times.
Anyway, all this is to say that many of the CEOs who gobbled up SoftBank cash are proving that the mentality of “Why not just raise more?” is a double-edged sword. I still think about what Benchmark’s Sarah Tavel told me in 2018:
“There’s a lot of strength and value to having a lot of capital, but as you know, there’s a lot of damage that having a lot of capital can do to a company. It can diffuse focus, it can cover up things that aren’t working inside it, and it can stop the leadership from understanding the mechanics of its own business.”
NEW UNICORN ALERT: I often joke that a bunch of the products and services I use end up as unicorns. There’s Rent the Runway, Glossier, StitchFix, Canva, and Calm. And now I can add ClassPass to that list. (I don’t know about you, but my imaginary portfolio is lookin’ fiiine.)
ClassPass, the studio fitness and wellness platform, raised $285 million in Series E funding at a $1 billion valuation. The company will use the capital to accelerate its international expansion, grow its corporate wellness offering and continue adding wellness activities to its platform, like facials and massages.
“This is more than we sought out to raise. We were oversubscribed,” says ClassPass CEO Fritz Lanman. “But we brought it in from two great partners to finish our global footprint.”
L Catterton and Apax Digital co-led the round, and were joined by investors Temasek.
I wrote in 2017 that ClassPass had undergone quite a bit of change in an effort to focus on profitability—it reworked its business model, discontinued its popular unlimited class option, and hiked membership prices. All of this caused backlash from users, and it’s unclear whether the company is profitable or close to being profitable, but Lanman and founder Payal Kadakia said it was ultimately good for the company’s bottom line.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
